Positive and Negative Factors of Globalisation:

Positive and Negative Factors of Globalisation:

As we know, globalisation insists sharp and continuing integration of the world economy and free movement of goods, services, capital and finance across national boundaries. In the world currency markets, trillions of dollars are exchanged every day. Goods and services are traded across countries and help in achieving higher growth rates for the countries. During the last decades there have been several discussions on the implications and impact of globalisation on development economy culture and moral values.

 According to Sobel (2009) “Globalisation consists of multiple processes by which people in one society become culturally, economically, politically, socially, informational, strategically epidemiologically and ecologically closer to people in geographically distinct societies”.

These processes include the expansion of cross border trade, production of goods and services by MNCs, out sourcing the work across borders, movement of people, exchange of ideas and popular culture, flow of environmental effects and flow of disease from one state to another, and routine transfer of billions of dollars across borders in no time. They connect communities, cultures, national markets, for goods and services and national markets for labour and capital. Today every aspect of our life has a global component.

The extent of global influence on our lives, and our interpretation of globalisation varies depending upon where we live, our nationality, our income, our professions, the openness and strength of our national political economies and how the process of globalisation affects us at any specific time. Creating connections across national boundaries can bring good and bad consequences. Some of the consequences of globalisation improve the human wellbeing, enhance social welfare, create wealth and enrich our life. Globalisation like any other process may also have its negative effects. It may spread illness, contribute to violent conflicts and threaten our environment.

Positive Effects Globalisation:

One of the positive effects of globalisation is that it enhances the movement of goods and services across border easier. We shall now discuss in brief the factors favouring globalisation in India.

1. Human Resources: India has advantage that it has largest pool of scientific and technical work force. Scientists and technical persons are hard workers and loyal to their employers. Given the right environment Indians can do excellent job not only in the fields of computers, electronics and software but also in the other professional fields such as C.A. financial analyst, stock market banks insurance and managements. India has an advantage that it has young and working age population who can be employed at a low cost in comparison with other developed countries. Many youths are working in other countries and sending their earning back to India in the form of remittances. Remittances clearly improve the life of the households that receives them in addition of the income recipients. Officially recorded remittances to developing countries reached at $ 330 billion in the year 2008. In India remittances jumped 19% to $ 66 billion in the year 2011-12. Remittances in the current fiscal from non-resident Indians are likely to exceed $75 billion despite global recession. This is because of fall in the value of rupee in 2012-13.   

Table-1: Remittances Received in India (in US $ Billion)

S.No.	Year	Amount
1.	2006-2007	29.10
2.	2007-2008	37.20
3.	2008-2009	51.60
4.	2009-2010	55.06
5.	2011-2012	66.10
6.	2012-2013	67.60
7.	2013-2014	70.39
8.	2014-2015	66.30
9.	2015-2016	68.9

2. Higher Growth: It is also believed that the globalisation also helps countries to achieve higher growth rates and human welfare. The rate of growth of GDP of India has increased from 5.4% during 1980-90 to nearly 6.3% during 1992 to 2005. It reached at a peak of 9.5 % during 2005 to 2008. It started declining due to the adverse effect of global slowdown during 2008-09 to around 7% and further declined to below 6% in the year 2012-13. Thus the figures reveal that the effects of globalisation on Indian economic growth have been quite positive.

3. Market Expansion: Between 1950 and 2005 world GDP increased six fold from about $ 8 trillion to $ 48 trillion, but the world trade in goods increased much faster from less than $ 1 trillion to $ 24 trillion or half the value of global output. India has also been a beneficiary of the globalisation process. Indian share in world trade has shown significant improvement from about 0.7 % in 2001 to 1.2% in 2010.  Now the economies have recovered from the shock and the year 2010 have shown the fastest growth in the trade volume reports WTO.

Reduces marketing costs:

 Companies that sell global products can reduce costs by standardizing certain marketing activities. A company selling a global consumer good, such as shampoo, can make an identical product for the global market and then simply design different packaging to account for the language spoken in each market. Companies can achieve further cost savings by keeping an ad’s visual component the same for all markets but dubbing TV ads and translating print ads into local languages.

Creates new market opportunities:

 A company that sells a global product can explore opportunities abroad if the home market is small or becomes saturated. For example, China holds enormous potential for e-business with more than 400 million Internet users, which is greater than the population of the entire United States. But while more than 70 percent of people in the United States actively surf the Web, just 30 percent of people in China do. Levels income across seasons:

A company that sells a product with universal, but seasonal, appeal can use international sales to level its income stream. By supplementing domestic sales with international sales, the company can reduce or eliminate wide variations in sales between seasons and steady its cash flow

Local tastes are important:

Despite the potential benefits of global markets, managers must constantly monitor the match between the firm’s products and markets to not overlook the needs of buyers. The benefit of serving customers with an adapted product may outweigh the benefit of a standardized one. For instance, soft drinks, fast food, and other consumer goods are global products that continue to penetrate markets around the world. But sometimes these products require small modifications to better suit local tastes.

4. Increase in Competition: Globalisation is seen as an opportunity by many as the firms can import technology and raw material at the lowest available rate and cut cost, improve quality and sell anywhere in the world. Liberalisation and competition enhance consumer choice and consumer satisfaction.

5. Improvement in Health: India is already a signatory of Alma-Ata. The declaration of Alma-Ata was adopted at the International Conference on Primary Health Care (PHC), Almaty (formerly Alma-Ata), Kazakhstan 6-12 September 1978. India is committed to attain the goal of “Health for All”. At Alma-Ata.  World Health Organisation (WHO) and UNICEF presented a new strategy based on primary health care   for achieving this goal. The declaration has 10 points and is non-binding on member states. The National Health Policy, which was declared by the Parliament in 1983, reiterated India’s commitment to attain the goal of Health for all by the year 2000 to ensure improved quality of life.

The Millennium Development Goals (MGDs) are 8 international targets that all 192 United Nations member states and a large number of international Organisations have agreed to achieve by the year 2015. They include cutting extreme poverty, reducing child mortality rates, fighting diseases such as AIDS and developing a global partnership for development around the world. The globalisation helps in expansion of health infrastructure, availability of good medical facilities and health services and serves people.

6. Improvement in Education: Investing in education seems to be an important strategic intervention that government can make. Education seems to have capability to influence many other variables. The world conference on Education for All listed some consequences of investment in primary education;

            To improve productivity of factor (Worker);        

            To help people in the field by providing skills for self employment and entrepreneurship;

            To help people to earn higher incomes;

To contribute to increase in productivity;

The world Conference on Education for All expanded the vision of basic education for all and emphasised:

            Universalising Access and promoting equity;

            Focus on Learning

            Broadening the means and scope of Basic Education;

            Enhancing the environment of learning;

            Strengthening partnership

The period of Globalisation helps in setting such targets and managing resources through international; financial institutions and agencies.

10.                          Globalisation of Production:

Many production activities are also becoming global. Globalization of production refers to the dispersal of production activities to locations that help a company achieve its cost-minimization or quality-maximization objectives for a good or service. This includes the sourcing of key production inputs (such as raw materials or products for assembly) as well as the international outsourcing of services. Let’s now explore the benefits that companies obtain from the globalization of production.

11.                          Access lower cost workers:

Global production activities allow companies to reduce overall production costs through access to low-cost labour. For decades, companies located their factories in low-wage nations to churn out all kinds of goods, including toys, small appliances, inexpensive electronics, and textiles. Yet whereas moving production to low-cost locales traditionally meant production of goods almost exclusively, it increasingly applies to the production of services such as accounting and research. Although most services must be produced where they are consumed, some services can be performed at remote locations where labour costs are lower. Many European and U.S. businesses have moved their customer service and other nonessential operations to places as far away as India to slash costs by as much as 60 percent.

12.                          Access production inputs:

 Globalization of production allows companies to access resources that are unavailable or more costly at home. The quest for natural resources draws many companies into international markets. Japan, for example, is a small, densely populated island nation with very few natural resources of its own—especially forests it therefore imports pulp and also owns forests in other countries.   This gives the firm not only access to an essential resource but also control over earlier stages in the papermaking process. As a result, the company is guaranteed a steady flow of its key ingredient (wood pulp) that is less subject to swings in prices and supply associated with buying pulp on the open market. Likewise, to access cheaper energy resources used in manufacturing, a variety of Japanese firms are relocating production to China and Vietnam, where energy costs are lower. Despite its benefits, globalization also creates new risks and accentuates old ones for companies. To read about several key risks that globalization heightens and how companies can better manage them, see this chapter’s Global Challenges feature, titled “Managing Security in the Age of Globalization.”

10.   Increased Free Trade between Nations:  Though India’s foreign trade has made cumulative progress but the size of foreign trade and its value both have increased at a slow rate that cannot be said satisfactory from any angle. Indian share in world trade was only 0.57 per cent in 1980s, which came down to 0.53 per cent in 1991. However, after liberalisation, it started picking up and has gone above one per cent. Our Balance of Payments has always remained negative since the beginning of the planning with the exception for few intervening years. Economists generally welcome liberalization of international trade and prescribed free trade as the regime that maximize global economic welfare.

11. Increased flow of communication: The improvement in communication, through the introduction and constant development high speed and accessibility of the internet has allowed international exchange to be done at one click of a button. The increased communication helps in expansion of knowledge of the residents. Newer culture and technology are opened to a particular country; their knowledge base also grows and expands. Employment opportunities are also available to the citizens.

12. Easy and Speedy: Transportation of goods and people: Economists also recommends free trade as a policy that is likely to produce welfare gain for each national economy. Consumers can get goods from those countries that produce them at low cost. Thus, both countries gain. The high price country can gain by importing godsend services, capital and labour at a lower price. While the lower price country can gain by exporting the goods at higher price that it would fetch at home.

13. Increased cooperation and reduction of likelihood of War: Where some of the consequences of globalisation improve the human condition, enhance social welfare, create wealth and enrich our lives The very extent of economic globalisation and the cross border cooperation necessary to fuel that that globalisation can produce dislocation, spread illness and contribute to violent conflicts. World have seen two such World Wars in which more than 70 million people dead and far more injured physically and psychologically.

Disadvantages of Globalisation

1.                  Increase Poverty and Inequality:

During the 20th century, global average per capita income rose strongly, but with considerable variation among countries. It is clear that the income gap between rich and poor countries has been widening for many decades. The most recent World Economic Outlook studies 42 countries (representing almost 90 percent of world population) for which data are available for the entire 20th century. It reaches the conclusion that output per capita has risen appreciably but that the distribution of income among countries has become more unequal than at the beginning of the century.

But incomes do not tell the whole story; broader measures of welfare that take account of social conditions show that poorer countries have made considerable progress. For instance, some low-income countries, e.g. Sri Lanka, have quite impressive social indicators. One recent paper finds that if countries are compared using the UN’s Human Development Indicators (HDI), which take education and life expectancy into account, then the picture that emerges is quite different from that suggested by the income data alone.

Indeed the gaps may have narrowed. A striking inference from the study is a contrast between what may be termed an "income gap" and an "HDI gap". The (inflation adjusted) income levels of today’s poor countries are still well below those of the leading countries in 1870. And the gap in incomes has increased. But judged by their HDIs, today’s poor countries are well ahead of where the leading countries were in 1870. This is largely because medical advances and improved living standards have brought strong increases in life expectancy. But even if the HDI gap has narrowed in the long-term, far too many people are losing ground. Life expectancy may have increased but the quality of life for many has not improved, with many still in abject poverty. And the spread of AIDS through Africa in the past decade is reducing life expectancy in many countries. This has brought new urgency to policies specifically designed to alleviate poverty.

Countries with a strong growth record, pursuing the right policies, can expect to see a sustained reduction in poverty, since recent evidence suggests that there exists at least a one-to-one correspondence between growth and poverty reduction. And if strongly pro-poor policies for instance in well-targeted social expenditure are pursued then there are a better chance that growth will be amplified into more rapid poverty reduction. This is one compelling reason for all economic policy makers, including the IMF, to pay heed more explicitly to the objective of poverty reduction.

 It is very difficult to reach at consensus on the issue of globalisation. Some experts praise globalization and integration of various economies. Alongside the numerous advantages s of globalisation there do exists some disadvantages of globalisation. While some experts see great opportunities in interdependence in the biggest problem of globalisation- as domino effect of economic crisis in one country can result in some severe repercussions on various countries with whom it shares economies ties. The following are the disadvantages of globalisation:

2.                  Globalization Harm Workers’ Interests:

Anxiety about globalization also exists in advanced economies. How real is the perceived threat that competition from "low-wage economies" displaces workers from high-wage jobs and decreases the demand for less skilled workers? Are the changes taking place in these economies and societies a direct result of globalization? Economies are continually evolving and globalization is one among several other continuing trends.

• One such trend is that as industrial economies mature, they are becoming more Service oriented to meet the changing demands of their population.

• Another trend is the shift toward more highly skilled jobs.

In fact, globalization is making this process easier and less costly to the economy as a whole by bringing the benefits of capital flows, technological innovations, and lower import prices. Economic growth, employment and living standards are all higher than they would be in a closed economy. But the gains are typically distributed unevenly among groups within countries, and some groups may lose out. For instance, workers in declining older industries may not be able to make an easy transition to new industries.

What is the appropriate policy response? Should governments try to protect particular groups, like low-paid workers or old industries, by restricting trade or capital flows? Such an approach might help some in the short-term, but ultimately it is at the expense of the living standards of the population at large. Rather, governments should pursue policies that encourage integration into the global economy while putting in place measures to help those adversely affected by the changes. The economy as a whole will prosper more from policies that embrace globalization by promoting an open economy, and, at the same time, squarely address the need to ensure the benefits are widely shared. Government policy should focus on two important areas:

• Education and vocational training, to make sure that workers have the opportunity to acquire the right skills in dynamic changing economies; and

• Well-targeted social safety nets to assist people who are displaced.

The MNCs from the developed countries invest in developing countries wherein they get cheap labour. Critics seek it as exploitation of labour.

 3. Economic Problem: In the globalised world, there are greater chances that economic disputation in one nation may have a disastrous impact on various other nations, closely related to it in terms of trade and commerce. It will be a Domino effect, wherein disturbances in one economy will result in disturbance in another and so on.

4. Cultural Problems: Culture and Globalisation seem to be at the loggerheads. Critics have a definite opinion that globalisation will hamper the age-old culture which have been followed religiously all over the world. The impact of the globalisation is noticeable in popular culture as well. Whether it is music, films or TV shows the international influence is slowly taking over. The western culture stands as an example of disadvantage and destroying the age-old traditions and culture in India.

5. Rise in Unemployment: One may feel that globalisation is promoting employment, but in fact, the developed countries are facing serious competition from cheap labour coming from highly populated countries. In developed countries, people are losing jobs because of outsourcing. Countries in developed world are facing great threat from out sourcing and decline in employment opportunities. This is also becoming a big political issue now a day.

6. Spread of Disease: Increase in flow of people will also result in spread of diseases, and thus make people more vulnerable to health issues. We do have many such examples wherein outbreak of a particular disease happened in some part of the world spread through the world before various stakeholders realise.

There are a few more disadvantages of globalisation such as environmental hazards, transfer of harmful and old technologies to developing countries and use of international; platform to fulfil the national objectives of developed world. Besides bilateral and regional trade blocks and treaties for cooperation among developing and developed countries can also work against the objectives of international cooperation.

The strong point that the critics of globalisation and supporters of anti-globalisation movement want to make is that this process will result in implications in terms of economics, culture, health, and employment and most of the countries are not ready to take on these disadvantages head-on. Therefore, the need of the hour is to discuss various pros and cons of globalisation and find out ways where advantages are maximised in the interest of the nation.

7. Globalization reduces national sovereignty:

Does increased integration, particularly in the financial sphere make it more difficult for governments to manage economic activity, for instance by limiting governments’ choices of tax rates and tax systems, or their freedom of action on monetary or exchange rate policies? If it is assumed that countries aim to achieve sustainable growth, low inflation and social progress, then the evidence of the past 50 years is that globalization contributes to these objectives in the long term.

In the short-term, as we have seen in the past few years, volatile short-term capital flows can threaten macroeconomic stability. Thus, in a world of integrated financial markets, countries will find it increasingly risky to follow policies that do not promote financial stability. This discipline also applies to the private sector, which will find it more difficult to implement wage increases and price mark ups that would make the country concerned become uncompetitive. In short, globalisation does not reduce national sovereignty. It does create a strong incentive to pursue sound economic policies. However, there remains a risk of huge capital in and out flow in the country generating economic fluctuations.

Indian Economy: Recent Trend of Globalisation and Liberalisation:

For the Indian economy to grow with equality and economic justice, the informal sector, home-based production and cottage industries need to achieve high growth with policy and institutional support. The contribution of these sectors to any economy cannot be ignored. This is especially true for a country like India, as they are important sources of employment and income for many families. They have 40 percent share in the total industrial output, 35 percent in exports, and over 80 percent in employment. However, many of such sectors are not doing well in this era of globalisation, which encompasses economic liberalisation. It has been found that in order to overcome the challenges and avail opportunities of globalisation and economic liberalisation, these sectors and associated entrepreneurs need institutional support for technology up-gradation, infrastructure support for market penetration, and adequate working capital finance from the banking sector.

India embarked upon the process of economic liberalisation in 1991. Since then liberalization has exposed all industrial units including small home-based enterprises in the informal sector to the inherent risks of free market competition. Globalisation has intensified the market competition by allowing imports and multinational corporations. The reform process of the

Indian economy has a far reaching impact on Indian informal sector. Most of the problems, during this era of economic liberalisation, arise due to the unorganised nature of the sector, lack of data and information, use of low technology and poor infrastructure of the sector.

The setting up of the WTO (World Trade Organization) in 1995 has intensified global competition. The World Trade Organization regulates multilateral trade and enforces its member countries to remove import quotas and other import restrictions, and to reduce import tariffs. In addition, countries, especially the developing countries, are asked to stop subsidies to exports as well as to domestic production. As a result, every single individual enterprise in India, small or large, whether exporting or serving the domestic market, has to face competition.

In India, selective de-reservation of some SSI products and removal of QRs (Quantitative

Restrictions) have started taking place with a view to enhancing exports and competing effectively in the global market. Out of 836 items reserved for production under SSI, 162items have been de-reserved and almost all the items are placed on the OGL (open general license) list of imports. This opens up the possibility of direct competition in the domestic market with the imports of high quality goods from the developed countries and cheap products from the other less developed countries.

Competition in the domestic market would further be intensified with the arrival of multinational companies as the restrictions on foreign direct investment have been removed.

Removal of quantitative restrictions and lowering tariffs are creating a serious impact on the small and informal sector, leading to closure of some units and consequent displacement of labour. In view of several desirable socio-economic objectives, Abid Hussain Committee made out a strong case for support and promotional policies to encourage the development of

SSIs left to free market forces. The committee recommended to effectively addressing the problems faced by the SSI units.

The silver lining amidst the fierce competition lies in exploiting the opportunities of globalization in terms of outsourcing, sub- contracting and ancillarisation of the products manufactured by corporate. To be able to face competition in a level playing ground the Indian informal sector needs to be endowed with technological up-gradation and modernisation. In the changing economic scenario, it is the knowledge-based technology, organization and information which will be able to improve the quality and competitiveness of products and thus help to face competition from imports. The free economy will usher inaccessibility to bigger markets, greater linkages for SSI with larger companies and marketing outfits, improved manufacturing techniques and processes.

However, the sector is afraid of adopting new technology because of the huge initial capital investment and adjustment of production process, uncertain input supply, marketing prospect and profit of the products manufactured with new technology. Other major impediments are lack of knowledge of technology sourcing, evaluation and demonstration facilities, lack of surveys and feasibility studies etc. Therefore, for the development of this sector there needs to be a major thrust on technology intervention in clusters which offers the small units an opportunity and easier access to get acquainted with new technologies.

Civil society and government agencies can play a significant role in educating small units about the changes in the business environment and the necessity of going in for technological up-gradation. Civil society organizations are mostly unable to come to a platform for conducting meaningful dialogues (exchange of information and views), taking forward the outcomes at appropriate levels and disseminate the learning to their respective constituencies. Thus, there is the need to facilitate the process of learning (through exchange of information and views) for policy advocacy at different levels. This will go a long way to instil trust and confidence in these units.

A Look to Current Phase of Globalization

Globalization, of course, is not a new phenomenon. The period 1870 to 1913 experiences growing trend towards globalization. The new phase of globalization which started around mid-20th century became very wide spread, more pronounced and over charging since the late 1980s by getting more momentum from the political and economic changes that swept across the communist countries, the economic reforms in other countries, the latest multilateral trade agreement which seeks to substantially liberalize international trade and investment and the technological and communication revolutions. There are several similarities and differences between the two phases of globalization. The Human

Development Report, 1999, mentioned the following as the new features of current phase of globalization:

1) New Market

• Growing global markets in services- banking, insurance, transport.

• New financial markets- deregulated, globally linked, working around the clock, with action at a distance in real time, with new instruments as derivatives.

• Deregulation of antitrust laws and proliferation of mergers and acquisitions.

• Global consumers market with global trends.

2) New Actors

• Multinational corporations integrating their production and marketing, dominating food production.

• The World Trade Organization- the first multilateral organization with authority to enforce national governments’ compliance with rules.

• An international criminal court system in the making.

• A booming international network of NGOs.

• Regional blocs proliferating and gaining importance- European Union, Association of

South-East Asian Nations, North American Free Trade Association, Southern

Africa Development Community, among many others.

• More policy coordination groups- G-7, G-40, G-22, G-77, and OECD.

3) New Rules and Norms

• Market and economic policies spreading around the world, with greater privatization and liberalization.

• Widespread adoption of democracy as the choice of political regime.

• Human rights conventions and instruments building up in both coverage and number of signatories and growing awareness among people around the world.

• Consensus goals and action agenda for development.

• Conventions and agreements on the global environment- biodiversity, ozone layer, disposal of hazardous wastes, desertification, and climate change.

• Multilateral agreement in trade, taking on such new agenda as environmental and social conditions.

• New multilateral agreement for services, intellectual property, communications, more binding on national governments than any previous agreements.

• The Multilateral Agreement on Investment under debate.

4) IT Revolution:

• Internet and electronic communication linking many people simultaneously.

• Cellular phones.

• Fax machines

• Faster and cheaper transport by air, rail and road.

• Computer aided design.

Exercise

1. What do you mean by Globalization? Bring out the nature and causes for globalization of Industry.

2. Discuss the issues involved in globalization. Does globalisation harm poor and increases inequalities?

3. Discuss the meaning of Globalisation. What are its advantages and disadvantages?

4. Globalisation is harmful and does not help developing countries to increase the rate of   growth. Discuss this statement.

5. Define globalization. How does denationalization differ from internationalization?

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