he reality of globalization

BREAKTHROUGH - Elfren S. Cruz (The Philippine Star) -

November 4, 2017 - 4:00pm

The issue on whether globalization is ultimately beneficial or harmful to the average citizen of
the world is clearly still a much publicly debated issue. The historical champions of open
markets – United States and United Kingdom – are now increasingly hotbeds for proponents of
protectionism. On the other hand, China which used to be a highly protected economy is now
championing globalization.

The rise in extreme global income inequality has been attributed to globalization. Trump’s
presidential victory and the Brexit win in the UK have also been traced to popular
disenchantment with globalization; and a perception that it has benefited only the very wealthy
few. The DHL Global Connectedness Index – which tracks international trade, capital,
information and people flow – shows that globalization slowed down in 2015 but did not go into
reverse. Updated data for 2016 for trade and investment suggests a continued slowdown but still
no reversal.

However, the media perception of globalization has become increasingly more negative.
According to the Harvard Business Review: “An analysis of media mentions for the term
‘globalization’ across several major newspapers – Wall Street Journal, New York Times,
Washington Post in the US and the London Times, Guardian, Financial Times in the UK –
reveals a marked souring of sentiments with scores plummeting in 2016.”

A recent issue of the Economist magazine has apparently accepted the fact that globalization may
have benefited certain sectors and regions, but has left behind large segments of society, in an
article entitled “ Left Behind: How to Help the Places Left Behind by Globalization.”

The article provides some useful insights on the reasons for regional inequalities caused by
globalization. Firms – particularly manufacturing – often do better when they are close together.
A maker of industrial machinery saves on costs when it is near the firms that provide it with raw
materials or components as well as its customers. Manufacturing plants must therefore, come in
clusters. A cluster of manufacturers attract workers.
The same concept of ‘clusters’ apply to other industries. Financial firms do well in New York
because they are close to banks that finance and clients that hire them. Start ups in Silicon Valley
have access to financing, customers, and new ideas that they will not easily find elsewhere.

According to the Economist, “A larger, more integrated market enables production at more
efficient scale and increased global output. Consumers gain access in cheaper and better goods
and services including new foreign varieties.

They do imply, however, that production will become more geographically concentrated. Cities
with long standing industrial tradition that could get by in a smaller economy find themselves
bleeding talent and jobs.”

These concept of “clusters’ means that countries cannot afford to have a policy of attracting only
single firms to invest; but, must look for ways to attract clusters of factories or financial firms or
service firms. Even within a country, globalization will make regional inequalities worse.

As the rich became richer, their wealth was supposed to start “trickling down” to the poor so that
ultimately everyone would benefit from the rich accumulating more wealth. This theory has
never worked. Income inequality has reached a level unprecedented in human history.

There was a time when the same “trickle down” theory was believed to be applicable to nations.
As certain nations became richer, they were expected to share their wealth with the poorer
countries of the world. This was the dream of many organizations like the United Nations.
Instead, the rich Western nations continued to further enrich themselves by economic
exploitation of the poor countries. The Third World countries were developed solely as sources
of raw materials and markets for the goods and services of the Western imperial powers. Japan
joined the Axis powers during the Second World War primarily because Imperial Japan needed
to secure reliable sources of raw materials and markets for its industrialization.

Today, China – the new economic giant – is following the same imperial pattern of the past
powers. Its Belt and Road initiatives are primarily aimed at securing reliable sources of raw
materials and markets for its economy. The primary objective is to continue the economic
growth of China.

China and Japan were once heavily protected economies until they were able to build an
industrial and financial base that could compete with the rest of the world. Now they are
suddenly champions of open markets and globalization.

The United States and the United Kingdom were once champions of globalization and open
markets. But now that they are losing their competitive edge, these two countries have elected
governments that are advocating protectionism.

Perceptions about globalization will remain mixed because its effects will continue to be mixed.
Globalization and technological change will enhance the economies of scale that will result in
more geographic concentration of wealth and talent. The Alibabas and Amazons will increase
their dominance in the service industries which will further decimate locally based businesses.
There are those who will insist that the exponential growth of technological change makes
globalization inevitable. Perhaps that is true, but the process of change will be a costly and
chaotic period. This is what history teaches us. The Industrial Revolution gave birth to the class
wars and Marxist revolutions of the 20th century. The economic and social changes resulted in
the rise of populist leaders and dictators that led to two World Wars and a Cold War.

I once read two contrasting articles on the same topic. The title of one was “ Globalization at
Warp Speed”; and the other one was “ The End of Globalization.” The future reality will
probably be somewhere in the middle of these two titles. Hopefully, the period of change will not

The good in globalization

Richard W. Fisher and W. Michael CoxAPRIL 9, 2006

DALLAS — The protests in France over job security for young workers have exposed the fault
lines between globalization and public policy. On the one hand, the French government has
recognized that the country's labor laws are uncompetitive and a drain on the economy. The
public reaction, however, shows the depth of misunderstanding regarding the realities of our
globalizing economy.
Nations can no longer sit within their borders and pursue policies incompatible with an
increasingly integrated world economy. The types of services, manufacturing and
entrepreneurship that generate national wealth are more mobile than ever, and they will forsake
countries that shackle business and labor with unnecessary burdens.

With this in mind, the Federal Reserve Bank of Dallas set out to document the connection
between globalization and public policy. We found that the more globalized nations tend to
pursue policies that achieve faster economic growth, lower inflation, higher incomes and greater
economic freedom. The least globalized countries are prone to policies that interfere with
markets and lead to stagnation, inflation and diminished competitiveness.

For our study, we began with research by Foreign Policy magazine and A.T. Kearney, a
management consultancy firm, which ranked 60 countries by degree of globalization. Singapore,
Ireland, the United States and other countries at the top of the rankings are far more integrated
into the world economy than the insulated nations at the bottom like Iran, Egypt and Bangladesh.
We divided the countries into four groups and looked at how each faction performed on policies
that shape economic performance.

Take inflation. In a world where investment capital can flit anywhere in the world with the click
of a computer mouse, nations should see the virtue of price stability and preserving the value of
money. And they do: The more globalized countries we studied had an average inflation rate of
2.3 percent from 2001 to 2003, compared with 10 percent for the nations in the least globalized
quarter.

This pattern is repeated in more than a dozen aspects of effective public policy, as measured by
the World Bank, Harvard University, the Heritage Foundation, Transparency International and
the Fraser Institute, a Canadian public policy group. (Although these groups used various
ranking systems to portray their data, we took the liberty of converting each to a 1-to-10 scale,
with 10 being the most successful, for the accompanying graphs.)

The gist is clear: As nations become more integrated into the world economy, they tend to
maintain fewer barriers to trade and the movement of money. They are less likely to impose
punishing corporate taxes and onerous regulations. Their technology policies are more favorable
to innovation. Nations more open to the world economy score above the less globalized countries
in respect for the rule of law and protection of property rights. More globalized countries also
offer greater political stability.

Not all policies fit neatly into this framework. We found that more globalized counties do no
better in limiting the size of government, which we consider vital to economic prosperity. They
are worse than the less globalized in containing public entitlements and subsidies, which must be
paid for by higher individual income taxes. Perhaps it is because they are richer and have the
means to spread those riches through their societies.

The French contretemps illustrates why labor policies are less sensitive to globalization than
factors like taxation and trade barriers. As long as workers refuse to acknowledge that they are
competing in a world economy, they will petition a wealthy government to protect their jobs.
This in turn slows job growth and raises unemployment, creating a greater demand for expensive
and expansive safety nets for idle workers.

Still, globalization may yet alter labor policies. France, Germany and other countries are
beginning to recognize that their labor rules are uncompetitive, and the timing of change is a
political question, not an economic one.

So, do our statistics show that globalization is necessarily the cause of good policies? That would
be overstating it - our data simply show the two trends are complementary. But it is clear that
countries with solid policies will be more successful in the global economy. The chicken-and-
egg debate shouldn't detract from the fundamental fact that globalization and good policies go
together.

Globalization's critics argue that a more open world economy sets off a race to the bottom by
encouraging countries to jettison protections for consumers, workers and the environment. In
reality, the opposite is true. If our data demonstrate anything, it is that globalization prompts a
race to the top by pushing countries to abandon policies that burden their economies in favor of
those that fuel growth and economic opportunity.

(Richard W. Fisher and W. Michael Cox are, respectively, the president and the chief economist
of the Federal Reserve Bank of Dallas.)
Globalization is the system of interaction among the countries of the world in order to develop the
global economy. It refers to the integration of economics and societies all over the world. Globalization
involves technological, economic, political, and cultural exchanges made possible largely by advances in
communication, transportation, and infrastructure.

It really helps for the people who work abroad in many different ways. However, globalization can also
be disadvantageous as it might affect the nations to lose its own culture and just be like any other
nation. e Globalization has also resulted in increased employment opportunities to the individuals across
the globe. The national borders are no more the limits for individuals to search for their dream job
(Thomas, 2000). Globalization has also facilitated changing of gender roles and securing women’s place
in a work place, especially in the developing countries. The trend of having more skill intensive jobs, over
mere qualifications, is also a positive impact of globalization. Many of the educational systems across
the world are also preparing themselves to deliver industry ready candidates with globally accepted
skills (Jackson and Andrews, 1999).

o conclude with, Globalization is a dual edge sword that has both positive and negative impacts on the
individual level as well as national level. The Globalization has necessarily increased economic prosperity
and opportunities in several developing nations, but has also deprived several qualified professionals
from developed countries, thanks to its Outsourcing phenomenon. Overall the Globalization has
facilitated sharing of resources, information and skills for the development and progress of the entire
global economy