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How Globalization Has Been Influenced

Globalisation has been evidently transforming the means and ways of interaction between nations for a few decades now (Hirst, Thompson and Bromley 2015). International trade and production have increasingly become globalised, and the corporate activities have become more diversified and multiplied to a greater extent. Globalisation is very real, and its consequences can be felt the world over. The global market is today more developed than the way it was in the 60’s and the 70’s and has since become indifferent to the national borders (Beck 2015). Indeed, nations seem to have lost their sovereignty, and their politicians have lost some of their capabilities to exert their influence on some key events (Baylis, Smith and Owens 2013). The end of the era of a nation state is in the offing. 

Factors that have shaped the Processes of Economic Globalization

According to Sturgeon (2013), economic globalisation can majorly be thought of as three diverse sets of factors that have shaped the globalisation process, including the changes that have transpired at a global scale in the last few decades. These factors include globalisation of production, globalisation of finance and globalisation of trade.

Globalization of production

Globalisation of production entails the changes on a global scale in regards to the means of organisational production of goods and services and encompasses three dynamics: growth of long-distance network of production, an increased role of transitional corporations in the global economy and an enormous increase in the Foreign Direct Investment (FDI) (Beck 2015).

The enormous increase of FDI: Foreign Direct Investment, as defined by Roberts (2015), refers to an investment that entails a long-term relationship and reflects a long-lasting interest and control of a resident unit in the source country within the host country. As from 1960, FDI was more concerted in the industrialised countries and its destination within the same category. The economic globalisation has however transformed this system to such an extent that the Third World countries have equally become important destinations. A very obvious example is in the case of transnational investments of corporations in which the transition economies have appeared to be having significant growth, and as is depicted by the UNCTAD, China has moved very fast to overtake the United States as the number one destination for FDI as of 2003 (UNCTAD 2005). One would accordingly be tempted to argue that globalisation of production is real phenomenon since economic globalisation has proven to reposition the destination of FDI. 

The role of transnational corporations in the global economy: Transnational corporations are those companies with their headquarters based in one country, mainly in the industrialised countries, and many of their subsidiaries based in many other foreign countries (Forsgren 2013). Some of the most popular transnational corporations include Samsung, Apple, Airbus and Nike among others. These companies make up the most important vehicles for FDI and sometimes even surpass the gross domestic product (GDP) of certain national economies. The role of the transnational corporations in the world economy has become of great importance as their numbers have noticeably increased in the recent times (Forsgren 2013). Again, some of these companies that have been located in some developing countries are likely to become important vehicles for FDI. Accordingly, the internationalisation and the increasing importance of these multinational corporations are fast shaping the economic globalisation process (Forsgren 2013).

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The growth of a long-distance network of production: According to Selwyn (2011), many of the large transnational corporations are making efforts to diffuse their production networks internationally, and this denotes a fundamental difference from the earlier decades when the processes of production were majorly organised within national borders. The new global product chains continue evolving over time and comprise market-based networks of global range structured by the multinational corporations by way of contracting and sub-contracting the production processes all over the world. Selwyn (2011) argue that two types of global commodity chains exist: producer-driven chain where the large manufacturing multinational companies assume the leadership role so that they organize the chains; and buyer-driven chain where the global retailers and the marketers take up the leadership role. Therefore worldwide production of goods and services progressively takes place by means of broadly-detached network activities which have categorically shaped something comparable to a global network of productive activities.

Consequently, the above-highlighted dynamics that make up the globalisation of production have swayed the global economy while defining the economic globalisation process.  However, as was hinted before, economic globalisation also encompass globalisation of finance.

The globalization of finance

Remarkable fluctuations in the form of global financial organisation have been a major determining factor in the economic globalisation (De Nicolò and Juvenal 2014). Certainly, the financial design as was fashioned by the Bretton Woods Agreement established a system of fixed exchange rates for all the national currencies. Following the collapse of this system some time back in the 1970s, the world financial system has gradually become globalised and brought forward an increasing propensity toward the global incorporation of the financial markets and some pioneering financial instruments (De Nicolò and Juvenal 2014). Consequently, today businesses more and more work in a world characterised by globally incorporated capital markets with developments in a given part of the globe fast distributing their effects on a global scale. Furthermore, globalisation of finance has brought forward a surprising currency trading explosion which has since been isolated from the transnational trade. It is, therefore, possible to comprehend that the changes relating to the global production and finance also inferred trade globalisation (De Nicolò and Juvenal 2014).

The globalisation of trade

Globalisation of the international trade generally entails the increase of this kind pf trade in all the aspects of the economic activities globally (Maurer and Degain 2012). International trade has experienced significant growth in regards to the national income. When compared to that era when there was the rapid growth of trade within the 1990s, export levels have today become lager for the Organisation for Economic Co-operation and Development (OECD) states owing to the fact that trading walls have come down all over the world. The global markets have as a result got up for more goods and services. Again, in regards to value, trade in the manufactured commodities take the largest share of nearly 75 per cent of the world trade while the services account only for 20 per cent of the total (Maurer and Degain 2012).

Changes in the geographical patterns of the international trade: Since the manufactured goods take the largest share of the international trade, there is no doubt that the industrialised economies take the lead in the international trade. Conversely, due to the globalisation of production and finance, there has been an increased tendency for the international trade to have a more geographically diversified outlook. Actually, with the exports between the industrialised nations becoming significantly dropped, the exports between the developing countries have witnessed a tremendous increase, and this has brought about change in the geographical patterns when it comes to international trade.

The advent of large regional trade groups: Trade globalisation has brought forth regional trade groups such as the North American Free Trade Agreement (NAFTA), Association of South East Asia Nations (ASEAN), European Union (EU) and Mercosur. These regional trade groups were all designed with one major aim; to give an additional impulse to the trade taking place between the member states (Kim, Mansfield and Milner 2016).

The first part of this discussion has succinctly highlighted the factors that have been vital in shaping the economic globalisation processes. But then globalisation and its impacts institute the root of a myriad of disputes and debates all of which will be discussed in the subsequent part of this essay.

The Globalization Debate

When confronted with the questions regarding globalization, one is supposed to consider three distinguish schools of thought: hyperglobalizers, sceptics and transformationalists. These diverse schools try to offer an explanation and an understanding of the current concept that is globalization, and more specifically, the economic globalization.

The Hyperglobalizers

Kenichi Ohmae, one of the most popular business writers, suggests that globalisation could be perceived as a novel period of human history where the “traditional” nation-states have since become unnatural, even incredible business units in a world economy (Ohmae, 1995). Generally, this view of globalisation champions an economic logic. Its neoliberal variant, on the other hand, celebrates the appearance of a unified global market and the principle of global rivalry as the heralds of human development. The hyperglobalisers therefore are of the view that economic globalisation will ultimately result into "denationalisation" of economies by forming global networks of production, finance and trade. National governments, according to this school of thought, are merely transitional institutions between the global, regional and the local tools of governance. As mentioned by Nadrag and Bala (2014), the virtual force of the global markets are far much important when compared to the national governments and their authorities are deteriorating.

There is a divergence between neoliberals and neo-Marxists within the hyperglobalist movements. The neoliberals view individual autonomy as an achievement while a triumph in the mind of neo-Marxists is the oppressive global capitalism (Ferguson and Mansbach 2012). These variants of the movement, however, have a common view when it comes to economic globalisation as they all agree that it is a new occurrence that creates winners as well as losers within the world economy. They perceive the North-South division to be an anachronism which has since been supplanted by the division of labour (Ferguson and Mansbach 2012).

Furthermore, the end of the Nation State according to the hyperglobalisers is nigh as they take globalisation to be a sign of the pioneering "global civilisation" as well as a new world order characterised by the advent of establishments of global governance. Undeniably, as was asserted by Ohmae (1995), the power of the nation state is challenged as the national economy is compromised due to the fact that the national economy is more of a site for global flows. Again, the national governments lack the capacity to control that which transpires within their borders or to satiate their citizens’ demands (Ohmae 1995). With the increasing importance of the institutions global governance, the autonomy nations are getting written off. Generally, it can be concluded that the hyperglobalisers see globalisation as restructuring of the framework of human accomplishment.

The Sceptics

The sceptics, unlike the hyperglobalizers, perceive globalisation simply as a myth or as an ideology that only depends on the economic conception. According to them, globalisation is predominantly associated with the impeccably incorporated global market. As was noted by Hirst and Thompson (2002), the extent to which economic globalisation has so far been achieved is categorically exaggerated. This school of thought recognise that the impact of the national governments in regards to the world economic activity is of great power and as such they see the hyperglobalisers' standpoint as politically naïve. From their perspective, the only thing that has been proven is that the economic activity is undergoing a significant "regionalization" as is evident in the emergence of such regional trade groups like EU, NAFTA among others. Certainly, according to Hirst, Thompson and Bromley (2015) the current global economy is relatively less integrated than it was the case in the past decades.

Notably, the sceptics also dispute the idea that the nation-state will soon come to an end as a result of globalisation Hirst, Thompson and Bromley (2015). Again, the sceptics have two diverse points of view. One category of the sceptics perceives the national governments to be the most significant part of internationalisation identified as a US-instigated economic order which was imperative in shaping an economic instinct for the liberalisation of the national economies. The other faction with some notable authors like Callinicos (1994) consider the increase in the global trade and the FDI as a new period of Westernisation where national governments are deeply concerned. They, however, have come into agreement that internationalisation come alongside the rising economic marginalisation of the developing countries. The sceptics basically seek to uncover the myths which endure the globalisation debate instead of the world developing into a more interdependent entity.

The Transformationalists

Transformationalists hold that globalisation in the new millennium is expected to become a central driving force that pushes forward the rapid economic, social and political changes to give the modern societies a new shape and to create a new world order (Scholte 1993).  This school of thought is of the view that the contemporary globalisation processes are historically exceptional in such a way that societies and governments worldwide have to adjust to a world where there is no more clear difference between the international and local, external and internal affairs (Servaes 2015). Globalisation in this perspective is thought of as an authoritative transformative force that is responsible for a great shake-out of economies, societies, governance, institutions of and world order. 

The direction of this particular “shake-out”, however, remains uncertain in the account of the transformationalists because of the reason that globalisation is seen as a fundamentally conditional historical process full of contradictions (Scholte 2014). The main concern, in this case, is the dynamic and flexible notion of direction in which globalisation may be taking and the type of world order it is likely to prefigure. When held against the hyperglobalist and sceptical accounts, transformationalists neither make any claim regarding the future course of globalisation nor do they strive to gauge the present in regards to some distinct, fixed perfect-type ‘globalised world’, be it a global civilization or a global market (Scholte 2014). Transformationalist account instead stresses on globalisation as a lasting historical process which is adorned with contractions and which is expressively shaped by hypothetical factors.

Having had this heated globalisation debate and studying various schools of thought on the same, it is now possible to determine how the economic globalisation is different from industrialisation, westernisation and liberalism or cultural convergence. Notably, the level of world trade has today reached such high levels than was ever witnessed before and also entails a much diverse range of commodities and services. The level of finance and the mode and rate of cash flow are the biggest differences between then and now. An example in this case is the electronic money stored as digits in the computers so that the current economy is not comparable to the earlier times; money transfer is simple in a single click. Globalisation is both new and revolutionary.

Globalization and the Economic Crisis

The current global economic crisis that was first felt in 2008 is still on and has two major aspects that have to be addressed by the governments and policymakers (Kahler 2013). The first aspect id the deterioration in the cumulative demand, consequently fronting a largescale destruction of employments and livelihoods. The second in this lists is the problem related to the credit freeze, which brought about virtual termination of loaning for investment and consumption. The developing countries were hardest hit by this crisis, although the effect was somewhat delayed (Kahler 2013). Each country had a different challenge to content with. The closer the Third World countries are interconnected with the global economy, the crasser the impact. The emerging recovery that is becoming noticeable is, at least for now, restricted to specific nations and regions. 

This crisis became primarily transmitted through trade and financial flows plunging millions of people back to their poor status, a state that was only rampant before globalisation. The recession has thwarted the efforts put towards economic development in various countries and the attainment of the Millennium Development Goals (MDGs) has seriously been threatened in several countries especially the developing nation states (Rodrik 2011). Most of these developing nations lack the resources required to kindle the economy and shield their socially vulnerable populations to the in the same way the industrialised countries would do. Many countries have however taken substantial measures to alleviate the impacts, and this has been enabled in part by the globalisation of trade. The Third World countries have also stepped up levels of cooperation between themselves and have taken the platform to demand urgently that they are allocated a greater say in the global matters.

In most cases, the industrialised countries are concerned with problems that affect them in one way or the other (Weeks 2011). When they come to realise that an eminent problem does not impact their country in any way, they tend to turn away and leave the affected countries to deal with their own problems or even if they decide to help then the aid is always limited or done with the aim of achieving something in return (Weeks 2011). There has been an intense pressure mounted on these countries by the international institutions to ease their erstwhile dominance to give room for the emerging nations that have since should a strong will to do so. Globalisation brought about a shift in power and influence which was vividly noticeable prior to this economic crisis (Rodrik 2011). Since the beginning of this crisis, however, the achievements have been noticed to be deepening and there is very little hope left if any for the economies that were once very promising.

Conclusion

Globalisation is a positive phenomenon, especially when considered from the economic perspective. It is an occurrence that has been shaping the way nations interact in the past few decades, and it has for sure contributed to the elevation of the previously third world countries to almost industrialised countries, with the best example being China. China is one of the most noticeable beneficiaries of globalisation with its FDI currently surpassing that of US. Corporate activities and the international trade and production have increasingly become globalised. It appears that nations have today lost their sovereignty, and they are left with very little voice on the matters of national concern. The debate on globalisation could be argued out through three different schools of thought; the hyperglobalisers, the sceptics and the transformationalists. From the analysis, it can be concluded that the hyperglobalisers are having a more convincing argument when they state that the era of nation-state is soon coming to an end. This is evident in the current economic activities that are cutting across the globe without the consideration of the national boundaries and if globalisation continue with the same pace, anything to do with nation-state will be gone and never to return.

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