Are we truly globalizing the world marketplace? A critical view. Jonika Kromidha Faculty of Economy, University of Tirana, Albania,

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1 International Journal of Global Business, 7 (1), 1-6, June Are we truly globalizing the world marketplace? A critical view Jonika Kromidha Faculty of Economy, University of Tirana, Albania, kromidha@yahoo.com Abstract Many debates exist on the question of globalization. Developing countries are increasingly concerned about the effects of globalization on regional inequality. Through literature review, this article attempts to see the impact of globalization considering its advantages and drawbacks. The paper suggests that the economic benefits of globalization which the world has enjoyed in recent years create also losers, who naturally dislike change. Their concerns should not be dismissed. Keywords: Globalization, Developing Countries, Developed Countries, Economic Benefits Introduction Globalization is defined as free movements of capital, products, services, people, and information technology among countries in all over the world. It creates and, in turn, is driven by an integrated global economy, which influences both, social and economic relations within and across countries. While some economists insist that the globalization process is a strong force for equalizing per capita income among nations, others suggest that the developing countries are exposed to threats or further aggravation and marginalization during this process. Some talk of the great opportunities that it bring and some others talk of an economic chaos and the creation of further differences between rich and poor (Welford, 2002). Which is the impact of globalization? Are we truly globalizing the world marketplace? Globalization and its drivers According to Hill (2003) globalization refers to the shift toward a more integrated and interdependent world economy with two main components: The globalization of markets: the merging of historically distinct and separate national market into one huge global marketplace. The globalization of production: the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production. The two most important factors that underlie the trend toward globalization are the decline in barriers to the free flow of capital, goods and services since the end of World War II and the technological change particularly in communication, information, processing and transportation technologies (Frankel, 2000).

2 International Journal of Global Business, 7 (1), 1-6, June The advances industrial nations of the West created GATT (General Agreement on Tariffs and Trade) in order to remove barriers to the free flow of capital, goods and services (Bhagwati, 1989). Later, the WTO (World Trade Organization) was established in order to police the international trading system. Since the founding of the WTO, 21 new non-gatt members have joined and 29 are currently negotiating membership. There are a total of member countries in the WTO, with Russia and Vanuatu being new members as of Eight rounds of negotiations among member states have worked to lower different barriers to the free flow of goods and services making globalization a theoretical possibility and the technological change has made it a tangible reality (Hill, 2003). The trend toward globalization brought a dramatic change in: World output and world trade picture Foreign direct investment picture World order By 2000 the Unites State accounted for 27% of the world output while in early 1960 s it was the world s dominant industrial power. It was a relative decline reflecting the faster economic growth of several other economies particularly in Asia (Hill, 2003). Throughout the 1990 s the amount of investment directed at developing and developed countries increased dramatically. According to the United Nations data, the ranks of the world s largest 100 multinationals are still dominated by firms from developed economies and for the first time, three firms from developing economies entered the United Nation s list of the 100 largest multinationals (World Investment Report, 2001). A very important trend has been the collapse of Communist power in Eastern Europe and the move toward free market economies in China and Latin America, which created opportunities for the international businesses (Hill, 2003). If all states liberalized their economies by opening them up to foreign trade and investment, they would all end up benefiting. There would be free movement of resources, personnel, capital and even ideas, and this would lead to an allover prosperity. So the benefits and efficiency of free markets are at the core of the globalization concept (Mugga, 2003). That is the theory. But what is the reality/ is the globalization really global? Globalization: impact in developed and developing countries Globalization evokes positive and negatives developments. As positive one is considered to be the integration of markets for goods and factors of production increasing revenue opportunity through global sales and reducing costs by producing in low cost countries (Hill, 2003). As a negative one, it is the damage to the environment and the increasing exposures of countries to external shocks that can precipitate banking and currency crises, such as those that rocked Argentina and Japan (Olubamise, 2003). Globalization seems to be easy in theory but difficult in reality. Some people believe that globalization is a good thing for US, Japan and European Union because they are strong enough to retaliate against the others with trade sanctions and prohibitive tariffs if the need 1

3 International Journal of Global Business, 7 (1), 1-6, June arises, but when it comes to the poor countries, the effects of globalization have been quite different. Their experience is not one of fair trade, diminished tariffs and free movement of goods and services. Rather, globalization means the rich countries with strong economies do as they wish, and the poor countries suffering what they must (Muga, 2003). So according to Muga (2003) from the perspective of poor nations, globalization as it currently exists is nothing less than a policy of economic tyranny, as Shakespeare wrote that it is excellent to have a giant s strength; but it is tyrannous to use it like a giant. On the other hand, rights such as economic and social rights, especially workers rights are seen as being endangered by globalization. On the contrary the proponents of globalization argue that activities of multinational enterprises in developing countries help to improve standards of living, bring about a more accountable and transparent government, and thus strengthen the rule of law (Olubamise, 2003). In developing countries globalization demands deeper cross boundary collaboration among people from diverse contexts social, cultural, technical and organizational, highly mobile, adequately trained workforce, torrid technological development, knowledge based economy and good Governance (Olubamise, 2003). On the other hand third world countries have been developed into a condition in which their productive capacity, their land, labour, forests and fisheries now produce mostly for the benefit of few rich people elsewhere (Chossudovsky, 1997). Rich countries, with about one-fifth of the world s people, are consuming about three-quarters of the world s resource production (Trainer, 2000). Moreover the Third World governments now have little or no influence on third world development. What will be developed will be only what it suits the corporations to develop. The proposals of the Multilateral Agreement on Investment, now being recycled via the WTO will virtually prevent governments from having any capacity to gear foreign investment to national needs (Goldsmith 1997; Rist 1997). Some people see globalization as a one-way traffic, which encourages the dumping of all sorts of goods and services in the developing countries while the doors of the developed countries remain shut against them. For globalization to be meaningful there should be a level playing ground for all countries where the developing countries should be given a fair chance to compete with competitors out there (Odo, 2003). According to Hans Abrahamsson (2002), who is a researcher at Sweden s Gothenburg University, poor African countries have been loaned money by the World Bank to revamp projects which yield agricultural produce but the same poor countries fail to export the produce because the western markets have been deliberately made it difficult to access. So the western countries had their own political interest in pushing for free trade and even establishing the International Monetary Fund and World Bank. On the other hand, despite spearheading the globalization movement, the US has been clearly violation WTO regulations, putting barriers to flow agricultural products from developing countries into its market adding weight to the protesters argument that by weakening the developing countries and any chances of competition in future the developed countries like, US are creating a modern form of colonialism (Jafry, 2002). For the Africans, as for other developing countries, globalization means:

4 International Journal of Global Business, 7 (1), 1-6, June Loss of sovereignty: the economic policies of most African countries are determined by the IMF and the World Bank 2. Marginalization: Africa is being consistently marginalized in world affairs. 3. Underdevelopment; one of the latest comments of the World Bank says it will take 40 years before Sub Saharan Africa returns to average per capita incomes of the mid-1970s (Siddiqui 1997) The rapid globalization process of the last decades has not only brought erosion of local culture and traditions of developing countries from assaults on national sovereignty, but also economic instability, transforming developing countries in mere production centers for the globe girdling agents of the richer (Jafry, 2002). Economic inequality is one of the most important causes of disorder in society. Moreover, the present form of globalization, no doubt, brings about inequality in both rich and poor societies (Farley, 1992). Firms of developed countries move jobs to low cost countries with weak lows and countries specialize in efficiently produces goods and import those that they can not efficiently produce. Although the globalization destroy manufacturing jobs in wealthy advanced economies and the wage rates of unskilled workers are much lower, supporters of globalization argue that their whole economy is better off as a result and some developed countries as US entered that new millennium stronger than ever (Hill 2003). The developing countries wish to be able to accept, reject, or modify policies according to their own needs. If a country finds that opening its markets has negative effects, it must be allowed to close them partially or entirely (Bangkok Post 1999). WTO has also raised a lot of issues including human rights and low wages but many of these issues have not been welcomed by many governments of developing countries who sees the discussion of different issues in the next round of WTO negotiations as a ploy to reduce their competitive advantage (Welford, 2002). Welford (2002) has said: Quite clearly, the rules of international trade, investment and finance require urgent reform if we are to reap benefits from globalization and reduce its negative consequences. This requires change on the part of the WOT, its member states and the main beneficiaries; big business Should be find a way to design and regulate globalization so as to benefit the poor while not impoverishing the rich, in order to deliver opportunities which are meaningless without the capacity to access these opportunities. Conclusion The developing countries are calling for the need to make the process of globalization more equitable and to reverse the widening gap between rich and poor nations. The theoretical benefits of globalization should be translated into real benefits. Globalization can not be a one-way street, the developing countries want equal opportunities with the developed countries. Globalization, to achieve its promise, will have to maximize the constructive interdependence among all nations industrialized, developing and poorer alike. It is the actions of people in the developing countries themselves that will determine in large part the pace at which they can benefit from globalization. But on the other hand the policies of the developed countries have their contribution to make.

5 International Journal of Global Business, 7 (1), 1-6, June It is difficult to say that we are truly globalizing. Globalization may be a useful policy only when people can truly believe that globalization is really global. The economic benefits of globalization faster growth, cheaper imports, new technologies, the spur of foreign competition which the world has enjoyed in recent years, create also losers, who naturally dislike change. Their concerns should not be dismissed. The ex United Nations Secretary - General Kofi Annan stated My friends, the simple fact of the matter is this: if we cannot make globalization work for all, in the end it will work for none (New Straits Times, 2001). References Abrahamsson, H Globalisation is Not Sustainable, Asia Africa Intelligence Wire pna Bhagwati, J. Protectionism (Cambridge, MA: MIT Press, 1989) Charles, W. L.Hill International Business: Competing in The Global Marketplace, 4 th ed, pp Chossudovsky, M the Globalisation of Poverty, London, Zed Books Frankel, J. A. Globalization of the Economy, National Bureau of Economic Research, Working Paper No. 7858, 2000 Farley, 1992, Sociology, 2 nd ed, Prentice Hall INC, pp Goldsmith, E Development as colonialism, in J. Mander and E.Goldsmith, The Case Against the Global Economy, San Francisco, Sierra. Jafry, S Living with globalization, Asia Africa Intelligence Wire, pna Muga, W The Stark Reality of Globalisation, Africa News Service p u2431 New Strait Times, 2001 Uneven results of globalization, pnstp Odo, A, 2003 Globalisation is Deceit Against Developing Countries Obasanjo, Africa News Services p u5639 Olubamise, B Globalisation, Human Rights And Development, Africa News Service p u2515 Richard, W., 2002 Globalization, Corporate Social Responsibility and Human Rights Editorial Rist, G The History of Development, London, Zed Books Siddiqui. F.k Globalisation: impact no international labour and environmental standards, Economic Review, v28 n4 p17(3)

6 International Journal of Global Business, 7 (1), 1-6, June Trainer, T Two Common Mistakes About Globalisation, International Journal of Sociology and Social Policy, volume 20, Number 11/12/2000, pp The Los Angeles Times Syndicate, 1999, Global Viewpoint: Globalisation not suitable for all (1065), Bangkok Post, pbkpo World Investment Report 2001