How globalization works

In simple terms, globalization is the process by which people and goods move easily across
borders. Principally, it's an economic concept – the integration of markets, trade and investments
with few barriers to slow the flow of products and services between nations. There is also a
cultural element, as ideas and traditions are traded and assimilated.

Globalization has brought many benefits to many people. But not to everyone.

Storm in a coffee cup

To help explain the economic side of globalization, let's take a look at the well-known coffee chain
Starbucks.

The first Starbucks outlet opened its doors in 1971 in the city of Seattle. Today it has 15,000 stores
in 50 countries. These days you can find a Starbucks anywhere, whether Australia, Cambodia,
Chile or Dubai. It's what you might call a truly globalized company.

And for many suppliers and jobseekers, not to mention coffee-drinkers, this was a good thing. The
company was purchasing 247 million kilograms of unroasted coffee from 29 countries. Through
its stores and purchases, it provided jobs and income for hundreds of thousands of people all over
the world.

A farmer holds organic coffee beans at a coffee field in the mountains of Peru's central jungle city
of Chanchamayo August 11, 2008. Coffee production in Peru, the world's largest exporter of
organic coffee, is booming as growers focus on quality, develop niche markets and find ways
around walls that can block growth. Picture taken August 11, 2008. REUTERS/Enrique Castro-
Mendivil (PERU) - RTR21CJO
Image: REUTERS/Enrique Castro-Mendivil
But then disaster struck. In 2012, Starbucks made headlines after a Reuters investigation showed
that the chain hadn't paid much tax to the UK government, despite having almost a thousand
coffee shops in the country and earning millions of pounds in profit there.

As a multinational company, Starbucks was able to use complex accounting rules that enabled it to
have profit earned in one country taxed in another. Because the latter country had a lower tax rate,
Starbucks benefited. Ultimately, the British public missed out, as the government was raising less
tax to spend on improving their well-being.

How did globalization happen?

We might think of globalization as a relatively new phenomenon, but it’s been around for
centuries.

One example is the Silk Road, when trade spread rapidly between China and Europe via an
overland route. Merchants carried goods for trade back and forth, trading silk as well as gems and
spices and, of course, coffee. (In fact, the habit of drinking coffee in a social setting originates
from a Turkish custom, an example of how globalization can spread culture across borders.)

What drives it?

Globalization has speeded up enormously over the last half-century, thanks to great leaps in
technology.

The internet has revolutionized connectivity and communication, and helped people share their
ideas much more widely, just as the invention of the printing press did in the 15th century. The
advent of email made communication faster than ever.

The invention of enormous container ships helped too. In fact, improvements in transport
generally – faster ships, trains and airplanes – have allowed us to move around the globe much
more easily.

A ship is loaded with containers at Sydney's Port Botany container terminal March 4, 2013.
Australia's trade deficit shrank by much more than expected in February to its smallest in 14
months thanks to higher prices for resource exports, a likely boost to profits and incomes that also
gave the local dollar a lift. Wednesday's figures from the Australian Bureau of Statistics showed
exports climbed 3.3 percent overall to a seasonally adjusted A$25.64 billion, the highest total in
eight months. Earnings from farm goods, coal, metals and iron ore all increase in the month thanks
in part to rising prices. Picture taken March 4, 2013. REUTERS/David Gray (AUSTRALIA -
Tags: BUSINESS) - RTXY7G5
Image: REUTERS/David Gray
What's good about it?
Globalization has led to many millions of people being lifted out of poverty.

For example, when a company like Starbucks buys coffee from farmers in Rwanda, it is providing
a livelihood and a benefit to the community as a whole. A multinational company's presence
overseas contributes to those local economies because the company will invest in local resources,
products and services. Socially responsible corporations may even invest in medical and
educational facilities.

Globalization has not only allowed nations to trade with each other, but also to cooperate with
each other as never before. Take the Paris Agreement on Climate Change, for instance, where 195
countries all agreed to work towards reducing their carbon emissions for the greater global good.

This chart, however, shows that global attitudes towards globalizing forces aren't all that good. It
shows that, in fact, in all but a couple of countries polled, people believe life was better in the old
days.
What's bad about it?

While some areas have flourished, others have floundered as jobs and commerce move elsewhere.
Steel companies in the UK, for example, once thrived, providing work for hundreds of thousands
of people. But when China began producing cheaper steel, steel plants in the UK closed down and
thousands of jobs were lost.

Every step forward in technology brings with it new dangers. Computers have vastly improved
our lives, but cyber criminals steal millions of pounds a year. Global wealth has skyrocketed, but
so has global warming.

While many have been lifted out of poverty, not everybody has benefited. Many argue that
globalization operates mostly in the interests of the richest countries, with most of the world's
collective profits flowing back to them and into the pockets of those who already own the most.

Although globalization is helping to create more wealth in developing countries, it is not helping
to close the gap between the world's poorest and richest nations. Leading charity Oxfam says that
when corporations such as Starbucks can legally avoid paying tax, the global inequality crisis
worsens.

Basically, done wisely (in the words of the International Monetary Fund) globalization could lead
to "unparalleled peace and prosperity". Done poorly, "to disaster".

How globalization works

In simple terms, globalization is the process by which people and goods move easily across
borders. Principally, it's an economic concept – the integration of markets, trade and investments
with few barriers to slow the flow of products and services between nations. There is also a
cultural element, as ideas and traditions are traded and assimilated.

Globalization has brought many benefits to many people. But not to everyone.

Storm in a coffee cup

To help explain the economic side of globalization, let's take a look at the well-known coffee chain
Starbucks.

The first Starbucks outlet opened its doors in 1971 in the city of Seattle. Today it has 15,000 stores
in 50 countries. These days you can find a Starbucks anywhere, whether Australia, Cambodia,
Chile or Dubai. It's what you might call a truly globalized company.

And for many suppliers and jobseekers, not to mention coffee-drinkers, this was a good thing. The
company was purchasing 247 million kilograms of unroasted coffee from 29 countries. Through
its stores and purchases, it provided jobs and income for hundreds of thousands of people all over
the world.

A farmer holds organic coffee beans at a coffee field in the mountains of Peru's central jungle city
of Chanchamayo August 11, 2008. Coffee production in Peru, the world's largest exporter of
organic coffee, is booming as growers focus on quality, develop niche markets and find ways
around walls that can block growth. Picture taken August 11, 2008. REUTERS/Enrique Castro-
Mendivil (PERU) - RTR21CJO
Image: REUTERS/Enrique Castro-Mendivil
But then disaster struck. In 2012, Starbucks made headlines after a Reuters investigation showed
that the chain hadn't paid much tax to the UK government, despite having almost a thousand
coffee shops in the country and earning millions of pounds in profit there.

As a multinational company, Starbucks was able to use complex accounting rules that enabled it to
have profit earned in one country taxed in another. Because the latter country had a lower tax rate,
Starbucks benefited. Ultimately, the British public missed out, as the government was raising less
tax to spend on improving their well-being.

How did globalization happen?

We might think of globalization as a relatively new phenomenon, but it’s been around for
centuries.

One example is the Silk Road, when trade spread rapidly between China and Europe via an
overland route. Merchants carried goods for trade back and forth, trading silk as well as gems and
spices and, of course, coffee. (In fact, the habit of drinking coffee in a social setting originates
from a Turkish custom, an example of how globalization can spread culture across borders.)

Essay # 1. Meaning of Globalisation:

By the term globalisation we mean opening up of the economy for world market by attaining
international competitiveness. Thus the globalisation of the economy simply indicates interaction
of the country relating to production, trading and financial transactions with the developed
industrialized countries of the world.

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Accordingly, the term, globalisation has four parameters:

(a) Permitting free flow of goods by removing or reducing trade barriers between the countries,

(b) Creating environment for flow of capital between the countries,

(c) Allowing free flow in technology transfer and

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(d) Creating environment for free movement of labour between the countries of the world. Thus
taking the entire world as global village, all the four components are equally important for
attaining a smooth path for globalisation.

The concept of Globalisation by integrating nation states within the theme work of World Trade
Organisation (WTO) is an alternative version of the ‘Theory of Comparative Cost Advantage’
propagated by the classical economists for assuming unrestricted flow of goods between the
countries for mutual benefit, especially from Great Britain to other less developed countries or to
their colonies. In this way, the imperialist nations gained much at the cost of the colonial countries
who had to suffer from the scar of stagnation and poverty.

However, the advocates of globalisation, especially from the developed countries purposely limit
the definition of globalisation to only three components, i.e., unrestricted trade flows, capital flows
and technology flows. They do not want to include the free flow labour within the parameter of
globalisation set by them.

According to Stieglitz, Nobel Prize Winner for Economics (2001) and former Chief Economists of
the World Bank, “Globalisation is the closer integration of the countries and peoples of the world
which has been brought about by the enormous reduction of costs of transportation and
communications, and the breaking down of artificial barriers to the flow of goods and services,
capital, knowledge, and (to a lesser extent) people across borders.”

Stieglitz is a powerful critique of globalisation and thus clearly pointed out the non-inclusion of
fourth parameter of globalisation, i.e., free flow of labour in the present format of globalisation
advocated by developed countries.

The World Commission on the Social Dimension of Globalisation (WCSDG) set up by ILO has
also made some important observations on globalisation. The Commission observed. “The
current path of globalisation must change. Too few share in its benefits. Too many have no voice
in its design and no influence on its course.”
“We wish to make globalisation a means to expand human well being and freedom, and to bring
democracy and development to local communities where people live.” But the advocates of the
policy of globalisation argue that globalisation would help the underdeveloped, and developing
countries to improve their competitive strength and attain higher growth rates. Now it is to be seen
how far the developing countries would gain by adopting the path of globalisation in future.

In the mean time, various countries of the world have adopted the policy of globalisation.
Following the same path India had also adopted the same policy since 1991 and started the process
of dismantling trade barriers along with abolishing quantitative restrictions (QRs) phase-wise.

Accordingly, the Government of India has been reducing the peak rate of customs duty in its
subsequent budgets and removed QRs on the remaining 715 items in the EXIM Policy 2001-2002.
All these have resulted in open access to new markets and new technology for the country.

Essay # 2. Characteristics of Globalisation:

Main features of globalisation are as follows:

(i) Liberalisation:
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Globalisation makes way for the freedom of the industrialist/businessman to establish industry,
trade or commerce either in his country or abroad; free exchange of capital goods, service and
technologies between countries.

(ii) Globalization of Economic activities:

Another characteristic of globalisation is the control of economic activities by domestic market
and international market. It also established coordination among the national economy and world
economy.

(iii) Free Trade:

One of the important characteristics of globalisation is free trade between counties. It also means
absence of excessive governmental control over trade.

(iv) Connectivity:
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Under globalisation, localities being connected with the world by breaking national boundaries;
forging of links between one society and another and between one country and another through
international transmission of knowledge, technology, ideas, information, literature and culture.
(v) Borderless Globe:
Globalisation makes way for establishing ‘borderless globe’, the ideal of which was articulated
by Kemichi Ohmae. It results breaking of national barriers and creation of inter-connectedness.

(vi) A Composite Process:

Globalisation is a composite process through which integration of nation-states across the world
can be made by common economic, commercial, political, cultural and technological ties. It also
leads to creation of a new world order with no national boundaries.

(vii) A Multi-dimensional Process:

Globalisation is a multi-dimensional process. Economically, it simply means opening up of
national market, free trade and commerce among nations, free flow of labour, capital and
technology, and integration of national economies with the world economy.

Politically, it means limited powers and functions of state, more rights and freedoms granted to the
individual and empowerment of the private sector culturally it means exchange of cultural values
between societies and between nations; and ideologically, it means the promotion and spread of
liberalism and capitalism.

(viii) A Top-down Process:

Globalisation originates from developed countries and MNCs based in those countries.
Technologies, capital, products and services are allowed to enter from developed countries to
developing countries. It is the developing countries which needs to be adapted with the changing
situations and to accept those new ideas for attaining higher level of socio-economic development.

The above characteristics of globalisation simply suggests that there is a great need for global
integration under the present global economic scenario. In view of the current global recession and
financial crisis, there is a paramount importance of global integration.

Essay # 3. Advantages of Globalisation:

Following are some of the important advantages of globalisation for a developing country like
India:

(i) Globalisation helps to boost the long run average growth rate of the economy of the country
through:

(a) Improvement in the allocative efficiency of resources;

(b) Increase in labour productivity; and

(c) Reduction in capital-output ratio.

(ii) Globalisation paves the way for removing inefficiency in production system. Prolonged
protective scenario in the absence of globalisation makes the production system careless about
cost effectiveness which can be attained by following the policy of globalisation.

(iii) Globalisation attracts entry of foreign capital along with foreign updated technology which
improves the quality of production.

(iv) Globalisation usually restructures production and trade pattern favouring labour-intensive
goods and labour intensive techniques as well as expansion of trade in services.

(v) Globalisation makes domestic industries of developing countries to become conscious about
price reduction and quality improvement to their products so as to face foreign competition.

(vi) Globalisation discourages uneconomic import substitution and favour cheaper imports of
capital goods which reduces capital-output ratio in manufacturing industries. Cost effectiveness
and price reduction of manufactured commodities will improve the terms of trade in favour of
agriculture.

(vii) Globalisation facilitates consumer goods industries to expand faster to meet growing demand
for these consumer goods which would result faster expansion of employment opportunities over a
period of time. This would result trickle-down effect to reduce the proportion of population living
below the poverty line.

(viii) Globalisation enhances the efficiency of the banking insurance and financial sectors with the
opening up to those areas to foreign capital, foreign banks and insurance companies.

Essay # 4. Disadvantages of Globalisation:

Globalisation also has many disadvantages also. Following are some of these disadvantages:

(i) Globalisation paves the way for redistribution of economic power at the world level leading to
domination by economically powerful nations over the poor nations.

(ii) Globalisation usually results greater increase in imports than increase in exports leading to
growing trade deficit and balance of payments problem.

(iii) Although globalisation promotes the idea that technological change and increase in
productivity would lead to more jobs and higher wages but during the last few years, such
technological changes occurring in some developing countries have resulted more loss of jobs
than they have created leading to fall in employment growth rates.

(iv) Globalisation has alerted the village and small scale industries and sounded death-knell to it as
they cannot withstand the competition arising from well organised MNCs.

(v) Globalisation has been slowing down the process to poverty reduction in some developing and
under developed countries of the world and thereby enhances the problem of inequality.
(vi) Globalisation is also posing as a threat to agriculture in developing and underdeveloped
countries of the world. As with the WTO trading provisions, agricultural commodities market of
poor and developing countries will be flooded farm goods from countries at a rate much lower
than that indigenous farm products leading to a death-blow to many farmers.

(vii) Implementation of globalisation principle becoming harder in many industrially developed

democratic countries to ask its people to bear the pains and uncertainties of structural adjustment
with the hope of getting benefits in future. Thus, the human and social costs of globalisation
usually multiply to such an extent that may tests the social fabric of the democracies in an
unprecedented manner.

GLOBALIZATION ESSAY EXAMPLE

Impacts of Globalization Essay

Globalization has been over the years spearheaded by a variety of factors including economic,
political and social factors. Technology and information systems have further propelled the
progress of globalization.

The world is increasingly becoming interdependent due to effects of globalization. Many business
entrepreneurs around the world are continually signing business pacts to work mutually,
increasing the numbers of interdependence. Political leaders around the world have realized that
they cannot influence the world independently hence the merger of political collaborations to have
absolute control of the world.

The following are some of the sectors that globalization has impacted immensely:

Economy
The rise of trade levels and movement of goods from one place to another spearheaded the
extended growth rate of the global economy. This has created an increased interdependence of
nations with objectives of forming blocks and unions to become the next global powerhouse.
Governments have realized that they can’t succeed independently, but with joint forces, they can
increase production of goods and services and meet the increased demand the world is facing
currently. Increased growth of industries and companies has increased the demand for finances
which has led to the mushrooming of banks that provide loans and help in the safekeeping of
companies’ investments. This has seen the growth of global economies by tenfold.

Big multinational companies like Coca-Cola are taking advantage of globalization by increasing
their levels of production and focusing on how to maximize profits. This has dwarfed the
emerging small businesses in the market as they cannot cope with the increasing demand for
goods and services in the market and the high cost of production.

Advancement of globalization has led to the restructuring of companies both in developed and
developing nations. Developed nations are exploiting the developing countries by setting up many
of their industries in these impoverished nations. They take advantage of the surplus of raw
materials, decreased the cost of production and low wages to employees. These industries know
that developing countries have less or no strict rules when it comes to pollution and also few
requirements needed to be approved to set up industries unlike in developed countries. Once these
industries exhaust the resources of a nation, they relocate to new areas with initial greener pasture
to them. The vicious cycle continues as these multinational companies use their financial muscle
to maneuver their desires to the unsuspecting host nation.

Globalization has given countries like the United States and Western nations the unfair advantage
over other countries to control the world. They wield and possess advanced communication,
information systems and have immense financial powers. They know too well that they are far
much ahead of other nations hence use these advantages to subtly enforce their agendas of
creating wealth at the expense of uplifting other problems faced by developing countries.

To different extents exclusive of developed nations’ interference, globalization has seen the
improvement of technology, information systems and increment in the nation’s economy. This
has propagated some of the developed countries to be now called middle income earning lands.
When the question of developed nations comes to play, they discriminate the developing country
to create the theme of dependence and give them dominion over the rest of the nations. Studies
revealed by the United Nations Development Report have shown that globalization has immensely
increased the gap between developed and developing countries.

The interdependence among nations saw the world fall into economic crisis when the United
States stock exchange market went into recession in 2003.

As long as developed nations negatively use their advancement to oppress the developing
countries, we will not realize the fruits of globalization.

Social
Globalization has led to increased focus on machinery and less emphasis on face-to-face
communication. Before the advent of communication, people gave priority to physical contact
compared to nowadays where everybody prefers the use of communication devices to convey
pieces of information to one another.

Culture has also changed with people forgetting the traditional practices and spending most of
their time online sharing ideas and flossing with the acquisition of new advanced instruments of
living.

As much as globalization has led to increased migration of people to foreign nations, host
nation’s inhabitants and immigrants’ wars have led to social unrest as the inhabitants want the
immigrants to assimilate with the social norms of the host country and immigrants obstinate to
retain their mother country social beliefs.

Political
Globalization has favored countries like the United States of America to have dominion and
control the world. They have financial muscle, machinery for mass destruction and technical
expertise. They use these to maneuver their political agendas all over the world. This has led to the
emergence of countries known as “the puppets of the west” because they are very dependent on
the world superpowers.

Excluding the negative impacts of globalization, world leaders can make decisions on emergencies
inflicting the world like global warming thank the advances communication, and information
systems brought about by conception of globalization.

Conclusion

Globalization is immensely affecting economic, social and political aspects of the world. Its
presence cuts across both the merits and demerits of globalization. Notorious superpower nations
have a reputation for using the advantage they have on globalization to oppress the developing
countries. They maneuver their interest at the expense of helping the nations at the brink of
humanitarian crisis. An essay about globalization should advocate for the unanimous prevention of
demerits of globalization.

Final Thoughts

Globalization is the way to go for the world to continue in its journey of development.
Superpowers need to show goodwill and withdraw their maneuvering ways of using globalization
to oppress their victims. Globalization essay examples should advocate for proper use of
globalization.

Claim #1: Globalization is about the liberalization and global integration of markets. This claim is
anchored in the liberal ideal of the self-regulating market as the normative basis for a future global
order. The liberalization and integration of global markets are presented as both desirable and
“natural” phenomena that promote individual liberty and material progress in the world.

Claim #2: Globalization is inevitable and irreversible. According to this assertion, globalization
involves a spread of irreversible market forces driven by technological innovations that make the
worldwide integration of national economies inevitable. The portrayal of globalization as some
sort of natural force suggests that people must adapt to the discipline of the market if they are to
survive and prosper.
Claim #3: Nobody is in charge of globalization. The claim of inevitability contains yet another
implication. If the natural laws of the market have indeed preordained the course of history, then
globalization does not reflect the arbitrary agenda of a particular social class or group. In that case,
certain social elites are not in charge of globalization, but markets and technology are.

Claim #4: Globalization benefits everyone. This claim lies at the very core of market globalism,
because it provides an affirmative answer to the crucial normative question of whether
globalization should be considered a good or a bad thing. Market globalists assert that free trade
and open markets provide the best prospect for creating jobs, spurring economic growth, and
raising living standards around the world. While market globalists typically acknowledge the
existence of unequal global distribution patterns, they insist that the market itself will eventually
correct some of these “irregularities.”

Claim #5: Globalization furthers the spread of democracy in the world. This claim is rooted in the
assertion that free markets and democracy are two sides of the same coin. Persistently affirmed as
“common sense,” the actual compatibility of these two conditions remains nonetheless an open
question.