Globalization: Discussion of The Viewpoints, Advantages and Disadvantages in Relation to Global Companies

Globalisation is a dynamic topic originally developed by Theodore Levitt, a professor at the Harvard Business School, in the 1960s. The term globalization, in simple terms, refers to the ‘effect of business expansion on a global scale’ (Wetherly & Otter, 2011, The Business Environment) and the impact of international trade and services. While globalisation has certainly allowed for developing countries to access our markets and grow, there are many claims that globalisation has made the ‘rich richer while making the non-rich poorer’ With the increase of globalisation many industries are being transformed, with the impact of foreign competition resulting in changes in jobs opportunities as well as relocation of production sites.

The recent surge of companies going global has resulted in various attempts at international guidelines to control the ethics of a company and ensure that human and workers rights violations are eradicated. The idea of globalization has three competing viewpoints; the neoclassical view, the Marxist view and the structuralist view. In this essay I will be discussing these viewpoints, looking at the advantages and disadvantages in relation to global companies, and outlining the effect this process is having on the global market.

The first perspective on globalization that I will be discussing is the neoliberal view. This ideology focuses on the benefits of globalization to an economy and supports the argument that market liberalization allows for the expansion of international markets as well as the growth of developing and developed countries alike. (211, Wetherly and Otter, 2011, The Business Environment). This perspective was particularly popular in the 19th century when industrialization was allowing for a range of commodities across the world for the first time. However, during this time, it was accepted that the more industrialized nations would focus on manufactures whereas the less industrialized countries would handle the raw resources due to the low costs of labor and materials. This is the ‘international division of labor’ (http://www.encyclopedia.com/social-sciences-and-law/sociology-and-social-reform/sociology-general-terms-and-concepts-48) an idea in line with the neoliberal view, creating a ‘growing differentiation of economic activity’, therefore highlighting the advantages of globalization. However this idea has been criticised due to the inequalities it can create, and 'after 1945 both developed and developing countries chose to intervene in markets and to engage in trade protection policies’. There was a resurgence in the idea of neoliberalism in 1989 when John Williamson, an English economist, put forward the idea of the Washington consensus.

The Washington consensus is a set of 10 economic policies designed to reduce government spending with ideas such as removing government control over industries, as well as redirecting tax breaks from the affluent, reducing tariff barriers and the privatization of state enterprises. These economic ideas have their drawbacks, however. For example, the privatization of state enterprises can result in neglect of the poor and lead to a wider gap between the rich and the poor. There are also claims that the idea of redirecting public spending towards the public sector is often overlooked, with focus tending to fall on market-orientated policies.

The second perspective on globalization is the Marxist/radical view that globalization is a bad thing. The embodiment of this view is Karl Marx, whose theories are still useful in today's globalized economy. Marx’s views reinforce the idea that ‘globalization is a result of the global expansion of capitalism’, and will eventually lead to a revolution against the owners of capital due to the exploitation of less developed countries. These ideas were then built upon later by radical writers such as Robert McChesney, who argued that globalization is ‘capitalism constituted on a transnational basis, not only in the trade of goods and services but, even more important, in the flow of capital and the trade in currencies and financial instruments’. (McChesney, 1998) Many people have even linked globalization to the construct of imperialism, ‘the practice of a nation extending its influence, taking over other countries whether by colonization or the use of military force’. While these theories have strived to create a system of true equality and to benefit the society they have their drawbacks. The Marxist approach requires people to live as part of a community and does allow for private ownership. This limits control that the public has over their place of residence and their businesses which diminishes the incentive for working, as well as restricting opportunities for new business owners as their company would be owned by the government.

The final perspective on globalization is the structuralist approach, this being that globalization has the potential to allow for industrialization in less developed countries without limiting the success of current global businesses who may rely on these countries for manufacturing. This approach was originally developed by Amartya Sen, the Nobel prize winner for economics in 1998, and outlines the need for ‘late industrialization’. In order for these countries to ‘break into the market’, they require structures to aid and assist them. Farmers in these countries may lack access to information necessary to expand and begin trading in the free market, and so structures such as advanced education must be put in place to ensure these farmers are given a fair chance.

One of the most visible examples of globalization is that of major cities such as New York and Tokyo which all share a variety of similarities due to globalization. These cities, in particular, have become informational hubs despite at the same time undergoing a period of deindustrialization due to globalization. The ‘automation of manufacture reduces the industrial presence’ (Reitz, Globalisation and Society, 2003) as factories are being relocated and replaced by knowledge-based activities such as marketing and design. This can be seen recently in Birmingham

Globalisation is happening right now and so maybe the argument should focus less on whether it is beneficial or not, but look more at the effect that globalization may be having on the global environment and the possible ethical exploitations of large multinationals. In recent times there has been more and more pressure for global companies to act in a socially responsible manner. Several international institutions have set up various guidelines, such as the UN charter or the World Trade Organisation, which are becoming more and more important to today's multinationals due to fear of public backlash (Homann, Koslowski and Luetge. Globalisation and Business Ethics. 2007). This provides itself with an opportunity for a company to appear as socially responsible as they can be, in order to encourage positive branding to increase market share and workers motivation. Often these companies try to find a balance between their ethical image, their environmental impact, and their profit. These are the three pillars of social responsibility for a global company (Jacqueline Cramer, ‘Corporate Social Responsibility and Globalisation, 2006). While companies that are becoming global are expected to follow these guidelines there are issues implementing them due to social and cultural differences between countries. A western company that sticks to its company policies and values too hard may be accused of imperialism, however, if they conform to the local situation completely they may be in breach of international law. The environmental issues of globalization are massive and this is quickly becoming an issue for multinationals. An attempt to resolve the damage done to our environment on an international scale came about with the signing of the Montreal Protocol in 1985 which aimed to reduce the number of chlorofluorocarbons used by corporations. (Peter Singer, One World, 2002) In order to ensure a level playing field, the developing countries were given a ‘ten-year period of grace’. Since then, however, more problems have arisen, particularly the effect these companies are having on climate change. This is having a stronger effect on developing countries than developed ones, as they are less in a position to transport people away from flooded areas and often lack the medical capabilities to combat the spread of disease-carrying insects. While some companies have made attempts to ensure that they meet international guidelines, the issue of climate change is only increasing as globalization increases. This could be seen as another way in which globalization is a bad thing for a Marxist, however more of a structuralist approach is being taken by leading companies and regulations are being put in place to combat this issue.