Globalization and the Impacts in Essay

  • Length: 13 pages
  • Sources: 13
  • Subject: Economics
  • Type: Essay
  • Paper: #16151225

Excerpt from Essay :

These companies are getting bigger and bigger. Some companies have such huge assets all over the world that they are worth more than many small countries. If you compare the GDP of many countries, you can see that the GDP is even less than the earnings of those big companies (Disadvantages of globalization, 2012).

The governments do not have the power to stop the multinational companies from closing a factory here, and setting up another factory in other parts of the world. They do not have the power to stop the big companies from retrenching workers. As a result, the governments have to deal with the jobless people, while the big companies are still making money. That is why the disadvantages of globalization are so frightening. The big companies will continue to get bigger and more powerful, while the governments of the world grow less powerful. The problem from one country easily enters the international realm, and affects the lives of so many people. The most annoying fact is that nobody has the powerful to do anything. Nobody can stop globalization despite its many disadvantages. Nobody can even contain the disadvantages, and enjoy the advantages of globalization (Disadvantages of globalization, 2012).

Globalization encompasses a wide assortment of facets such as economic, politics, social and cultural. Globalization is a unique and noteworthy characteristic of recent world history. The facets in globalization, while being wide, both affect and are associated to each other. Therefore, it is reasonable to say that, amongst other things, political globalization entails economic globalization as actions of both aspects are related and therefore, to some degree, overlapped. Fundamentally, politics and economics are indivisible within social associations whereas politics (the attainment, allocation, and exercise of power) is in essential to economics (the manufacture, swap, and utilization of resources), and at the same time economics is essential to politics, helping to establish where power lies and how it is exercised. Political Economy necessitates examination of both views -- political and economy -- in which politics forms the economy and of the way in which the economy shapes politics (My Work on These Things: What Impact Has Globalization Had on the Nation-State, 2006).

Economic globalization refers to what takes place in the world in which the moving flows of goods, capital, labor, and information and technology seem to simply advance across national boundaries which quickly expands the political and economic interdependence. Political globalization is what takes place in world politics as a consequence of the growing economic activities within that of numerous processes. Nevertheless, the connection between economic globalization and wearing away of the democratic nation-state is more political than economic in nature. Even though, what seems rather less controversial is that the political processes, events and activities these days appear more and more to have a global or global measurement (My Work on These Things: What Impact Has Globalization Had on the Nation-State, 2006).

Globalization generally comprises four fundamentals namely extensity, intensification, velocity and deepening impact. Extensity refers to social, political and the economic activities stretching across national areas. This is more than likely due to the greater quickness resulting from the progression in technology and communication. The flow of ideas and goods around the world leads to greater interdependence like intensification. That means a local development can lead to a big global outcome. The discussion of global politics is to recognize that political activity and the political process is extending, deepening, and augmentation of the process itself. Connected with this is such that developments at even the most local level can have worldwide implications and vice versa. An expansion of political process refers to the mounting collection of issues which surface on the political outline combined with the extremely diverse assortment of agencies or groups involved in political decision making procedures at all levels from the local to the international (My Work on These Things: What Impact Has Globalization Had on the Nation-State, 2006).

2) in what ways do the 2008 financial crisis and recession signal that contemporary has-or has not- produced new and dispersed sites and sources of power?

While the accurate causes of the current global crisis, and the burden to be attached to them in particular national contexts, carry on to be debated, a number of points are widely accepted. The immediate trigger for the recession was the financial crisis, embracing banks and other organisations in a lot of nations, provoked by the extensive default of subprime mortgage holders in the U.S.A. but, critics argue, for such defaults to produce widespread harm to the global financial system and the world economy, a range of causal conditions had to be in place. Causes of the current recession have been said to include: the limited reach of the regulatory structure, that required banks to weight assets according to their risk but also allowed the creation of new, structured finance products to flee regulatory requirements; the accessibility of funds to Western capital markets, including substantial amounts from China, aiding lending; low interest rates, motivating the demand for credit for investment and utilization, and resulting high levels of indebtedness; the appearance of a shadow banking system facilitating financial organisations to take on assured banking functions and loosening the regulations governing borrowing and lending; the financialization of debt, facilitating the alteration of consumer debt into tradable securities, including mortgage-backed securities whose value, and related risks, were hard to establish; the international trading of such securities, that conveys problems globally; finance providers' payment systems that support extreme risk-taking with little apprehension for borrower default, partly stimulated by traders' beliefs that Government will intercede in the case of market instability; the failure of credit rating agencies and auditors to measure the value and risk of financial assets and products suitably; and the housing and asset bubbles, that confident investors, businesses and consumers to take on debt. Instability in energy prices during 2008 also added to the environment of economic doubt (Kitching, Blackburn, Smallbone, & Dixon, 2009).

Each of these issues has arguably added to the current crisis, first by impacting finance providers' balance sheets and, second, by swaying the demand for, and supply of, credit to businesses and individuals. Defaults on subprime mortgages caused defaults on other financial products, as payments to creditors holding derived products could not be made. This encouraged investors to recover their investments, inspiring a run on a number of institutions. Fear of exposure to what have become known as damaged or toxic assets caused banks to decrease lending to each other and this inspired a general reduction of liquidity in the wholesale finance markets. The international nature of the financial services industry led to troubles originating in the U.S. subprime mortgage sector being conveyed all through the world. "The crisis has led to the collapse, Government bail-out or partial nationalisation of major financial institutions in the U.S. And Europe; to major programmes of fiscal and monetary reform; and to support for businesses and homeowners in the UK and elsewhere to combat the crisis" (Kitching, Blackburn, Smallbone, & Dixon, 2009).

Previous recessions can provide pointers as to probable responses by UK businesses and policy makers but, given the specificities of the present crisis, it is hard to forecast trends exactly or to prescribe courses of action with a high amount of confidence in their likely success. One key characteristic of the current situation with strong inferences for business reactions, and one which renders it diverse from previous recessions, is the mounting globalization of economic activity. "Globalization refers to the numerous forms of interconnectedness between people and places via flows of goods, services, finance, people and information, including the cross-border value-chains of multinational enterprises. Such processes have been encouraged by the declining costs of transport and communications, reduced barriers to trade, the collapse of command economies and the influence of liberal market ideologies" (Kitching, Blackburn, Smallbone, & Dixon, 2009).

Globalization processes are difficult to understand, and even trickier to administer, as business activities and outcomes are prejudiced by the actions of distant others and, equally, local action influences those far away. Globalization creates new occasions and pressures, adds considerable complexity to business decision-making, and generates widespread instability and doubt in market processes that augments the risks of deciding on and putting into practice particular strategies. Market unsteadiness has been particularly obvious in the finance sector, where the extent and rapidity of financial movements across national borders has augmented the susceptibility of national Governments to unexpected shifts. Currency speculators can have a grave impact on national Government aims and policies, as happened in the UK in 1992. "Even large, powerful multinationals may find it difficult to manage global influences that inevitably shape business adaptation and performance under recession conditions, whether or not business owners/managers are even aware of them"(Kitching, Blackburn, Smallbone, & Dixon, 2009).

The current crisis has promoted interest in alternative modes of financial governance. It has stimulated the expansion of existing institutions and arrangements and the emergence of new ones in the global South.…

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