Globalization: Causes, Effects, and Moral Responsibility

Understanding Globalization

When examining globalization and international trading, we can see that trade has existed for millennia. However, in the past century, many nations have substantially increased their international trade. One nation's resources become accessible to another nation's citizens when trade agreements are established. As resources in each country become scarce and limited, the availability of different resources across countries serves as a catalyst for trade (Pugel, 2004).

Globalization is not a concept that can be defined clearly with a single beginning and end; many authors define it differently. It involves economic integration, the transfer of policies across borders, cultural transmission, the circulation of knowledge, and the reproduction of power relations and discourses.

Globalization can be defined as the process of increased relationships between national economies through international trade, foreign direct investments by multinational firms, and international financial investments (Pugel, 2004). Swedish journalist Thomas Larsson offers this definition:

"The process of world shrinkage, of distances getting shorter, things moving closer. It pertains to the increasing ease with which somebody on one side of the world can interact, to mutual benefit, with somebody on the other side of the world." (Larsson, 2001)

Technological Drivers of Globalization

American economist Theodore Levitt was the first to use the term "globalization" in 1983. He argued that people's tastes around the world seemed to be converging, and firms began offering standardized products in all countries—Coca-Cola being a notable example.

The world in which we live constantly changes, and what occurs on one side of the globe affects people on the other. People are influenced by common developments and shared forces, a phenomenon we call globalization (Schaeffer, 1977).

Technology represents one of the most significant drivers of globalization. Technological advances have made it easy to transfer information and money across borders. Nowhere is this more apparent than in international finance, where technology has dramatically shrunk the perceived constraints of time and space. Fiber optics and the internet have radically reduced the costs of transmitting information. Financiers anywhere in the world can now complete transactions instantly, making it extremely difficult for governments to regulate capital flows (Garrett, 2000).

The cost reductions in telecommunications have been dramatic. Expressed in 2005 US dollars, a three-minute telephone call from New York to London cost $80 in 1950 but had fallen to $0.23 by 2007 (Riley, 2012). We now live in a world of 24-hour global trading where governments have only marginal influence over the movement of liquid capital across borders (Garrett, 2000).

The internet, however, presents a more complex picture. While it facilitates the movement of information and finance, it can actually make it easier for governments to regulate the movement of physical goods across borders and the sales and purchases of fixed assets (Garrett, 2000). Economists argue that the potential gains from international integration have increased substantially as a result of technological advances. This means governments still have the opportunity to protect their countries from external forces if they choose to do so. However, the "increased opportunity costs of closure" have become so large that the balance tips strongly in favor of open foreign economic policy (Yergin & Stanislaw, 1999).

Some economists contest these claims. Rodrik has argued that there is no actual evidence that free trade (Rodriguez & Rodrik, 1999) or capital mobility (Rodrik, 1998) positively affects economic growth.

Technological change has clearly affected the ease with which nations can trade internationally in recent decades. However, the argument that technology has determined trade liberalization policies is particularly weak. Moving large physical goods across borders remains relatively transparent, and governments can monitor and slow such movements if they wish. The information technology revolution and rise of the internet have been connected with the growth of powerful international strategic alliances among firms (Garrett, 2000). Multinational firms can potentially evade government restrictions by forging informal alliances rather than swapping equity.

Transportation and Trade Barriers

In summary, technology is the strongest driver of globalization in international finance, where governments have limited ability to control the flow of capital. However, the argument that technology has driven trade and the multinationalization of production is considerably weaker. The movement of physical goods across borders remains relatively visible, and governments retain regulatory authority over trade and the behavior of multinational corporations. This regulatory capacity may change as e-commerce matures, but it is unlikely that governments' ability to regulate trade and multinational production will disappear in the foreseeable future.

Beyond information technology and the internet, improved transportation infrastructure has significantly driven globalization in recent times. The growth in freight volumes and the diversity of origins and destinations demonstrate the central importance of international transportation as a primary globalization driver. Economic development in Pacific Asia, and China in particular, has been a major factor behind this growth. The vast distances required for trade have resulted in increased demand for maritime shipping and port activities. China now imports large quantities of basic raw materials and energy while exporting manufactured goods as its industrial and manufacturing sectors have developed. The circulation of goods and people within the global economy depends fundamentally on efficient transportation (Rodrigue, 2007).

Regular shipping links between major port cities worldwide have become commonplace, particularly across the North Atlantic between Europe and North America. Modern ships have become increasingly efficient, prioritizing speed alongside cargo capacity. In the 1940s, a liner required approximately 12 days to cross the Atlantic; by the 1930s, this had decreased to 4 days (Rodrigue, 2007). The costs of ocean shipping have fallen significantly due to containerization, bulk shipping, and other operational efficiencies.

The 21st century has introduced new challenges for transportation infrastructure. Congestion in many international terminals causes delays and unreliability. Additionally, energy uncertainty and substantial increases in energy costs create significant pressures on international transport systems.

The reduction and removal of trade barriers following World War II enabled more countries to trade freely and exploit their comparative advantages. The growth of multinational corporations—firms operating in at least one country outside their home state—has epitomized global interdependence. The falling transport and communication costs discussed earlier have facilitated the emergence and expansion of multinational firms, a phenomenon sometimes called the "death of distance." Many multinational corporations based in the UK or US now operate production facilities across multiple countries. Nations consuming goods produced by multinational firms therefore depend on supply chains spanning several countries.

Baumann's Ethical Critique

Although globalization offers many benefits and appears to be the direction of world development, significant social and ethical issues create considerable controversy. The poorest populations seem to be exploited, overworked, and underpaid under terrible conditions. The gap between rich and poor globally is extreme. The bottom 2.5 billion people—40% of the world's population—live on less than $2 a day and receive only 5% of the world's income. Proponents of globalization claim that free trade creates wealth that trickles down and improves conditions for the poor (Adler, 2012).

Sociologist Zygmunt Bauman, who holds strong opinions about globalization's adverse effects, addresses how ethical issues are systematically overlooked:

"To understand how that astounding moral blindness was possible, it is helpful to think of the workers of an armament plant who rejoice in the 'stay of execution' of their factory thanks to big new orders, while at the same time honestly bewailing the massacres visited upon each other by Ethiopians and Eritreans; or to think how it is possible that the 'fall in commodity price' may be universally welcomed as good news while 'starvation of African children' is equally universally, and sincerely, lamented." (Bauman, 1989)

This powerful quotation illustrates how people can simultaneously dismiss global suffering while celebrating economic gains. When advocates claim that globalization creates jobs and improves the world, we must examine the evidence carefully. Has inequality increased? According to United Nations reports, gaps between the poorest and richest countries have continued to widen. "In 1960, the 20% of the world's people in the richest countries had 30 times the income of the poorest 20%. In 1997, the gap had more than doubled—it is now 74%." (Adler, 2012)

Are the poor actually worse off? The world's population exceeds 6 billion, with approximately 1.2 billion living in absolute poverty (Adler, 2012). Children represented one in three of those living in extreme poverty globally in 2010, compared with only one in five living above the poverty line. In low-income countries, the situation is more severe, with nearly half of all children living in extreme poverty (Olinto, Beegle, Sobrado, & Uematsu, 2013).

This is clearly a massive issue, and I believe that people in better positions should work to address it. We need to achieve meaningful progress in slowing or reversing the dangerous increase in worldwide inequality through fair trade rather than so-called free trade. It is troubling that the developed world spends over a billion dollars daily on farm subsidies while contributing only one-seventh of that amount in development aid (Adler, 2012).