Effects of Globalization Essay

Globalisation has been the most debated topic among businesspeople, economists and politicians in the recent years. Globalisation is defined as â€Å"the shift towards a more integrated interdependent world economy† (Hill, Cronk, & Wickramasekera, 2008). The trend towards greater globalization has been driven by two macro factors. The first factor is the declining trade and investment barriers that have occurred since the end of World War 2 (Hill, Cronk, & Wickramasekera, 2008). The next factor is the dramatic technology developments in recent years in communication, information processing and transportation (Hill, Cronk, & Wickramasekera, 2008). The following research will focus on the positive and negative impacts of globalisation on jobs, wages, the environment, working condition and national sovereignty. Jobs Benefits Heckscher-Ohlin theory asserts that more abundant a factor, the lower its cost (Hill, Cronk, & Wickramasekera, 2008). High population countries like China and India, which provide abundant labours in low cost, can attract more investment from overseas. Hence, globalization can boost greater employment opportunities in less developed countries (Ghose, 2000). For example, the rapidly expanding rose industry in Ecuador generates US$240 million in sales and supports tens of thousands of jobs in Ecuador (Thompson, 2003). Apart from that, India’s computer-software and service, which is undertaking the outsourced office functions for companies based in United States, Australia and the United Kingdom, has employed 1.3 million people in 2006 (Bhattacharjee, 2006). In addition, Accenture, which is a large US management consulting and information technology firm, has recently created 5000 jobs opportunities in software development and accounting in Philippines (Birnbaum, n.d.). Procter & Gamble has also employed 650 professionals who prepare the global tax returns for the company in the Philippines (Engardio, Bernstein, & Kripalani, 2003). The ANZ bank in Australia decided to increase 1100 employees in its Indian Information Technology operations based in Bangalore (The Sydney Morning Herald, 2005). Logitech as one of the world’s largest producers of computer mouse, has employed 4000 workers to assemble mouse in its own factory in Suzhou, China (Chief Executive, 2003). Costs However, globalization critics argue that technological change in globalization that favored skilled workers may have further depressed the demand for low-skilled workers (Goldberg & Pavcnik, 2007). Nissanke & Thorbecke (2008) also claim that new technology is heavily biased in favour of skilled and educated labour. Globalization is a threat for jobs losses to countries with lower cost structures due to lack of regulation or inadequate enforcement of labour, health, safety and environmental standards (Foley, 2006). For example, over 350 workers were retrenched in Australia and New Zealand as the manufacture plant of the iconic boot maker, Blundstone, would be shifted to Asia (Barlow, 2007). Apart from that, the Bank of America cut nearly 5000 jobs from its US-based information technology workforce and transferred some of these jobs to India since the work that costs $100 an hour in the United States can be done for $20 an hour in India (Engardio, Bernstein, & Kripalani, 2003). Apply the mercantilism theory, the ANZ bank’s step to increase employees in Bangalore will cost job loss in Australia while trying to save cost for the bank. Wages Benefits Workers in less developed countries can earn higher wages as a consequence of globalization (Brunner, 2003). Lustig’s study (1998) also shows that wages of skilled workers increased by more than 15 percent. For instance, a worker in Ecuador earns the equivalent of US$210 a month which is substantially above the country’s minimum wage of US$120 a month (Thompson, 2003). Levi Strauss & Co favours to do business with partners who provide wages and benefits that fulfill the applicable laws and match the prevailing local industry practices under the Global Sourcing and Operating Guidelines of the company (Levi Strauss & Co, n.d.). Costs On the other hand, globalization has reduced the wages of unskilled labor relative to high skilled labor in Latin America (Wood, 1997). According to Lustig (1998), wages of unskilled workers fell by 15 percent as a result of free trade. Environment Benefits Although there are many cases that show multinationals have caused many severe environmental damages, there are also multinationals that help preserve the environment. One of the examples will be The Body Shop. The company uses as little packaging as possible in order to conserve natural resources and reduce waste (Bartlett, Elderkin, & McQuade, 1991). Customers are encouraged to bring old containers to the shop to refill as a consequence in getting a discount on the next purchase by doing so (Bartlett, Elderkin, & McQuade, 1991). The Body Shop has made an agreement with the Kayapo Indians, who harvest Brazil nuts in the Amazon rain forest. One of the goals of the agreement is to protect the plants in the Kayapo Indians harvest in the rain forest (Bartlett, Elderkin, & McQuade, 1991). The company is now introducing plastic bottles made from 100 % recycled material. It replaced all its carrier bags with 100 per cent recycled and recyclable paper bags in 2008. It a lso increased the recycled content in the gift packaging (The Body Shop, 2009). Starbucks is another good example to show its corporate ethic in preserving the environment. For example, Starbucks is using the U.S. Green Building Council’s LEED ® certification program as a benchmark in constructing their high performance green buildings. (LEED ® is short for Leadership in Energy and Environmental Design) (Starbucks, 2010). Starbucks offers a 10-cent discount in the U.S. and Canada to encourage customers to use their own mugs or tumblers for their beverages. Starbucks introduced Grounds for Your Garden in 1995, which offers its customers complimentary five-pound bags of used coffee grounds to enrich garden soil (Starbucks, 2010). Costs Environmentalists believe that globalization can threaten the planet’s ecosystems (Jabbra & Dwivedi, 2004). They argued that the world is facing severe environmental challenges such as global warming, water pollution and acid rain (Jabbra & Dwivedi, 2004). For example, California winemaker Robert Mondavi planned to invest in a project in France to produce high quality wine that would be sold in Europe. However, the plan had been objected by the local environmentalists since they argued that the plan would destroy the ecological heritage of the area (Henley, 2001). The formation of the North American Free Trade Agreement (NAFTA) between Canada, Mexico and the United States in 1994 was opposed to allow US manufacturing firms to freely pollute the environment after moving to Mexico (Chaote, 1993). A BHP majority-owned mine was responsible for discharging the by-products from mining into the pristine Ok Tedi river in Papua New Guinea which can cause severe environmental damage. There was a dislocation of the local villagers as a result of the severe pollution (Lafitte, 1995). Shell as one of the largest oil producers in the world has been criticised for causing major oil spill incidents which results in the death of most agriculture and the contaminated of the farming land in Nigeria (Hinman, 1993). The solution to the problem is not to roll back the globalization efforts that have led to economic growth. In fact, it is to get all the nations of the world to set higher limit standard on pollutions. Working Condition Benefits Evidence indicates that foreign ownership improves the working conditions in the process of raising wages (Brown, Deardorff, & Stern, 2002). For instance, some responsible growers in Ecuador have joined a voluntary program aimed at helping customers to identify responsible growers. The growers have distributed protective gear, trained workers in using chemicals, and hired doctor to visit workers at least a week (Thompson, 2003). Under the Global Sourcing and Operating Guidelines of the company, Levi Strauss & Co favours partners who utilize less than sixty-hour work weeks and will not use contractors who require in excess of a sixty-hour work week (Levi Strauss & Co, n.d.). Levi Strauss & Co will only do business with partners who provide workers with a safe and healthy work environment (Levi Strauss & Co, n.d.). Business partners who provide residential facilities for their workers must provide safe and healthy facilities. For instance, Levi Strauss & Co terminated a long term contract with one of its large suppliers after discovering it allegedly forcing 1200 Chinese and Filipino women to work 74 hours per week in guarded compounds on the Mariana Islands (Donaldson, 1996). Unilever has a code of ethics to provide safe and healthy working conditions for all employees. Unilever implemented a coordinated response across all its operations to combat the outbreak of the Influenza A (H1N1) virus around the world. For instance, Unilever provided clear guidelines to its operations on how to respond to the pandemic, posted materials across the office and factory, highlighted the simple steps individuals could take to protect themselves and made sanitizers available in appropriate locations (Unilever, 2010). Unilever requires all its professional drivers worldwide to have regular medical check-ups to ensure their fitness to drive and have also banned the use of mobile phones while driving (Unilever, 2010). Unilever has globally launched a campaign named Lamplighter which involves coaching employees individually on their exercise, nutrition and mental resilience, and monitoring their progress through an initial check-up and six-monthly follow-ups (Unilever, 2010) . Costs According to Schaeffer (2003), globalization has contributed significantly to the poor working condition of workers. Some critics also state that globalization has a deleterious effect on working conditions of workers in most of the developing country (Frenkel & Kuruvilla, 2002). For example, workers in Ecuador always fumigate roses in normal clothes without any protective equipment (Thompson, 2003). Some scientists state that many employees in the industry have serious health problems as a result of exposure to toxic chemicals (Thompson, 2003). A study from the International Labour Organisation claimed that female employees in the industry had more miscarriages than average and 60% of the workers suffered from headaches, nausea, blurred vision and fatigue (Thompson, 2003). Apart from that, Nike has always been accused for violating the employees’ right in the workplace. In 2001, the Panorama team uncovered occurrences of child labour and sweatshop working conditions in a Cambodian factory used by Nike. They work seven days a week, often up to sixteen hours a day (Kenyon, 2000). Workers reported that they were punished to clean toilets or run around factory grounds as a penalty for being late (BBC News, 2001). There were also reports of workers being coerced into sex and being fondled by managers (BBC News, 2001). Workers still work in dangerous conditions such as inhaling toxic chemicals and losing fingers in cutting machines (BBC News, 2002). While auditing 569 factories in 2003 and 2004, Nike found that up to 50 percent of the contract factories restrict workers’ access to toilets and drinking water during the work day (MSNBC, 2005). National Sovereignty Cost Economic globalization has caused the loss of national sovereignty as the inability of national governments to control their citizens (Allison, 2000). Schaeffer (2003) also claims that globalization has prompted a nation to have limited sovereignty. This is because increasingly interdependent global economy shifts economic power away from national government and towards supranational organizations like the World Trade Organisations (WTO), the European Union (EU) and the United Nations. WTO can instruct a member state to alter trade policies that violate GATT regulations. If the violator refuses to do so, the WTO allows other states to impose trade sanction on the transgressor. The European Union (EU) lost its national sovereignty while banning the imports of hormone-treated beef from the United States that might lead to health problem. This is because EU ban was not allowed under the General Agreement on Tariffs and Trade (GATT) of World Trade organization (WTO) (Hill, Cronk, & Wickramasekera, 2008). However, EU refused to comply with it and US government imposed 100% tariff on imports of certain EU products (Hill, Cronk, & Wickramasekera, 2008). It shows that EU’s decision is bind under GATT. Nigeria has lost its national sovereignty in the oil industry since the government is afraid to harm the nation’s economy. Not only do the multinationals take all the profits, they also give all valuable positions to foreign specialists brought in. This only leaves bad, low-paying jobs to the locals. As a result, the country does not receive any profit it should for natural resources found on its land. (Combating the exploitation of workers in developing nations by multinational corporations, n.d.). Conclusion Last but not least, it is not surprised to learn the fact that there are winners and losers in the process of globalisation since the costs and beneï ¬ ts of globalization are not equally distributed (O’Hara & Biesecker, 2003). However, â€Å"globalisation has brought more benefits than costs† (Gunter & van der Hoeven, 2004). Globalization is an extremely powerful movement and it is impossible to stop it (Cummins & Venard, 2008). Thus, all countries should involve in free trading in order to enhance the world economy.