Discuss the impact of globalization on Australia and other economies.
Globalization refers to the integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity hence becoming a global economy. This process has had a significant effect on economic growth, and development, trade, investment and TNC??™s, income inequality, environmental sustainability and the role of financial markets all around the world including Australia.
Globalization has played a critical role in economic growth and development affecting countries in different ways. Due to globalization developing countries have greater opportunities to expand their economy by producing goods for the global consumer markets and experience a greater access to new technologies and foreign investment. Developing countries, such as China and India have experienced rapid economic growth and major improvement in their economic developments a result of policies that have been put in place to increase international investment and export strategies to other nations. This is beneficial as their income levels and economic growth increases. Hence there is a possibility of converging income levels and narrowing the gap of inequality.
On the other hand, globally integrated and advanced economies experienced comparatively weak growth due to globalization in the past 2 decades. Highly globalized financial markets like US and Europe suffered worst effects of the late 2000s global rescission. Globalisation has also contributed to negatively to other growth outcome such as through foreign indebtedness in Africa and Greece, and exchange rate volatility in Latin America. However some aspects of globalization has benefited Developed economies. TNC??™s such as Toyota motors, Mc Donald??™s, BHP Billiton etc have been able to take advantage of trade liberalization and the deregulation of financial markets, which has allowed them to access to developing nations and to cheap labour / resources.
Globalisation has resulted in substantial increase in the size of trade flows and foreign investments which have been largely influences by TNC??™s, resulting in world trade growing at a rate twice that of global production. International trade in G&S has increase hence it is now equaled to 2/3 of global output. Changes in the trend of Technology and government policies have fostered trade growth around the world. A significant impact of trade growth has resulted to good being produced in different stages in different regions. For example, stages of motor vehicles could involve material manufacturing, component manufacturing and final assembly occurring in 3 different countries. i.e Toyota a leading motor vehicle company from Japan transport manufactured parts, which are spread worldwide and assembled across the globe in countries such as Australia and USA.
Globalisation of financial markets has seen an increased reliance on foreign sources of finance investment. More countries have greater access to oversea funds for investment hence foreign direct investment (FDI) plays a greater role in creating more economic activity. FDI flows are mostly enjoyed by economies with already favorable economic prospects. In addition, the growth of short-term financial flows has had a destabilising impact on many economies. The removal of restrictions on foreign ownership spurred the growth of TNCs, of which there are now 82 000. In 2008, TNCs accounted for 1/3 of total world exports and employed over 77 million people. The combined value of top 100 TNCs accounts for 4% of global GDP thus dominating the worlds major industries such as telecommunication and pharmaceuticals. Major criticism for TNCs is that they do not operate under laws of one government and so can move facilities to countries with less government restrictions. Lower labour standards and environmental protection laws in developing countries can lead to exploitation and environmental degradation.
Globalisation has created global competition and a need for TNCs to utilize the cheaper resources available, and this is often at the expense of the employees??™ wages. High-income nations have benefited greatly from the process, which Africa and parts of Asia are still experiencing high levels of absolute poverty.
An increase in financial flows provides greater opportunity and fuel economic growth. Financial flows concentrate in higher skill and higher technology sectors hence favoring developed nations and leading to an increase in financial inequality within countries. According to IMF, in the past 3 decades income inequality has risen by almost 0.45%. It states that 1/5 of the inequality is due to globalisation ad technology changes. As a result, there has been a shift n production processes away from lower- skilled labour towards higher skilled jobs. Therefore benefiting people with higher education, consequently leading to increase in unemployment for he less skilled workers.
On the other hand, as trade flows grow, the structure of the economy is changes. Increased openness to trade provides more export opportunities, which has raised income of agricultural workers in LDC by a small percentage. Lower traffic on imports improve standard of living for the poor by reducing the price of goods. In advanced countries, increased trade flows shifts employment towards higher paid services industries.
Globalisation diver nations to produce more at lower prices, often at the expense of the natural environment. As nations experience rapid growth, the amount of pollution they create has also increased dramatically. i.e deforestation for paper or woodchip industries, contribute to depletion of marine life through unsustainable fishing practices or poising water supplies by mining operations pollutions. Low-income countries that are desperate to attract foreign investment earn higher export revenues that engage in economic behaviours, which has devastating environmental effects.
For example, the rapid development of nations such as India and China concerns many people because of the lack of environmental laws in these countries, and this extremely high rate of growth. China is now the largest carbon emitter and India being the 3rd largest, together accounting for 30% of world??™s carbon emissions. This growth is mainly driven by heavily polluting manufacturing industries, which release carbon dioxide emission hence contributing to greenhouse effect. This puts pressure on the atmosphere, the natural environment and on limited resources.
However improved efficiency and innovation, along with the formation of international organisations has benefited the environment by reducing pollution levels and improving environmental standards. It offers opportunities to protect environment by forcing nations to face up to their global responsibility of environmental preservation. This promotes share costs of preservation, increases scrutiny into environmental practices of TNCs and facilitates transfer of environmentally friendly technology.