Factors Contributing to the Growth of Globalisation - Coursework Example

Globalisation [Name] [Institution] Introduction Recently, almost all the sectors of economic policy have been overtaken by the concept of globalisation in the entire world. Its effects have been felt on most government decisions pertaining to macro-economic policies either directly or indirectly. Globalisation has been a powerful phenomenon that history has not recorded in the recent times to affect developing nations together with their financial as well as trade institutions and their policies. It has transformed the flow of thinking towards technology, trade and foreign investment among others. Perception of a nation’s progress has been diverted by globalisation; the progress rely strongly both on the domestic resources and what the nation gets from other nations as opposed to the past (Narula, 2003 p. 1). This essay seeks to explore the concept of globalisation, factors contributing to its growth and its effects on Australian businesses and consumers. Concept of Globalisation The times we are living are characterised by many worldwide changes. The occurrences of one part of the world affect the inhabitants of another part of the world. Common developments influence individuals all over the world (Schaeffer, 1997 p. 1). This is the phenomenon that illustrates the concept of globalisation. Harris holds that the concept is today used in different contexts (1993 p. 775). A broad context in which it is applied is in the media where it is used day in day out to describe a wide variety of economic, environmental, sociological and political trends. The concept is used in a narrower context in the world of business to mean the production, distribution and marketing of products as well as services at an international realm. The progressive increase of globalisation is affecting every person in numerous ways. This is in the kind of food we consume, the type of clothes we put on, the numerous technologies that we employ, the modes of travel at our disposal and the kind of employments we pursue as they are all connected to globalization. Globalisation is transforming the world and making it like a global village. The essence of globalisation rest in offering liberty to a nation’s economic frontiers to permit unrestricted international trade in services as well as goods, entry and exit of foreign capital as well as technology in addition equal treatment to both foreign and domestic investors. Intrinsically, globalisation describes the integration of economies of the world via uninhibited trade as well as financial flows, similarly via mutual exchange of knowledge and technology. Globalisation also encompasses free inter-country movement of labor. There are various forms in which the move towards globalisation is reflected like comprehensive decrease in tariffs, utilisation of different promoting measures, easier foreign capital inflows, permitting reach to foreign financial institutions and fiscal liberalisation among others (Narula, 2003 p. 1). Variables like labour and capital flows, increasing significance of international trade and the technology transferred from other parts of the world among others provide a base for measuring the level of the integration brought about by globalisation. It is imperative to realise that the revolution in communication and information in addition to transportation technology has assisted in making the process of globalisation almost become a reality. The numerous benefits of globalisation are revealed by the increased trade. The consumers as well as producers in turn get a wider choice of goods that usually integrate more improved technology. Theoretically, consumers and producers are able to reach indifference curves in a globalizing nation thereby displaying their higher level of satisfaction for the consumer while the producers enjoy higher levels of profits. Further, the size of the market is increased by opening the economy thereby assisting the producers yield large economies of scale. There is also the benefit of an increased international competition for the globalising nations. The globalised nations accrue advantages through increased availability of resources, private investment inflows and bigger capital. These advantages assist the recipient nation to propel the development pace beyond what could otherwise have been likely. As its true for other macro-economic variables, it is also true that globalisation is not tied to economic sphere alone rather; it has been involved in other spheres as well. Social sphere is one particular sphere that globalization has been reflected in growing engagement of international NGOs, media groups and human right groups among others in numerous nations (Narula, 2003 p. 2). Examining the role played by international bodies such as OXFAM, we find the role becomes more evident during times of need like famines and elections. The implication of this is that the current globalisation wave even domestic non-economic factors attract a lot of cross-border interest similarly to economic issues. However, such matters bring about anti-globalisation feelings as well. Such kind of feeling fuel more when it reflects on social and cultural aspects of daily life through introducing a new set of values like western values. These aspects seem to endanger the long standing socio-economic equilibrium of the nation. This seems as a veiled trial to dictate occidental cultural hegemony in the name of globalisation. Some powers as a result dislike such interests or propagation of western lifestyles (Narula, 2003 p. 3). Factors Contributing to the Growth of Globalisation Harris shows that three factors mainly contribute to the growth of globalisation. They include; transformations in technologies, quick growth and increase in the size of developing nation’s economies and decrease in trade as well as investment barriers in the post-World War II era (1993 p. 763). To begin with is trade agreements; every country originally came up with its own rules governing foreign trade. As a result of this, there were unfair regulations as well as tariffs resulting into tariff wars in the 1930s. It has become convenient for countries to agree to rules that limit their own freedom of action in matters pertaining to trade. Additionally, nations are attracted to work toward elimination of manmade and often trade barriers. There are numerous trade agreements in the current world and three of them are the ‘Agreement on Tariffs and Trade (GATT), the European Community and the North American Free Trade Agreement (NAFTA)’. GATT was the first and the major significant agreement whose aim was to decrease tariff limitations among its participants. It was signed initially by 23 countries back in 1947 but countries have been joining thereby growing the number. The most purposeful trade agreement to be tried is the Uruguay Round of GATT. About 108 countries would reduce tariff as well as other barriers on agriculture and textile goods in addition to protecting other services (Richman, 1993 p. 14). Another way in which trade agreements effect globalisation is through the European Community. The internal borders of the 12 member nations of this community have been dismantled in order to enhance relations. This was the only initial step towards even better purpose of the peaceful union of these nations; the members ought to establish a common market. NAFTA is the other agreement that is aimed at impacting significantly on the way of conducting business although it is limited to few nations (Mario & Kathryn, 1993 p. xiii). All these agreements have improved the quality of life since they have increased access to goods as well as services manufactured in other nations. The other factor contributing to the growth of globalisation is new rules as well as restrictions. The scope for national government to come up with their economic policies is reduced by multilateral trade agreements, intellectual and services property rights, reinforced by strong means of enforcement (Stokes, n.d p. 1). The second major factor for globalisation is the quick growth of developing nation’s economies. Jacob holds that the global surge represents an increase in consumers who require goods as well as services (1994 p. 75). The need emerges due to the elevation in per capita incomes of the developing nations. Of the world biggest markets that are coming up, East Asian nations are the most increasing. Their approximated per capita income grew at a rate of 6.5% annually from 1983 to 1993. The incomes rose by 8.5% each year in China alone (Jacob, 1994 p. 74). Todays’ technological improvements have also played a role in globalisation. Due to these developments, the world has become smaller with communication being instant in many world parts (Engardio, 1994 p. 47). The developing regions perceive the improved communications as a means to leapfrog of economic development. The technological changes have contributed to the growth of globalisation by increasing the speed and spread of communication as well as knowledge transfer. For example, consumers from Australia can purchase products from any country in the globe, can also purchase shares in any major market and transfer funds. The expansion of new markets has also seen globalisation grow since foreign exchange as well as capital markets operate throughout the day with real time dealings. Another factor is the new institutional players like World Trade Organisation whose growing authority has capability of imposing on a country requiring assistance (Stokes, n.d p. 1). Hence, globalisation has grown as a result of combination of factors as discussed above. Impacts of Globalisation upon Australian Businesses and Consumers Since the mid of 1980s, the trade policies in Australia have been channeled to opening domestic firms to the global market. A major focus of Australian structural reform has been to expose the private sector to stiffer competition from domestic and international sources. Back in 1950s, Australia had safeguarded sectors like clothing, textiles and footwear as well as motor vehicles. Some individuals would argue that reducing the protection would decrease employment but most firms that were protected heavily during the 1970s and 80s still suffered employment losses and lacked efficiency to compete in export markets (Stokes, n.d p. 2). Imports have increased as a result of cutting protection but exports have increased due to increased efficiency. The GDP of both imports and exports of goods has grown in 2000 thereby reflecting the continuous influence of globalisation on the economy of Australia. The organisation of Australian trade has been transformed by the effects of globalisation. Considerable growth has been recorded in industries although the Australian rural sector has not seen only limited growth. The other component of globalisation encompasses the potential impact of transformations in the global market on economies. What this means is that Australian businesses consider the potential entry of international competitors into their markets. Employment policies and businesses plan pricing strategies depending on what could occur in case inexpensive foreign manufacturers or TNC’s came into the market. This also implies that businesses threaten to set up or consider their operations in nations where profits are foreseen to be greatest such as low wage nations, where unions are suppressed and there exist decreased corporate rates of taxes. Employers as well as the governments apply these fears to push for workplace reforms as well as labour market. In Australia, this has been achieved with the move to single contracts as well as the growing workforce casualisation. The lowly skilled as well as marginalized employees seem to lose out through poorer working conditions and less job security while certain highly skilled workers may reap benefit from this. There has also been internationalisation of financial markets in Australia. This has been contributed by four clear forces namely disintermediation, internationalisation, market saturation and deregulation of financial markets (Clarke & Clegg, 2000 p. 141). The Australian businesses are affected because of their financial market working on a global margin. The extension of the financial market to the globe exposes Australian businesses to more risk. Globalisation has also transformed patterns of consumption into cultured products and worldwide consumer markets have huge effects on the strategies of the Australian companies. This concept branches from the chances that come from the world becoming more globalised, thereby making consumers’ tastes and preferences standard. Hence, globalisation has impacted both positively and to a small extent on the Australian businesses and consumers. Conclusion . Globalisation has overtaken almost all the sectors of the economy because of the impact on decision making. The growth of globalisation has been contributed by three major factors as discussed above. Globalisation has made the entire world like a small village because of the improvements it has brought. It has transformed the flow of thinking towards technology, trade and foreign investment among others. In Australia, globalisation has been integrated more into the country’s economy for quite some time now. Australian firms have to be more integrated if they are to keep up. References Louis S. R 1993, Dangerous Times for Trade Treaties, Fortune, 14. Engardio, P 1994 Third World Leapfrog, Business Week, p. 47. Jacob, R 1994, The Big Rise, Fortune, 74 -75. Mario, B., & Kathryn, J. R 1993, North American Free Trade Agreement, Westport, CT: Quorum Books. Narula, S. 2003, Globalisation. Development Policy Management Forum (DPMF). Retrieved from http://www.dpmf.org/images/occasionalpaper7.pdf Harris, G. H 1993, Globalisation, trade, and income, Canadian Journal of Economics, 775 Schaeffer, R. K 1997, Understanding globalisation, Lanham, MD: Rowman & Littlefield Publishers. Stokes, A. R n.d, The Impact of Globalisation on the Australian Economy, Economics, 36 (3) Read More