Globalization: Overview.

Introduction

Globalization is a form of cultural integration that is usually defined in terms of economics but also encompasses cultural, biological, and political homogenization on a global scale. The term is often used to describe the process by which dominant cultures exert social, political, and economic influence on other nations and cultures.

The globalization debate has its origins in the first contact between ancient societies. Economic globalization began when large cultures began to exchange resources with or attempt military conquest of other cultures.

Many social scientists adopt a neutral stance on globalization while attempting to elucidate both the benefits and the detriments of current and historical trends. Within the larger public debate, there are those who believe that globalization will eventually lead to a utopian world society, while others believe that it will cause the obliteration of less dominant cultures in favor of more economically developed ones and potentially exacerbate economic inequality.

Throughout history, governments have been viewed as the principal agents of globalization. In recent decades, however, multinational corporations have become a more important force in economic and environmental globalization. Many of these companies have reached into new global markets in their efforts to discover sources of new revenue. Meanwhile, major supply chain disruptions, such as the one caused by the COVID-19 pandemic of the early 2020s, have led some businesses to reconsider the costs and benefits of multinational operations.

Understanding the Discussion

Capitalism: An economic system in which the means of production are owned by individuals or companies rather than by the government. Goods, services, and capital are exchanged in a free market.

Developing countries: Those countries classified by the World Bank as low- or middle-income nations. The distinction is made on the basis of the country’s gross national income (GNI).

E-Commerce: Commerce and economic transactions that take place electronically, including Internet-based transactions and direct electronic connections between businesses.

Homogenization: Making something uniform or similar.

International Monetary Fund (IMF): An international organization of 189 countries, established in 1947 with the goal of promoting cooperation and exchange between nations and aiding the growth of international trade.

Mercantilism: An economic theory that holds that a nation’s prosperity is based on its supply of capital; generally associated with nations whose major mode of accumulating wealth is through merchant trading with other nations.

Multilateral: A system involving the participation of more than two countries.

Multinational corporation: A corporation that conducts business in more than one nation.

Offshoring: Transferring organizational functions to another country.

Outsourcing: Transferring noncentral functions to another entity to complete. This can be done in the same country, such as when a company outsources its shipping function to a major shipper, or offshore for cost benefits.

Protectionism: Measures set up by a governing organization to protect domestic industry and economy from foreign competition. Protectionism includes import and export regulations and government support for domestic production.

World Bank: A union of international organizations established in 1945 to provide aid to countries seeking to participate in international exchange and to reduce poverty around the world. Its member organizations are the International Development Association, the International Center for the Settlement of Investment Disputes, the International Finance Corporation, the International Bank for Reconstruction and Development, and the Multilateral Investment Guarantee Agency.

History

Some historians believe that economic and social globalization can be traced to the establishment of the Maurya Empire in India around 320 BCE. The Maurya Empire was among the first societies to develop international commerce, having established trade with Asia and Europe.

During the second century BCE, natives of present-day China established the Silk Road, a trade route that ran through China, Egypt, Persia, India, and Rome. The Silk Road was a multilateral project, with each nation contributing to the protection of trade routes and the establishment of trade protocols.

Eventually, religious organizations from Asia, India, Mesopotamia, and Europe established communities and worship sites in foreign nations. Environmental globalization was initiated through the exchange of crops and livestock. By the tenth century CE, nearly all imperial societies were involved in international trade, and these economic links were accompanied by the exchange of religion, philosophy, and biological organisms.

By the mid-1300s, international trade was accomplished via ocean transport. The intentional and unintentional transport of animals and plants led to the extinction of numerous species around the world, as well as the spread of diseases such as the Black Plague. However, the transport of agricultural products also contributed to the growth of many nations, allowing them to build a stock of goods for export.

The rise of European colonialism in the 1400s hastened the development of intricate trade regulations. European colonial powers grew during the 1600s and 1700s as many nations participated in capturing and selling slaves from Africa, the Americas, and elsewhere. Slavery became one of the chief forces for cultural globalization as traders inadvertently created ethnic populations in foreign nations.

From the 1600s through the early 1800s, global economics was based on mercantilism, and political influence was tied to the size of a nation’s merchant fleet and its accumulation of tradable goods. By the end of the 1700s, some nations were shifting toward protectionism while attempting to improve their infrastructure. Independence movements began to surface in opposition to imperial governments, causing domestic upheaval.

Capitalism emerged in Europe and the Americas during the mid-to-late eighteenth century, accompanied by the development of democratic political systems. The colonial period in Europe and Asia gradually declined during the nineteenth and twentieth centuries, giving rise to new nations with trading ties to their former colonizers.

In the first half of the twentieth century, shifts in political power created an ebb and flow of international trade. As resources were depleted in some nations, the export capital of other nations grew, and economic pressures led to increased economic cooperation, legislation, and military conflict. More nations began to use economic measures to settle international disputes, in place of or in addition to military conflict. In 1945, the World Bank was established, followed by the International Monetary Fund in 1947. These organizations were intended to help regulate and monitor the economic relationships between countries.

The advent of radio and television technology greatly hastened the pace and potential of intercultural exchange, as did the Internet decades later. In addition, immigration and international travel have created ethnic communities in many nations. Cross-cultural marriage and procreation have further obscured traditional divisions between societies.

Whereas the globalization debate previously focused on the activities of governments and social organizations, the growth of multinational corporations and e-commerce gave rise to a new facet of the debate. Corporations have increasingly become the chief agents for globalization.

Multinational corporations from economically dominant nations often establish factories and overseas offices in developing nations. Corporations that do this benefit from reduced labor costs and, in some cases, a nearer proximity to raw materials.

Critics of multinational corporations have accused them of maintaining unfair or unethical labor practices and exploiting the less stringent labor laws of developing nations. Such corporations have also been accused of unethical environmental practices, including the illegal disposal of dangerous waste materials and environmentally degrading consumption of natural resources, as well as adopting business practices that make it difficult or impossible for smaller independent businesses to compete. Though corporations may comply with the laws of their host nations, many critics believe that corporations from economically dominant countries have a responsibility to maintain labor, environmental, and ethical standards that are comparable to those of their nations of origin.

Corporate advocates have responded by saying that overseas corporations often pay wages in excess of the average income for factory workers in the host nations, and their environmental practices often exceed the legal requirements of their host nations as well. According to these corporations, competition is inherent to a market economy, and each company has a right to use any legal methods to promote their own brand above competing brands. In addition, some companies report that they could not provide their products to consumers in an economically viable way without seeking out the lowest-cost production environment.

The perception of multinational corporations as exploiters of marginal communities has led to boycotts, demonstrations, and protests. Antiglobalization activists have attempted to reduce public support for multinational corporations in order to force the companies to restructure their labor, environmental, and competitive policies. The degree to which corporations are responsible for acting outside of the social and political structures of the countries in which their factories are located in the name of social justice continues to be debated.

Governments have been using trade and economic incentives to urge political change since the earliest days of imperial merchant trading. In the age of globalization, the question of whether and to what extent wealthy nations should use economic power to exert social and ethical pressure on developing nations remains an open one. Globalization advocates say that economic incentives enhance the safety and security of the global environment by creating political ties between nations and helping end inhumane government practices. Critics argue that countries should be free to undergo independent processes of cultural evolution and that the beliefs of one nation should not be forced on others. Operating globally can be challenging for multinational corporations because of differing views on the ethics of globalization and clashes between different cultures. Many global companies employ individuals in foreign countries who can translate and interpret local customs and expectations.

Those opposed to globalization believe that the disproportionate influence of wealthy nations will reduce or eradicate cultural individualism in the world. Advocates argue that global business is currently undergoing a natural process of evolution and that wealthy nations are simply playing a role in this process. They point to the economic success of China and India as a result of increased globalization, while critics counter that although large companies may prosper, individuals, especially low-skilled workers, and smaller-scale businesses typically do not see any of the benefits of such prosperity.

During the first decades of the twenty-first century, many multinational corporations structured their offshoring in such a way as to minimize or even eliminate their tax liability, thus denying their host countries revenue to which they would otherwise be entitled. In 2012, for example, multinational corporations Amazon, Google, and Starbucks were heavily criticized in the United Kingdom for the minimal tax they paid on revenue earned from sales within the UK due to the way their various holdings are structured and globally distributed. Such tactics are commonplace, contributing to an estimated annual loss of more than £30 billion from the UK government due to tax avoidance.

In 2015, the United States and eleven other countries, including Canada and Mexico, signed the Trans Pacific Partnership (TPP) Agreement, a free-trade agreement that proponents hailed as a catalyst for economic growth and market standards in Asia and the Pacific region. However, opponents of the agreement claimed it would hamper the local economies of smaller states and homogenize several key industries, including energy and manufacturing. US president Donald Trump, who took office in January 2017, also vehemently opposed the deal as detrimental to working-class Americans. Trump quickly withdrew the United States from the TPP, stating that he planned to take a protectionist, "America First" approach to trade policy.

Similarly, when voters in the United Kingdom voted in favor of a June 2016 referendum to leave the European Union (EU), a move popularly termed "Brexit," many saw it as a rejection of globalization, particularly of the common market and open immigration policies that the EU had adopted. The UK's withdrawl from the EU became official in January 2020. Other national governments around the EU adopted increasingly "Eurosceptic" postures as well amid rising nationalism, populism, and other political trends. Such developments indicated that popular sentiment can swing both toward and away from the trend toward greater international integration. At the same time, developing nations and emerging economies, such as India, continued to forge ties with others around the world, changing the political and economic dynamics of globalization.

Globalization Today

One of the biggest shocks to the twenty-first century's globalized economy began in late 2019 and early 2020 with the onset of the COVID-19 pandemic. The pandemic, which killed an estimated fifteen million in its first two years, according to the World Health Organization (WHO), also contributed to a global economic downturn and led to many business closures and public health restrictions. In this environment a number of supply chain disruptions occurred, with consumers and businesses around the world facing delays, shortages, and other issues. Many multinational corporations reported revenue losses in 2020 and 2021 as a result of these disruptions. The pandemic eased in many countries as the 2020s wore on and average business revenue losses shrunk by 50 percent by the end of 2022, according to survey data published by supply chain risk management company Interos. Still, as a result of the pandemic, many businesses became more interested in onshoring their operations, including by investing in domestic manufacturing, as a way to reduce the impact of similar disruptions in the future.

Other supply chain disruptions throughout the early 2020s led some governments and corporations to reassess the risks of a globalized economy. Some of these disruptions had political origins. For example, the Russian invasion of Ukraine, which began in February 2022, led to swift and far-reaching sanctions which cut certain aspects of the Russian economy off from the global economic system. In response, Russia, which at that time was a major energy supplier for Germany and other western European countries, halted its supplies of natural gas to Europe, leading to high prices and an energy dispute. In order to reduce their reliance on Russian gas, by 2023 many EU countries had begun looking elsewhere for their energy supply and considered increased investment in domestic sources of renewable energy. Russia's rift with the EU, US, and other allies of Ukraine also led it to pursue stronger economic ties with China, possibly as part of a long-term realignment of the global economic order.

Additionally, starting in October 2023, renewed war between Israel and Hamas, a Palestinian political and military organization based in Gaza, heightened regional instability and highlighted the risks that armed conflict posed to global shipping. As the conflict continued into the first months of 2024 it spilled over into neighboring countries, including Lebanon. In Yemen, where a Shia Muslim opposition group known as the Houthis had been fighting a years-long insurgency against the government, the Houthis began attacking shipping routes in the Red Sea, a critical global shipping lane, as a way to place strain on Israel's economy and express solidarity with Palestinians in Gaza. By the end of March 2024, despite airstrikes by the US and other allies of Israel against Houthi operations in Yemen, the Houthi campaign had inflicted economic damage on Israel. For example, the Israeli port of Eilat, located on the Red Sea, had experienced an 85 percent drop in shipping activity.

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