Introduction
Globalization is a growing trade, culture and social phenomenon which involves world economies depending on each other for trade in goods, services, investments, information and other commodities. The past two decades has seen world’s economies more connected in terms of faster transportation means, faster and more efficient and convenient communication, and breaking of language barriers. This has led to more countries partnering with other countries in governmental and private levels to partake in commercial and trading interests for each country’s benefit. This essay will be discussing the positive impact of globalization to all world’s countries. It will discuss the different theories of globalization and how it has impacted regional from a socio-economic perspective.
Economic theories and ideas that encourage companies to pursue globalization
The Schumpeter’s theory of economic development is one of the oldest and most popular theories supporting the globalization idea. It states that development is centrally determined by the entrepreneur and the innovations he/she introduces in the process of economic development. Published in 1911, the theory is centered around four features: –
- Circular flow – This is based on the presumption that all economic activities follow a familiar, repetitive path with producers ensuring that they adjust the production and supply of products according to prevailing demand in order to maintain the continuity.
- The entrepreneur – According to Schumpeter, the entrepreneur/innovator is the key to the process of development because he initiates development in a society through his activities. He/she then carries forward and expands the development.
- Business cycle – Business cycle is the process in which an economic life adopts new economic conditions in order for it to keep alive. It describes the process through which a new innovative product replaces a similar, old product, leading to disintegration of the economic factors which where nourished by the old product and proliferation of new economic factors to support the new innovation.
- Capitalism decay – Schumpeter theory’s last feature avers that the uncontrolled growth of capitalism turns the noble spirit of entrepreneurship into a routine, dis-personalized activity performed with the aim of advancing big business only. The tendency by entrepreneurs to expand production turns entrepreneurship-oriented businesses into public companies with shareholders who are disinterested in personalized nature of the business.
Schumpeter’s theory supports the idea of globalization in several ways. First, it encourages the entrepreneurship spirit among people and the conversion of entrepreneurship ideas and innovations into global products and brands through expansion and mass production. Secondly, countries are forced to make economic changes which create ample conditions for their businesses to be competitive in the global market. They are also forced to adopt measures (such as easing of conditions for foreign companies which want to operate in their countries) so as to attract more businesses and industries into their territories. Lastly, globalization is one way for entrepreneurs to ensure they can dominate the global market in their respective industries so as to control the next phase of innovations in those industries.
The business of globalization and globalization of business
In an article titled “The business of globalization and the Globalization of business” Constantine E, Passaris of University of New Brunswick, Canada discusses how new global economies are increasingly been driven by globalization, liberalization of trade and information communications and technology. By globalizing trade, national borders are melted while adoption of free trade has led to enhanced integration of economies. A revolutionized IT has made it possible to do business from any part of the world without necessarily been physically present in those locations. All this, he avers, has been driven by a culture of innovation of ideas, technologies and initiatives.
Another driver of globalization is the ability of people from any corner of the world to interact, live, learn, invest, seek medical services, exercise their democratic rights and freely communicate with each other. More interactions between people have erased negative perception about trade between people from different cultures and nationalities, enabling them to embrace a globalized approach to trading and commerce.
How globalization has led to regional development from a social-economic standpoint
World-system theory
Today, more world systems have been standardized due to globalization. Countries which share common borders and wish to trade with each other have been forced to form trading blocs in order to facilitate easier trade and commerce between them. In order to have uniformized trading system, the countries are forced to standardize their political, communication, education and other systems so as to make globalization practical in the whole trading bloc. Due to the desire of countries to join the globalization bandwagon, countries with repressive laws and political systems are forced to change them into democratically-aligned system and laws. Others have to uplift educational standards of their citizens, make better business laws and generally create policy that ensures the country’s political, educational, business and economic systems are at par with the rest of the partners in order to fully benefit from the trading partnerships. A good example is the NAFTA trade agreement between the US, Canada and Mexico which has led to Mexico adopting more democratic political system and training its workforce on the latest business skills in order to fully benefit from the agreement.
Theories of global capitalism
Globalization has led the world away from protectionist forms of economies (such as socialism, communism etc) to capitalism. Capitalist economies ensure there is cut-throat competition among entrepreneurs and innovators so as to stay ahead of the pile. Competition leads to companies and countries establishing better infrastructural facilities such as roads, ports, airports, communication networks, skill development etc in order to keep pace with the competition. It also leads to countries encouraging more innovative ideas among its citizens so as to outdo other countries/companies and stay ahead. A highly competitive globalized market leads to better infrastructural facilities, citizens who are more educated and skilled, better health and recreational facilities etc.
Capitalism in a globalized market also ensures that citizens in a trading bloc have access to the highest-quality products and services at the most competitive prices. This helps in improving the quality and convenience of lives of citizens.
For instance, regional trading partnerships such as the EU has enabled companies in countries such as Britain to acquire cheaper labor from eastern European countries such as Romania and Poland while citizens in those countries can enjoy more liberal freedoms since their governments had to adopt democratic political systems so as to be allowed to join the EU trading bloc. The citizens can also enjoy better education and healthcare due to upgrade of their country’s systems to EU standards. Labor laws have also become more favorable to workers from those countries since their countries have harmonized their labor and human rights laws to European standards.
Conclusion
Globalization is a concept that has been in existence for the last 500 years but has been accelerated in the last three decades due to growth in international transport, breaking of language barriers, standardization of education systems and the advancement of information communication technology. Due to globalization, all regions of the world have benefited from the policies countries and companies put in place in order to stay competitive, standardize their infrastructure with those of trading partners and maintain skilled labor force.
The theory of world system refers to how countries have been forced by the globalization trend to adopt to more liberal and democratic practices, upgrade their labor, human rights, healthcare and educational systems in order to maintain the trading partnerships and their competitiveness.