"Opening up the financial system to foreign capital flows can lead, and has led, to disastrous financial crises, which have resulted in great pain, suffering and even violence" (Mishkin, 2006, p.9).
Directly linked to the previous disadvantage and the basic definition of globalization, is the fact that the interdependence of sectors and institutions increases in a global market. In this instance then, a financial crisis within one country or within one institution is likely to generate negative effects upon its partners. The most relevant example of chain reaction to a financial crisis is the current situation, in which the global community is threatened with economic collapse due to the financial difficulties of the United States. The situation is similar in terms of politics or the social environment.
Globalization has often been assimilated with Americanization, meaning by this the desire of the American corporations to transcend boundaries and get access to cheaper resources (Rollin, 1989). Otherwise put, globalization promotes the interests of multinational organizations, which can simultaneously benefit from various comparative advantages, creating economies of scale. These scale economies are situations in which one company (or a unified group of organizations) has access to resources and the power to implement its own prices. The most relevant example in this instance is Wal-Mart. The retail monolith has often been accused of destroying the local economies by employing uncompetitive prices. The situation is similar in regard to globalization, when large corporations become present in small communities and has best been stated by Grzegorz Kolodko (2003, p.12) as the "dying off of some traditional branches of manufacturing in certain countries due to their low competitiveness, which creates rampant unemployment and poverty."
Following the same line of thoughts, globalization has also been accused of generating fierce competition in the international environment. While this may be perceived as an advantage as it forces national industries to develop, it also poses the threat that the national companies will be unable to adapt along. "The disadvantages of globalization are that a firm might not be able to survive the global competition. The cheaper imported goods will kill the domestic industry. This will bring about problems of unemployment and current account deficit to the affected industry" (Suryadinata, 2006, p.206).
Fact remains the national economies do not become discouraged by the global competition and continue to intensify their efforts. A most relevant example in this instance is given by a situation in which the global corporation sells imported goods at uncompetitive prices. The local manufacturers will strive to increase their competitive position by making personal and financial sacrifices. Their efforts will either be repaid or not, but their existence is a proven fact.
The power that these corporations could come to own in the end is yet another reason for concern and materializes in a "threat that control of world media by a handful of corporations will limit cultural expression" (Dark September Rains). This could then lead to violent manifestations, with the aim of preserving the cultural heritage. Then, another disadvantage is given by increased migration (also generated by the corporations' search for cheap and skilled workforce), which could increase the risks of contagious diseases being transported from a location to the other. Then, relative to Americanization, the post-war economic growth was based on consumption, an unrealistic and unsustainable model of economic growth, which could be transferred to the emergent Asian and European countries (Dark September Rains).
5. Discussion and Conclusions
Globalization is the buzzword of the twenty-first century. The concept basically refers to a free movement of information and resources across countries. Its effects are numerous and multifaceted and affect all features of the everyday life, including the social, cultural, economic, political, technological or environmental backgrounds. The specialized literature on the topic of globalization presents the reader with a multitude of sources and opinions, some defending the process, others disclaiming it.
Among the most significant benefits of globalization, one could point out a more efficient allocation of resources or the increased opportunities of economic growth and development through a better access to capitals, technologies, commodities or labor force. Some disadvantages however revolve around the downside of fierce internationalized competition, materialized in the death of national industries (in the face of scale economies and uncompetitive prices), further generating job losses, increased unemployment rates, reduced living standards and even violent manifestations. In this line of thoughts then, the initial quote seems relevant by presenting a real situation.
The literary references to the role that governments play in addressing the threats of globalization are reduced, generally because this role is reduced. The quote however suggests that governments are as much to blame as the multinational corporations. This is probably because the corporations reveal a growing power relative to the government. For instance, out of the largest global economies, 51% are corporatists, and only 49% are governmental. As a result then, governments tend to support the growth and success of corporations (Leonard). Then, another specification to be made is that governments look at globalization as an external force, in the face of which they have no power. Therefore, the sole stand they can take is to adapt along. "Governments portray globalization as an external force that confronts them and leaves them few choices. They have to adapt. Globalization is a reality, not an option as former U.S. President Bill Clinton expressed it. EU commissioner Leon Brittain said: Resisting globalization is an impossible proposition" (Holm). Ultimately then, governments do seem to dance to the songs of the corporations, which are able to play the federal institutions against each other. And their tunes indicate increased competition which does harm the individual citizens. In making this statement however, one has to remain objective and still remember the benefits of the globalizing forces, against its threats.
Ervin, J., Smith, Z.A., 2008, Globalization: A Reference Handbook, ABC-CLIO
Geddes, P., 2004, the Benefits of Globalization, Foundation for Research on Economics and the Environment, http://www.free-eco.org/articleDisplay.php?id=378last accessed on January 19, 2009
Holm, H.H., Globalization and What the Governments make of it, European Institute Firenze, Retrieved at http://www.djh.dk/pdf/forskning/global.pdfon January 20, 2009