What is Globalization?

In a narrow sense, globalization describes the increasing internationalization of production, distribution, and marketing of goods and services. In a broader sense, it refers to the expansion of global linkages, the organization of social life on a global scale, and the growth of a global consciousness, hence to the consolidation of the world society. It is a complex economic, political, cultural, and geographical process in which the mobility of capital, organizations, ideas and peoples has taken on an increasingly global or transnational form.
Economic globalization refers to the process that advancing the integration of the world economy through trade and investment. Political globalization refers in part to an increasing trend toward multilateralism, in which the United Nations plays a key role and national non-governmental organizations (NGOs) act as watchdogs over governments. International NGOs increase their activities and influence over national economies and their states' decision-making. Cultural globalization refers to the worldwide cultural standardization. It is the process by which tastes and preferences of individuals become more similar across countries e.g. Hollywood movies, McDonald's or Sushi, etc. Geographical globalization refers to the trend of intensifying connections among people at widely varying spatial and temporal scales. The reduction in the barriers to real and virtual interaction among people, even between distant places, is due to the rapid increases in transportation and communication technologies.

Globalization comprises three core elements: the expansion of markets; challenges to the state and institutions; and the rise of new social and political movements.

The expansion of markets
Technological improvement and government deregulation help establish the transnational networks in production, trade and finance. These networks are now expanding globally.

In the goods and services market, advanced means of communication and new techniques of production help establish the production and trade networks among nations so that the quantity and the speed of goods and services trade across the globe increase. Also, in financial markets, globalization facilitated by new financial instruments permits a wider range of services to be bought and sold across the world economy. Both goods and services and financial markets have been expanding under globalization.

The transformation of politics
The second element of globalization is the challenges to the state and institutions. Because of the increase in political interactions among nations, political power and political activities will be widely spread across the border. The global issues like human rights, environmental protection will require states to coordinate policy-making at levels above the nation-state. Thus, the original political situation may be changed. The sates' political boundaries become much less important.

The emergence of new social and political movements
Because of the advanced communication system and the media like internet, book and music, international ideas and values can easily be transferred across countries and develop a new global culture which may inspire some new social and political ideas as well as movements.

Pros and Cons of Globalization

Pros

Increase Economic Growth
Economic globalization is the process of integration of the world economy. Under the economic globalization, nations open up their economies to import goods, services, and capital from other nations by removing barriers such as trade restrictions, quotas, tariffs and restrictions on foreign ownerships. This can create more opportunities for a country to promote trades and attract investments. The increasing trades and investments under globalization can drive economic growth and create jobs.

Increase the Efficiency of Business
Economic integration lowers national barriers to trades and investments, so goods, services and money move more freely throughout the world. Businesses are exposed to competition and advanced technology. Less competitive and profitable businesses will fail and exit the market. To survive, firms have to maintain their own competitiveness. Thus, open economic systems can create incentives for companies to be more cost-efficient in order to stay competitive.

Benefits to consumers
Firms are more efficient. Production costs are kept low in free market. Hence, consumers will benefit from low prices and enjoy increased real income.

In addition, as countries participate in international trades, they will shift their pattern of production to those goods and services that they have comparative advantages to trade at competitive prices. Consumers will then benefit from the increasing variety of goods and services available and the lower prices.

Gains to the owners of multinational enterprises
Globalization allows free movement of new communication technologies among nations. New communication technologies such as the use of the internet, e-mail, mobile phones and satellite broadcasting offer people more opportunities to communicate in groups and get new information from both close and distant sources more quickly. With the knowledge of the rest of world in their finger tips, multinational enterprises can respond faster to the changes of wage costs, shifting their production from higher-wage industrialized countries to lower-wage developing countries. As a result, the lower wage costs can benefit the owners of the enterprises.

Also, the owners of multinational enterprises can gain from the openness to foreign investments. In the developing world, capital is scarce. Most investment opportunities remain unexploited. When multinational enterprises invest their capital in the developing countries, their returns on investment are likely higher than those in the industrialized countries.

Higher Living Standard
An open economy, which encourages international trades and foreign investments, expands the choice set for consumers and brings in capital and technologies from abroad. Thus, with more choices and higher technologies, people's living standard is raised.

Capital inflow to poor economies; increase total export of developed countries
Due to the higher mobility of capital under globalization and higher return of investment in the developing countries, more foreign direct investment (FDI) will go to developing countries.

Moreover, after making FDI, companies in developed countries export more intermediate goods to the developing countries (FDI-receiving countries) for further production process but export less finished goods for sales. If the rise in exports of intermediate goods outweighs the fall in exports of finished goods, total exports from the FDI-sending countries rise. Thus, FDI-sending countries will benefit.

Cons

Reduction in Economic Growth
More liberalized trade may have negative impacts on jobs and economic growth when a country imports more than exports. This imbalance is most likely to happen to countries whose domestic industries were heavily protected before the liberalization. If these industries cannot survive under the intensified international competition, the countries will rely more on imports. Given the same exports, the net exports will decrease as well as the GDP and economic growth.

Widening of Income Inequality
The combined action of increased trade and capital flows under globalization is likely to raise the demand for and push up the wages of some relatively skilled labor in certain industries which have comparative advantages in a country. On the other hand, the demand for relatively unskilled labor falls, so as their wages. This widens the income inequality within the country.

Job Losses
Globalization results in competition among nations. That means domestic exports have to compete in the international market. Unfortunately, some domestic companies may fail to survive or relocate their production line to other countries with lower costs; hence, more people in the domestic country lose their jobs.

Downward Pressure on Wages
Free trade and FDI may take jobs from workers in the advanced industrial economies to cheaper workers in poor countries. Because of an increase in the idle labor in developed countries, there is a downward pressure on overall wages. Meanwhile, although the poor workers in developing countries are drawn into jobs, most of them still have to work for long hours in shabbier premises and get very low pay.

Supervision from international organization
Multinational economic institutions, such as the World Trade Organization, the World Bank, and the International Monetary Fund, are seen as the monitors who render judgment on global trade practices. These organizations will intervene as some countries violate the trade agreement under free trade. Therefore, countries are now bounded by more global rules and regulations, which did not exist before free trade.

Tax Avoidance and the Reductions of Social Protection
Corporations are inclined to invest in a place with lower tax rate. With the trend of economic integration and globalization, if there is tax differential between countries, people or corporations most likely move to places with lower tax rates to make their investment. In order to attract the inflows of FDI, governments have to lower the tax rates for corporate income. Thus, globalization gives rise to tax competition which not only limits governments' controls on the tax system, but also reduces their tax revenues.

In many nations, especially the developing one, corporate tax revenues are one of the major sources of state income. Tax avoidance and tax competition will cause inadequate revenues of governments to support the infrastructure development and limit the government's ability to provide social programs and safety nets.

De-regulation
Trade agreements require governments to remove many legislative or administrative regulations which may restrain free trade. Many barriers to free trade are removed despite the potential environmental, social or developmental effects of doing so. For example, Canada has for many years banned the production and the use of insecticide DDT within the country due to its negative environmental impact, but she cannot restrict any food with the use of this insecticide imported into Canada. Thus, trade agreements may defeat some national policy.

Threatening Environment
An upsurge of trades and investments in the natural resource industries such as forestry, mining, and petroleum development are threatening the health of the world forests, mountains, waters, and other sensitive ecosystems. According to a research conducted by the World Watch Institute, globalization threatens the planet and its inhabitants. For instance, the size of our forests is shrinking as the value of global trade in forest products climbs from $29 billion in 1961 to $139 billion in 1998; fisheries are collapsing as fish exports rise nearly fivefold in value since 1970; human health is also endangered with the usage of pesticide increasing nearly nine-folded since 1961.

In addition, high-tech industries such as computers and electronics have also gone global in recent years, which have heavy environmental costs. It is because semiconductor manufacturing employs hundreds of chemicals which contain carcinogens that will harm human health.

The Possible Impacts of Globalization

Privatization
Globalization pushes countries to privatize public utilities, such as electricity, water and public transport because government may not provide the public utilities in an efficient way. As a result, many public utilities change their modes of operation. For instance, medicare systems and hospitals become 'user pay' and only accessible to those who can afford to pay. Many research institutions now depend on private funding, and have to re-direct their research focus from subjects of public interest to areas of commercial value. Public transport only exists where there is an adequate base of customers, but it will be reduced or eliminated at the peripheral regions.

Enforcement of Global Rules and Regulation
At the international level, globalization provides small states with new opportunities, but also highlights the existing power and advantages of large and powerful states. With the increasing transnational economic activities like large volume of trading goods and services, global rules, regulations and free trade agreements are required to ensure equality and non-discrimination among countries. This requirement creates the need for the enforcers of the rules. The enforcers are usually the large and powerful states.

Human Rights and Democracy
The spread of democracy itself is also a result of globalization. It is because globalization allows democratic idea spreading widely around the world easily. Also, with advanced communication system, international investors are easier to access the information and know which countries offer better human rights situation. They will then choose a politically stable country with secure private property rights to invest. If the local government wants to attract foreign investment, it has to engage in democratic reforms. In this sense, freeing trades and investments can encourage democratization.

Implications of Globalization on Social Security

There seems to be a trade-off between globalization and having a welfare state. A society usually gets fund by imposing different taxes to provide some degree of public social security. However, some taxes will reduce its economic competitiveness in the global context. For example, corporate tax will reduce the profits of the owners of corporations. To maximize their profits, the owners will move their corporations to the countries where they face lower corporate tax rate. If government taxes on the returns of capital and labor, then capital and labor will migrate to countries where their returns are not so depressed. Therefore, there is a pressure for all countries to minimize taxation and force governments to dismantle their welfare state and shift to the private provision in order to cut the governments' expenditure.

Nevertheless, government income is crucially important because the income can be used both for financing social security and for promoting the efficiency of economic production, such as the provision of law and order, spending on education that can enhance the productivity of workforce. Unfortunately, the lower tax rate caused by tax competition limits the revenues received and the spending of governments, and forces governments to make choices between improving productive efficiency and providing social security when they decide how to spend their funds. Governments usually value the productive efficiency more. Hence, spending on public provision, especially for the elderly, may decrease. It is because the elderly have already left the workforce, public spending on them will not add to productive efficiency. Thus under globalization, governments tend to lower taxation to attract more labor and capital, and ignore the welfare of their elderly. Such competitive success will force other nations to pursue similar low-tax policies. As a result, public provision may dismantle gradually as globalization intensifies.

Implications of Globalization on Education

Given the increasing economic globalization and restructuring in the world political and economic systems, the requirement for having more knowledge and information is inevitable. Hence, higher education received by the individuals in the future workforce is required. Other than formal institutional educations, continue education is important as well.

Moreover, the globalization of the economy demands the workforce to have various skills and abilities. Therefore, the workforce should have an improved education that can enhance the ability to access and apply knowledge; to think independently; to exercise appropriate judgment and to collaborate with others. The traditional education system which simply conveys a body of knowledge should be reformed, so as to teach how to learn, solve problems and synthesize the old with the new.
In order to meet challenges brought by globalization, several components of teaching should be included or enhanced:

Focus on abstract concepts
The reality of the rapid-fire global economy requires those who are seeking valuable employment to be able to identify problems, gather necessary information, and make decisions and choices based on complex uncertain realities. Therefore, education should focus on training learners to be more familiar and comfortable with abstract concepts and uncertain situation.

Enhances the students' ability to manipulate symbols
In today's economy, business persons are required to constantly manipulate globally used symbols, such as political, legal and business terms and concepts (such as intellectual property rights), and digital money (in financial systems and accounting concepts). Therefore, the education system should enhance the students' ability on that.

Increased quantity of scientifically and technically trained persons
Some kinds of industries emerge in the age of globalization like biotechnology; new materials science; human genetics; advanced computing; artificial intelligence, and human or computer interfaces. These industries demand employees that are highly trained in science and technology. Therefore, universities have to quickly adapt to the needs and expand this element in education system.

Encourages students to work in teams
Under globalization, communication among nations and multinational enterprises increase. Employees need to work closely in teams. Therefore, students, the future workforce, should be encouraged to work in teams to develop interpersonal skills such as in-group dynamic, leadership and management.

Not only should students learn to work in teams, but they should also learn to work in global networked virtual teams. This enhances team performance when using virtual tools to communicate, structure group dialogue and decision making, record rationales for choices, and facilitate collective activities.

Implication on the Roles of Government

The roles of governments become less important under globalization. It is because under economic integration, governments cannot control the mobility of the factors of production. Individuals can easily move their resources out from those countries with less ideal economic conditions to where they can maximize their utilities. The nation-state becomes a dysfunctional unit in terms of which to organize economic activity.

Although the roles of governments become less important after economic integration, they still have at least three vital functions which can only be carried out by nation-state governments. They are:

1. To protect the members of society from oppression or injustice of each other;
2. To protect the society from invasion by other nations;
3. To erect and maintain an infrastructure that supports public goods.

The first function of a government is to protect the members of society by maintaining and enforcing the legal system. For individuals to maximize utility, a legal system is required to protect private ownership of property and adjudicate disputes among contracting parties.

The second function is to protect its own country and sustain sovereignty when there is a threat of invasion. Even if the multinational enterprises have become more powerful against the government, they cannot be compared with that of the government since they cannot tax on citizens and conscript the tax revenue as they want. They are also unable to deploy physical force fight against the enemies.

The third function of a nation-state government is to establish the infrastructure such as improving education, building transportation system, and expanding communication links. The existence of these infrastructures can attract more investments which are central to economic development. Hence the role of establishing infrastructure can directly influence the growth of a nation's economy.

Besides the three functions, there are some responsibilities which cannot be neglected by governments under globalization.

Education
In some developing countries, the poor drop out after primary school while the rich go on to higher education. Therefore, the government should move quickly in the direction of universal secondary education. So as to upgrade the labor force, increase the incomes of the great majority and thus making globalization becomes good for everyone.

Labor Force
The workers have the risk to be exploited by the companies e.g. longer working hours, poor working conditions. Government should pass regulations to protect workers from the greater power of employers and from labor market risks. The regulations should include a more socialized solution to unemployment risk by adopting contributory individual savings, unemployment benefits, etc.

Social Security
Facing the benefits and challenges of globalization, the national governments have to make choices whether to resist or accept the consequences of globalization. For example, Government may force down domestic wage level in order to maintain a competitive labor market to secure jobs or try to isolate the domestic economy by means of protection. Both methods can indeed help the country to have higher competitiveness which is very important to a country when it goes global. However, they are difficult to achieve and may lead to serious social consequence because of lower wage payment and falling living standard.

If the national governments allow their countries to go global and get accept the potential advantages of globalization, they should concentrate on the development of technology and knowledge, both in education and industrial terms, in order to maintain the social interest of citizen. Meanwhile, governments should transfer the resources to generate a generous system of social welfare at the expense of employment.

An important part of the role of national governments is to make global economy system work better and more acceptable. For example, through providing social capital and common goods to preserve the basic needs of society and reduce the destruction from advanced globalization.

Besides, governments are the initiators of policies and regulations to promote environmental protection and health and safety standards. Governments have to set the rules governing the economic environment in an effort to restrain the excess of the market and discourage corruption. It is also important for governments to oversee the provision of constantly upgrade communications and other physical infrastructures so as to encourage investment.

Although the decision-making capacity of governments under globalization is decreasing, their representative capacity remains significant. Governments have the principle mean of protecting national economic interests at international meetings of associations, such as World Trade Organization (WTO) or the International Monetary Fund (IMF). Overall, the losses in terms of economic sovereignty and the ability to pursue macroeconomic policies are balanced by new responsibilities created by the onset of fully global capitalism.