GLOBALIZATION

Globalization is a process of worldwide spread of science, technologies, businesses, etc through

the means of transportation, communication, and trade. Globalization has affected almost all the
countries worldwide in various ways such as socially, economically, politically, and
psychologically too. Globalization is a term indicating fast and continues integration and
interdependence of countries in the field of business and technologies. The effects of
globalization have been seen on the tradition, environment, culture, security, lifestyle, and ideas.
There are many factors affecting and accelerating globalization trends worldwide.

The reason of acceleration in the globalization is because of the people demands, free-trade
activities, worldwide acceptance of markets, emerging new technologies, new researches in the
science, etc. Globalization has huge negative impacts on the environment and given rise to
various environmental issues like water pollution, deforestation, air pollution, soil pollution,
contamination of water resources, climate change, biodiversity loss, etc. All the ever growing
environmental issues need to be solved on urgent basis by international efforts otherwise they
may finish the existence of life on the earth a day in future.

In order to prevent the loss of environment, there is need of globalization of eco-friendly

technologies and huge level environmental awareness among people. In order to deal with the
negative effects of globalization, companies need to develop greener technologies which may
replace the current status of the environment. However, globalization has helped a lot positively
to save the environment by improving various resources (reducing adverse effects on the
environment like hybrid cars using less fuel) and promoting education.

Apple brand has also aimed to manufacture Eco-friendly products to reduce negative impacts of
globalization and exceed positive effects. Increasing demands of the ever increasing population
lead towards extensive deforestation causing great level environmental issue. Till now, almost
half of the useful forests have been cut in the past years. So, there is a need to make globalization
under control to reduce its negative effects.
 Definitions of Globalization
In this section, we have provided multiple definitions of globalization since it is a widely defined
word with several connotations to many different people. With this comprehensive outlook on
globalization, we encourage our readers to shape their own opinions on this pressing concept in
the modern world.

The most general and encompassing definition of globalization, presented to the students during
the beginning of the course, is:

“Globalization is a complex web of social processes that intensify and expand worldwide
economic, cultural, political, and technological exchanges and connections.” – Dr. Cairo

Globalization - Computer Definition

Operating around the world. Although many large companies have globalized for decades, the
Web, more than any other phenomenon, has enabled the smallest company to have a global
presence.

Globalization - Investment & Finance Definition

The spreading influence of companies beyond their national borders and increased
interconnectivity between the economies and cultures of countries. Since 2000, there have been
increasingly vocal protests against the ill affects of globalization. Critics have increasingly
demon- strated against globalization at international monetary and trade meetings of
organizations such as the International Monetary Fund

Swedish journalist Thomas Larsson, in his book The Race to the Top: The Real Story of
Globalization, states that globalization:
is the process of world shrinkage, of distances getting shorter, things moving closer. It pertains to
the increasing ease with which somebody on one side of the world can interact, to mutual
benefit, with somebody on the other side of the world.

Paul James defines

Globalization with a more direct and historically contextualized emphasis:

Globalization is the extension of social relations across world-space, defining that world-space in
terms of the historically variable ways that it has been practiced and socially understood through
changing world-time

How globalization works in india

India had the distinction of being the world's largest economy in the beginning of the Christian
era, as it accounted for about 32.9% share of world GDP and about 17% of the world population.
The goods produced in India had long been exported to far off destinations across the world. the
concept of globalisation is hardly new to India.

India currently accounts for 2.7% of world trade (as of 2015), up from 1.2% in 2006 according to
the World Trade Organisation (WTO).Until the liberalisation of 1991, India was largely and
intentionally isolated from the world markets, to protect its fledgling economy and to achieve
self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative
restrictions, while foreign direct investment was restricted by upper-limit equity participation,
restrictions on technology transfer, export obligations and government approvals; these
approvals were needed for nearly 60% of new FDI in the industrial sector.The restrictions
ensured that FDI averaged only around $200M annually between 1985 and 1991; a large
percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits
of non-resident Indians.

India's exports were stagnant for the first 15 years after independence, due to the predominance
of tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the
same period consisted predominantly of machinery, equipment and raw materials, due to nascent
industrialisation. Since liberalisation, the value of India's international trade has become more
broad-based and has risen to 63,0801 billion in 2003–04 from 12.50 billion in 1950–
51. India's trading partners are China, the US, the UAE, the UK, Japan and the EU.The exports
during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an
increase of 18.06% over the previous year.

India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and
its successor, the World Trade Organisation. While participating actively in its general council
meetings, India has been crucial in voicing the concerns of the developing world. For instance,
India has continued its opposition to the inclusion of such matters as labour and environment
issues and other non-tariff barriers into the WTO policies.

Despite reducing import restrictions several times in the 2000s,India was evaluated by the World
Trade Organisation in 2008 as more restrictive than similar developing economies, such as
Brazil, China, and Russia. The WTO also identified electricity shortages and inadequate
transportation infrastructure as significant constraints on trade. Its restrictiveness has been cited
as a factor which isolated it from the global financial crisis of 2008–2009more than other
countries, even though it experienced reduced ongoing economic growth.

Payments

Since independence, India's balance of payments on its current account has been negative. Since
liberalisation in the 1990s (precipitated by a balance of payment crisis), India's exports have been
consistently rising, covering 80.3% of its imports in 2002–03, up from 66.2% in 1990–91.
Although India is still a net importer, since 1996–97, its overall balance of payments (i.e.,
including the capital account balance), has been positive, largely on account of increased foreign
direct investment and deposits from non-resident Indians; until this time, the overall balance was
only occasionally positive on account of external assistance and commercial borrowings. As a
result, India's foreign currency reserves stood at $285 billion in 2008, which could be used in
infrastructural development of the country if used effectively. In September 2017 India's foreign
exchange reserves crossed $400 billion.
India's reliance on external assistance and commercial borrowings has decreased since 1991–92,
and since 2002–03, it has gradually been repaying these debts. Declining interest rates and
reduced borrowings decreased India's debt service ratio to 4.5% in 2007.

In India, external commercial borrowings (ECBs) are being permitted by the government for
providing an additional source of funds to Indian corporates. The Ministry of Finance monitors
and regulates these borrowings (ECBs) through ECB policy guidelines.

Investment

Foreign direct investment (FDI) in India has reached 2% of GDP, compared with 0.1% in 1990,
and Indian investment in other countries rose sharply in 2006.

As the third-largest economy in the world in PPP terms, India is a preferred destination for
FDI; India has strengths in information technology and other significant areas such as auto
components, chemicals, apparels, pharmaceuticals, and jewelry. Despite a surge in foreign
investments, rigid FDI policies resulted in a significant hindrance. However, due to some
positive economic reforms aimed at deregulating the economy and stimulating foreign
investment, India has positioned itself as one of the front-runners of the rapidly growing Asia-
Pacific region. India has a large pool of skilled managerial and technical expertise. The size of
the middle-class population stands at 50 million and represents a growing consumer market.[19]

India's liberalised FDI policy as of 2005 allowed up to a 100% FDI stake in ventures. Industrial
policy reforms have substantially reduced industrial licensing requirements, removed restrictions
on expansion and facilitated easy access to foreign technology and FDI. The upward moving
growth curve of the real-estate sector owes some credit to a booming economy and liberalised
FDI regime. In March 2005, the government amended the rules to allow 100 per cent FDI in the
construction business. This automatic route has been permitted in townships, housing, built-up
infrastructure and construction development projects including housing, commercial premises,
hotels, resorts, hospitals, educational institutions, recreational facilities, and city- and regional-
level infrastructure.

A number of changes were approved on the FDI policy to remove the caps in most sectors.
Fields which require relaxation in FDI restrictions include civil aviation, construction
development, industrial parks, petroleum and natural gas, commodity exchanges, credit-
information services and mining. But this still leaves an unfinished agenda of permitting greater
foreign investment in politically sensitive areas such as insurance and retailing. FDI inflows into
India reached a record US$19.5bn in fiscal year 2006/07 (April–March), according to the
government's Secretariat for Industrial Assistance. This was more than double the total of
US$7.8bn in the previous fiscal year. The FDI inflow for 2007-08 has been reported as $24bnand
for 2008-09, it is expected to be above $35 billion. A critical factor in determining India's
continued economic growth and realising the potential to be an economic superpower is going to
depend on how the government can create incentives for FDI flow across a large number of
sectors in India.In September 2012 the government approved 51% FDI in multi-brand retails
despite a lot of pressure from coalition parties.

…FIVE DIMENTIONS OF GLOBALISATION

{ Economic: global finance and market of economy,multinationals, networking, international

trade and business, new labour markets, new development cooperation.

{ Political: Human rights, international terrorism, war and new security problems. { Democracy:
good governance by people’s participation, Human rights.

{ Ecological: sustainable globalisation: use of common resources and legislation (biosphere;

water, forest, earth, air, atmosphere)

Advantages:
1. Increase in employment opportunities: As globalization increases, more and more
companies are setting up businesses in other countries. This in turn increases the
employment opportunities that people atone place have. People can get better jobs
without having to move to other countries in search of better jobs. Today, many
multinational companies such as Microsoft, Google and Toyota etc. have their offices in
India and many Indians work for these companies in India. Without globalization, Indian
people would not have had the opportunity to work for such companies in India.

2. Education: With the increase in globalization, it has become easier for people to move
across borders to different parts of the world to acquire better education. This has
resulted in an integration of cultures. People from underdeveloped and developing
countries often move to developed countries to get better education. More and more
 Indian students are traveling to countries like the UK or the USA to pursue higher
education. This has also opened their cultures towards the Indian culture to some extent.

3. Increase in free trade: An increase in free trade has opened doors for investors in
developed countries to invest their money in developing countries. Big companies from
developed countries have the freedom to operate in developing countries. In the 2000s,
Japanese and European companies such as Kawasaki and Siemens started producing
high-speed trains in China. This helped Chinese firms in gaining knowledge about the
production process and now Chinese companies such as China South Locomotive &
Rolling Stock Corp. are producing high-speed trains on their own.

4. Faster flow of Information: Information flows from one part of the world to the other
immediately, resulting in the world being tied together. Vital information can be shared
between individuals and corporations at a very fast rate. It has also facilitated in
increasing the ease of transporting people and goods.

5. Increase in quality of goods and services: As a result of globalization, people have

access to the best quality of goods and services throughout the world. Companies have to
strive to provide better quality goods and services to the consumer and the consumer has
the liberty of choosing whichever product he thinks is best suited for his needs. This
allows a person in America to wear clothes made in India and Mexico while watching a
football match taking place in England on a TV made in China.

6. Decrease in prices of goods and services: As the competition in the market has
increased due to rapid globalization, producers have to price their products competitively
in order to remain in the market. This has become a boon for the consumer as he can get
better quality products at cheaper prices. An example is that of the car Ambassador in
India. It was the only car available in India along with the Fiat before the liberalization of
the Indian Economy. These cars were inefficient and expensive. Once the Indian
economy was opened, other car companies started selling their cars in India at cheaper
prices. This was a major benefit for the Indian consumer.
7. Reduction in cultural barriers: As people move from one country to another, barriers
between various cultures tend to decrease.This has resulted in tolerance and openness
towards other cultures. This has also facilitated communication between different
cultures and hence, nations. It has also led to a reduction in wars as we are today living
in one of the most peaceful periods in the history of mankind.

Disadvantages:

1. Environmental degradation: Developed countries can take advantage of

underdeveloped countries’ weak regulatory laws in terms of environmental protection.

2. Unfair working conditions: Many multinationals have been accused of social injustice
by exploiting labor in underdeveloped countries in order to cut costs. Labor are provided
unhealthy working conditions leading to health hazards. Many large companies have also
been accused of using child labor in their factories in underdeveloped countries. Nike’s
much publicized use of child labor along with poor working conditions and low wages in
its factories in Indonesia is a well-documented example.

3. Fall in employment growth rate: Though the promotion of the idea that the advances in
technology and increase in productivity would create more jobs has been a cornerstone of
globalization, it has been seen that in the past few years, such advances have led to a
decrease in the employment growth rate in some developing economies. This can also be
attributed to the fact that companies move their production facilities from one place to
another in search of cheaper labor once the workers in the previous country start
demanding better wages.

4. Growing disparity among the rich and the poor: 86% of the world’s resources are said
to be consumed by the richest 20% of the world population. This means that the poorer
80% only gets to consume 14% of the world’s resources. This is a direct result of
globalization according to some activists who believe that globalization only serves the
rich whereas the poor have to face its disadvantages.
 5. Small scale industries face extinction: Small scale industries which are indigenous to a
particular place face extinction as they do not have the resources or the power that the
multinational companies have. As a result, these small industries are unable to compete
with bigger companies and go out of business. An example is the bamboo furniture
making industry in India. The manufacturers work out of their homes and work hard to
make furniture out of bamboo. These workers cannot compete with large companies
selling cheap pl·

6. Rapid spread of deadly disease: furniture and as a result, their industry faces
extinction.: Deadly diseases such as AIDS or other communicable diseases can spread at
very fast pace via travelers or due to other means as a direct consequence of
globalization.

CAUSES OF GLOBALISATION
Globalization refers to the concept in which the whole world behaves as if it is one market
through the integration of the cultural, economic and infrastructural aspects with interdependent
production trends, consumption of the same goods and resources, and reacting to the same urges.
Globalization began when men started to trade commodities and products and moved forward
through explorations, revolutions, colonialism and the huge advancements in communication and
information technology

Technological Development

Development of technology is one of the main causes of globalization. The development of

technology has led to the drastic reduction to the costs of transportation, travel and
communication after World War II. The modes of communication have developed from
telegraph system and computers using punch cards to cell phones, Internet, satellites and PCs.
These developments have played a big role in reducing distance and time, and thus led to
globalization.

Business Development

Business firms have always been in favor of globalization, believing it would improve their sales
and profits, and they worked actively toward expansion of markets. Economic globalization has
been brought about by several bilateral and multilateral agreements. These agreements and
organizations like the World Trade Organization played a key role in bringing about economic
globalization. Trade agreements between companies help to develop distribution networks,
franchisee relations and relations across nations among several business establishments.

Technological Perspective

Globalization has paved the way for initiation of cost-efficient plans and technologies, and these
strategies have caused the multinational companies to invest in and switch their operations to
developing countries as a cheaper option. Globalization has led to a flood of software and
hardware business all over the world. This also led to the transfer of skilled and trained experts
from developing countries like India to the developed countries like the U.S. and the U.K. The
Internet has caused the development of a virtual universe aiding the delivery of education,
business data, information and entertainment.

Cultural and Societal Perspective

Globalization has brought about positive and negative consequences. One of these results is the
promotion of cultural uniformity. Consumers across the world have similar demands and
preferences, and the great cultural differences that existed between nations are gradually eroding.
The role that the governments play in individual countries has changed as a result of
globalization. As the nations get together as a result of globalization, some of the individual laws
that each country held were lost. The governments have started the formulation of policies that
help the economic activity between countries and build the skills of their people to prepare them
for entering the global market. However, this has also led to an increase in the gap between the
rich and the poor.

IMPACT OF GLOBALIZATION

A. Economic Impact:
1. Greater Number of Jobs: The advent of foreign companies and growth in economy has led to job
creation. However, these jobs are concentrated more in the services sector and this has led to rapid
growth of service sector creating problems for individuals with low level of education. The last
decade came to be known for its jobless growth as job creation was not proportionate to the level
of economic growth.
2. More choice to consumers: Globalisation has led to a boom in consumer products market. We
have a range of choice in selecting goods unlike the times where there were just a couple of
manufacturers.
3. Higher Disposable Incomes: People in cities working in high paying jobs have greater income to
spend on lifestyle goods. There has been an increase in the demand of products like meat, egg,
pulses, organic food as a result. It has also led to protein inflation.
4. Protein food inflation contributes a large part to the food inflation in India. It is evident from the
rising prices of pulses and animal proteins in the form of eggs, milk and meat.

With an improvement in standard of living and rising income level, the food habits of people
change. People tend toward taking more protein intensive foods. This shift in dietary pattern,
along with rising population results in an overwhelming demand for protein rich food, which the
supply side could not meet. Thus resulting in a demand supply mismatch thereby, causing
inflation.

In India, the Green Revolution and other technological advancements have primarily focused on
enhancing cereals productivity and pulses and oilseeds have traditionally been neglected.

5. Shrinking Agricultural Sector: Agriculture now contributes only about 15% to GDP.
The international norms imposed by WTO and other multilateral organizations have
reduced government support to agriculture. Greater integration of global commodities
markets leads to constant fluctuation in prices.

 This has increased the vulnerability of Indian farmers. Farmers are also increasingly dependent on
seeds and fertilizers sold by the MNCs.
 Globalization does not have any positive impact on agriculture. On the contrary, it has few
detrimental effects as government is always willing to import food grains, sugar etc. Whenever
there is a price increase of these commodities.
 Government never thinks to pay more to farmers so that they produce more food grains but resorts
to imports. On the other hand, subsidies are declining so cost of production is increasing. Even
farms producing fertilizers have to suffer due to imports. There are also threats like introduction of
GM crops, herbicide resistant crops etc.

6. Increasing Health-Care costs: Greater interconnections of the world has also led to the
increasing susceptibility to diseases. Whether it is the bird-flu virus or Ebola, the diseases have
taken a global turn, spreading far and wide. This results in greater investment in healthcare system
to fight such diseases.

7. Child Labour: Despite prohibition of child labor by the Indian constitution, over 60 to a 115
million children in India work. While most rural child workers are agricultural laborers, urban
children work in manufacturing, processing, servicing and repairs. Globalization most directly
exploits an estimated 300,000 Indian children who work in India’s hand-knotted carpet industry,
which exports over $300 million worth of goods a year.

 B. Socio-Cultural Impact on Indian Society

Nuclear families are emerging. Divorce rates are rising day by day. Men and women are gaining
equal right to education, to earn, and to speak. ‘Hi’, ‘Hello’ is used to greet people in spite of
Namaskar and Namaste. American festivals like Valentines’ day, Friendship day etc. are
spreading across India.

1. Access to education: On one hand globalisation has aided in the explosion of

information on the web that has helped in greater awareness among people. It has also led
to greater need for specialisation and promotion of higher education in the country.
2. On the flip side the advent of private education, coaching classes and paid study material has
created a gap between the haves and have-nots. It has become increasingly difficult for an
individual to obtain higher education.
3. Growth of cities: It has been estimated that by 2050 more than 50% of India’s population will live
in cities. The boom of services sector and city centric job creation has led to increasing rural to
urban migration.
4. Indian cuisine: is one of the most popular cuisines across the globe. Historically, Indian spices
and herbs were one of the most sought after trade commodities. Pizzas, burgers, Chinese foods and
other Western foods have become quite popular.
5. Clothing: Traditional Indian clothes for women are the saris, suits, etc. and for men, traditional
clothes are the dhoti, kurta. Hindu married women also adorned the red bindi and sindhur, but
now, it is no more a compulsion. Rather, Indo-western clothing, the fusion of Western and Sub
continental fashion is in trend. Wearing jeans, t-shirts, mini skirts have become common among
Indian girls.
6. Indian Performing Arts: The music of India includes multiples varieties of religious, folk,
popular, pop, and classical music. India’s classical music includes two distinct styles: Carnatic and
Hindustani music. It remains instrumental to the religious inspiration, cultural expression and pure
entertainment. Indian dance too has diverse folk and classical forms.
7. Bharatanatyam, Kathak, Kathakali, Mohiniattam, Kuchipudi, Odissi are popular dance forms in
India. Kalarippayattu or Kalari for short is considered one of the world’s oldest martial art. There
have been many great practitioners of Indian Martial Arts including Bodhidharma who supposedly
brought Indian martial arts to China.
8. The Indian Classical music has gained worldwide recognition but recently, western music is too
becoming very popular in our country. Fusing Indian music along with western music is
encouraged among musicians. More Indian dance shows are held globally. The number of
foreigners who are eager to learn Bharatanatyam is rising. Western dance forms such as Jazz, Hip
hop, Salsa, Ballet have become common among Indian youngsters.
9. Nuclear Families: The increasing migration coupled with financial independence has led to the
breaking of joint families into nuclear ones. The western influence of individualism has led to an
aspirational generation of youth. Concepts of national identity, family, job and tradition are
changing rapidly and significantly.
10. Old Age Vulnerability: The rise of nuclear families has reduced the social security that the joint
family provided. This has led to greater economic, health and emotional vulnerability of old age
individuals.
11. Pervasive Media: There is greater access to news, music, movies, videos from around the world.
Foreign media houses have increased their presence in India. India is part of the global launch of
 Hollywood movies which is very well received here. It has a psychological, social and cultural
influence on our society.
12. McDonaldization: A term denoting the increasing rationalization of the routine tasks of everyday
life. It becomes manifested when a culture adopts the characteristics of a fast-food restaurant.
McDonaldization is a reconceptualization of rationalization, or moving from traditional to rational
modes of thought, and scientific management.
13. Walmartization: A term referring to profound transformations in regional and global economies
through the sheer size, influence, and power of the big-box department store WalMart. It can be
seen with the rise of big businesses which have nearly killed the small traditional businesses in our
society.

C. Psychological Impact on Indian Society

1. Cultural Identity Development : The first is the development of a bicultural

identity or perhaps a hybrid identity, which means that part of one’s identity is
rooted in the local culture while another part stems from an awareness of one’s
relation to the global world.

 The development of global identities is no longer just a part of immigrants and ethnic minorities.
People today especially the young develop an identity that gives them a sense of belonging to a
worldwide culture, which includes an awareness of events, practices, styles and information that
are a part of the global culture. Media such as television and especially the Internet, which allows
for instant communication with any place in the world, play an important part in developing a
global identity.

A good example of bicultural identity is among the educated youth in India who despite being
integrated into the global fast paced technological world, may continue to have deep rooted
traditional Indian values with respect to their personal lives and choices such as preference for an
arranged marriage, caring for parents in their old age.

2. Growth of Self-Selected Culture: means people choose to form groups with

like-minded persons who wish to have an identity that is untainted by the global
culture and its values. The values of the global culture, which are based on
 individualism, free market economics, and democracy and include freedom, of
choice, individual rights, openness to change, and tolerance of differences are part
of western values. For most people worldwide, what the global culture has to
offer is appealing. One of the most vehement criticisms of globalization is that it
threatens to create one homogeneous worldwide culture in which all children
grow up wanting to be like the latest pop music star, eat Big Macs, vacation at
Disney World, and wear blue jeans, and Nikes.
3. Emerging Adulthood: The timing of transitions to adult roles such as work,
marriage and parenthood are occurring at later stages in most parts of the world as
the need for preparing for jobs in an economy that is highly technological and
information based is slowly extending from the late teens to the mid-twenties.
Additionally, as the traditional hierarchies of authority weaken and break down
under the pressure of globalization, the youth are forced to develop control over
their own lives including marriage and parenthood. The spread of emerging
adulthood is related to issues of identity.

4. Consumerism: Consumerism has permeated and changed the fabric of

contemporary Indian society. Western fashions are coming to India: the
traditional Indian dress is increasingly being displaced by western dresses
especially in urban areas. Media- movies and serials- set a stage for patterns of
behavior, dress codes and jargon. There is a changing need to consume more and
more of everything.
Globalization and employment.

According to the theory of the relative comparative advantages, both trade and FDI
should take advantage of the abundance of labour in DCs and so trigger a trend of
specialization in domestic labour-intensive activities and so involve an expansion in local
employment. However, contrary to this Heckscher-Ohlin (HO) prediction, the analysis of
the recent literature supports the conclusion that the employment impact of increasing
trade is not necessarily positive for a developing country. In particular, a relaxation of the
hypothesis of homogeneous production functions across different countries allows for
either the possibility of multiple equilibria (Grossman and Helpman, 1991), or for quite
differentiated employment trends in the evolutionary “catching-up” models (Fagerberg, 5
1988 and 1994; Dosi et al., 1990; Cimoli and Dosi, 1995; Verspagen and Wakelin, 1997;
Targetti and Foti, 1997; Montobbio and Rampa, 2005). In fact, when “total factor
productivity” increases in the DCs as a consequence of globalization, the employment
enhancing competitive effect has to be compared with the direct labour-saving effect of
the imported technologies (see Haddad and Harrison, 1993; Coe et al., 1997; Aitken and
Harrison, 1999; Kathuria, 2001). In other words, in a developing country, the final
employment impact of increasing trade depends on the interaction between productivity
growth and output growth both in traded goods sectors and in non-traded sectors. The
final outcome cannot be assessed a priori for different reasons. On the one hand, export
may involve a demand-led economic and employment growth, but - on the other hand –
import may displace previously protected domestic firms, inducing labour redundancy.
Moreover, in the presence of supply constraints (lack of infrastructures, scarcity of skilled
labour, under investment, inefficient labour market), even in the exporting sectors
productivity growth may exceed output growth, to the detriment of job creation. Finally,
domestic sheltered sectors (such as agriculture, public administration, construction, non-
traded service) may act as labour sinks, often implying hidden unemployment and
underemployment in the informal labour market (see Fosu, 2004 and Reddy, 2004).
Shifting our focus from trade to FDI inflows, when a developing country opens its
borders to foreign capital, FDIs generate positive employment impacts both directly and
indirectly through job creation within suppliers and retailers and also a tertiary
employment effect through generating additional incomes and so increasing aggregate
demand (see Lall, 2004). Yet, all these positive employment effects of “greenfield” FDI
have to be compared with the possible crowding-out of non-competitive and previously
sheltered domestic firms (implying bankruptcies and job losses); with the possible
labour-saving effects of the new technologies brought about by multinational firms; and
with the possible reduction in employment associated with FDI operating through
Mergers and Acquisitions (M&A). In fact, both imports and inward FDI may imply a
“crowding out” of domestic production (especially formerly protected nascent industries;
think, for instance, to the 6 case of large urban state-owned firms in China, see Rawski,
2002; see also Aitken and Harrison,1999). This job displacement effect can be further
amplified when FDI inflows are accompanied by financial liberalization and consequent
increases in the interest rate, in turn leading to shrinking domestic investments (see Berg
and Taylor, 2001). Since the overall employment impact of trade and FDI is uncertain
from a theoretical point of view, it is important to collect data on these relationships and
to empirically investigate the direct and indirect effects of globalization on the domestic
employment of a globalizing DC. Matusz and Tarr (1999) survey the studies carried out
before 1995 on the impact of globalization on employment in DCs. Comparing the level
of employment before and after trade liberalization the authors conclude that trade and
FDI liberalization has been beneficial for labour except in the transition countries of
Eastern Europe. Ghose (2000 and 2003) analyses the relationship between trade
liberalization and manufacturing employment. He highlights that - although increasing
trade and FDI have been relevant only in a small bunch of newly industrialized countries
- for those countries the growth of trade in manufactured products has implied a large
positive effect on manufacturing employment. More evidence has been collected at the
national level mostly for the manufacturing sector. It draws a contrasted picture of the
effect of globalization. In successfully integrating DCs, the employment effects of trade
liberalization has been mixed (mostly negative) in Latin America (see Rama, 1994;
Revenga, 1997; Levinsohn, 1999; ILO, 2002; Cimoli and Katz, 2003) whereas they seem
globally positive in Asian countries (see Lee, 1996; Orbeta, 2002). Indeed, the theoretical
issues and the empirical evidence discussed in Lee and Vivarelli (2004) lead to the
conclusion that the employment impact of trade and FDI is country and sector specific
and that the HO theorem is actually rejected in most cases. For instance, Lall (2004)
observes that – while there is a clear evidence that several DCs have exhibited export and
employment growth as a consequence of opening to trade and FDI (see also UNIDO,
2002) – doubts can be cast about the belief that globalization should always benefit
employment growth within a DC; indeed, different “national 7 absorptive capacities” (or
“social capabilities”, see Abramovitz, 1986 and 1989) - in terms of institutional setting,
labour skills, technological capabilities and competitiveness of domestic firms – can
amplify the positive employment impact of globalization, while institutional mismatches
between the market, the organisations and the government (see Perez, 1983; Shafaeddin,
 2005) and lack of local capabilities can severely jeopardize the potential for economic
and employment growth (see also Basu and Weil, 1998). In this framework, Gros (2004)
notes that opening to trade implies both an increase in value added and in labour
productivity and so that the employment impact cannot be predicted a priori; empirically,
the best results in terms of employment growth happen to be within the “non globalizing”
DCs (basically because of a lack of any improvement in labour productivity) and in the
“slowly globalizing” DCs which are characterised by a labour friendly balance between
output and productivity trends. Finally, Spiezia (2004) studies the employment impact of
trade on the manufacturing sector. By comparing labour intensities of exported, imported
and non-trade goods the author concludes that in 21 out of 39 sampled DCs an increase in
the volume of trade resulted in an increase in employment; however, in the second group
of 18 countries, increased integration produced a reduction in employment (in contrast
with the HO theorem). As far as FDI is concerned, the author finds out that the impact of
FDI on employment is increasing with per-capita income, resulting not significant for
lowincome DCs.

2. Ways in which economic globalisation may impact on employment

We have identified seven aspects of employment on which economic globalisation may have an
impact. This list is not intended to be exhaustive. It will simply show the diversity and
complexity of the issue.

2.1 Number of jobs

Economic globalisation may first have an impact on the number of jobs available in the
economy, and thus affect key macro-economic variables such as the unemployment rate and the
employment-to-population ratio. The issue is made more complex by the fact that the impact can
be different at the micro-economic level (establishment, enterprise, economic activity) and at the
macro-economic level (total economy), as well as in the short/long term. Offshoring is a case in
point [1]. Closing an enterprise in country A to move it to country B may result in job losses in a
particular economic activity of country A. It may also result in job gains for country A as a
whole because of higher productivity in the remaining enterprises, higher wages, and higher
consumption demand. This optimistic view seems to be supported by some of the latest ILO
analyses, according to which the number of jobs available in the world is higher than ever before
[2]. Factors other than economic globalisation, such as demographic growth, may however be the
real cause of this situation.

2.2 Structure of jobs

Economic globalisation may also affect the structure of jobs, i.e. their distribution across
economic activities. Jobs linked to certain economic activities may tend to disappear whereas
jobs linked to other, maybe new activities, are created due to changing competitive advantages
and patterns of specialisation [3]. Here again the issue is made more complex by the fact that
changes in the structure of jobs can be caused by economic globalisation but also by
technological progress, for example.

2.3 Composition of jobs

The composition of jobs, i.e. the mix of skilled and unskilled jobs in the economy, is also likely
to be affected by economic globalisation. So far, in developed countries, low-skilled workers
have been most affected by stagnating revenues and / or increasing unemployment due to
competition from developing countries’ workers and also as a result of technological progress.
The workforce in developing countries, however, is becoming better qualified and increasingly
engaging in more sophisticated, service-oriented activities. Skilled workers in developed
countries are more and more feeling the competition of their counterparts in developing
countries.

2.4 R&D jobs

Jobs in the field of R&D are often regarded as of strategic importance for national economies
because of their link with innovation. In developed countries, economic globalisation results in
opposite trends. On the one hand, there are enterprises moving their R&D activities abroad in
order to bring them closer to important markets or to benefit from qualifications more readily
available in some foreign locations. On the other hand, there are also enterprises moving their
production activities abroad to allow them to focus on R&D activities at home.

2.5 Job earnings

Economic globalisation may affect job earnings in two ways. First, by increasing the overall
efficiency of the economy, i.e. its productivity, it causes an increase in real incomes that may be
shared with job earnings. Second, by fostering movements of products and production factors it
may eventually even out price differences between countries, including the price of labour, i.e.
job earnings. Both trends seem to materialise at the global level. According to recent ILO
analyses the share of working poor in total employment is on the decrease [4]. Also, job earnings
seem to be steadily increasing in developing countries, leading to a narrowing of the job earnings
gap at global level. At the same time, however, the job earnings gap between the best and the
least qualified workers seems to be widening within developed countries [5]. It looks like wage
inequalities are slowly changing places.

2.6 Migrations

A great and increasing number of people are moving between countries and continents. For the
OECD countries it is estimated that about 30 per cent of migration is linked to labour [6]. Labour
migration is directly fostered by regional agreements liberalising the movement of people as in
the EU, by changing patterns of specialisation, and by the development of multinational
enterprises moving key personnel to, from and between their foreign affiliates. The development
of transport and communication facilities serves as a catalyst. Migration leads to significant
inflows and outflows of workers whose impact on labour markets is still unclear. In developed
countries migrants may ease labour shortages and be part of the solution to population ageing. In
developing countries, however, migration to more developed countries may result in a « brain
drain ».

2.7 Employment conditions

Employment conditions are part of the competition between economic locations in addition to
more obvious factors such as labour costs. Lower safety requirements, longer working hours, or
a ban on trade unions, for example, may be attractive for multinational enterprises and may spur
offshoring. This may in turn have an effect on employment conditions in the source countries of
offshoring as recently observed in some EU countries as regards working hours. Changing
patterns of specialisation induced by economic globalisation or technological progress, such as a
more serviceoriented economy, may also have effects on employment conditions that are not
always clear.

How Globalization is Increasing Inequality in India

The theory of comparative advantage suggests that with an increase in globalization, income
inequality in poorer countries should decrease. However empirical findings suggest that with an
increase in the global market, inequality further increases. The World Bank defines globalization
as interdependence of countries resulting from the increasing integration of trade, finance,
people, and ideas in one global marketplace. It is the integration of economies, industries,
markets, cultures and policymaking around the world. With time, due to rapid increase in trade
across boundaries, does a relationship exist between globalization and income inequality?

Globalization has brought far reaching consequences in the economic well-being of individuals
of all the regions of the world and more importantly among all income groups. But according to
some authors, it has been accompanied by an increasing rate of inequality in terms of income
distribution. And this has happened in both developed as well as developing nations. The
empirical evidence on growth and income inequality seem to contradict the optimism of the
proponents of globalization. For most countries, the last two decades have brought about slow
growth and rising inequality.

By the Hecksher-Ohlin model and one of its theorems, the Stolper Samuelson Theorem, an open
economy leads to an increase in both real and nominal return on the abundant factor in a country
and a converse effect on a scarce factor. But according to Robert Barro the standard theory
seems to be in conflict with the concerns expressed in the ongoing popular debate about
globalization. The general notion is that an expansion of international openness will benefit most
of the domestic residents who are already well-off.

The 1990s were crucial in the economic timeline of India. The economy was opened up and
there was an influx of foreign investments. With India turning into a global village, the social,
cultural, economic aspects of the country changed over time. The dearth of employment in the
80s was replaced by the new jobs that were brought in by the multinational companies that
invested here. With the Information Technology hub being set in Bangalore initially and
elsewhere later, the economy started showing promise. But whom did these jobs actually go to?
When almost 80 percent of the labour force in the economy is involved in agriculture, it will
definitely lead to an increase in inequality when almost all the investments occur in the private
sectors, that too mostly in the IT and infrastructure sectors. A big number of multinational
companies that come to this country mostly invest in these two sectors. A small number of
highly qualified people are getting high profile jobs, with huge salaries. But a vast majority of
the population is unaffected by this. Rather many are affected adversely by globalization.

Whatever foreign direct investments are occurring in the education sector, it caters only to a
certain section of the society. At the primary and secondary level, only 29 percent of the students
receive education from the private schools, the schools where the foreign companies invest. The
rest, that is, the government run schools lack a lot of facilities, infrastructure and thus a further
inequality is created. Moreover, most of India’s labour pool is unskilled and lack the basic skills
required to work in a multinational company. Thus, the minority percentage who get the required
skills are getting the highest benefits, while the majority of the population lies below the poverty
line. Thus, in a country like India, it is very clear that globalization has led to an increase in
inequality. According to a survey, 75 percent of technical graduates and more than 85 percent of
general graduates lack the skills needed in India’s most demanding and high-growth global
industries such as information technology. These high-tech global IT companies directly or
indirectly employ less than 1 percent of India’s labour pool. The informal sector, which forms
about 90 percent of the work force, is widely unaffected by this globalization (often it is
adversely affected). So more often than imagined, these are the people who keep on getting
poorer.
Thus, we can conclude that even though the neoclassical models state that inter-country trade
reduces inequality, the empirical results say something else. What can be done about the
resulting challenge to global security, stability, shared prosperity, and most fundamentally to
global social justice? Because global markets work better for the already rich (be it with
education or for countries with stable and sound institutions), we need something closer to a 21
global social contract to address unequal endowments – to increase educational opportunities for
the poor and vulnerable, and to help countries build sound institutions. Because global markets
are imperfect, we need global regulatory arrangements and rules to manage the global
environment (Kyoto and beyond), help emerging markets cope with global financial risks (the
IMF and beyond), and ways to discourage corruption and other anti-competitive processes (a
global anti-trust agency for example). And because global rules tend to reflect the interests of the
rich, we need to strengthen the disciplines that multilateralism brings, and be more creative about
increasing the representation of poor countries and poor people in global forum – the IMF, the
World Bank, the UN Security Council, the Basel Committee on Banking Regulation, the G-8,
and so on. We need, in short, creative thinking about the reality that we have a vibrant and
potentially powerful instrument to increase wealth and welfare: the global economy. But to
complement and support that economy we have an inadequate and fragile global polity. A major
challenge of the 21st century will be to strengthen and reform the institutions, rules and customs
by which nations and peoples manage the fundamentally political challenge of complementing
the benefits of the global market with collective management of the problems, including
persistent and unjust inequality that global markets alone will not resolve.

As Prime Minister Narendra Modi now talks about pushing further economic reforms, jets
around the world to attract foreign investment by showcasing India as a manufacturing
destination and talks of smart cities, he has to consider empirical data to ensure that third
generation reforms do not increase inequality. Stung by the charge that his government is “suit-
boot ki sarkaar,” the Prime Minister has already shifted focus to include the poor in his scheme
of things and his many schemes like Jan Dhan, Direct Subsidy Transfer, Skill India, Insurance
and Crop Insurance are all designed to ensure that the poor are not deprived of growth benefits.
But as explained earlier, if the economy grows in a skewed manner, with some sectors getting a
lion’s share of investment, inequalities are going to increase.

1. Unemployment:
The main reason for low level of income of the majority of Indian people is unemployment and
underemployment and the consequent low productivity of labour. Low labour productivity
implies low rate of economic growth which is the main cause of poverty and inequality of the
large masses of people. In fact, inequality, poverty and unemployment are interrelated. Since
sufficient employment could not be created through the process of planned economic
development, it was not possible to increase the income levels of most people.
2. Inflation:
Another cause of inequality is inflation. During inflation, few profit earners gain and most wage
earners lose. This is exactly what has happened in India. Since wages have lagged behind prices,
profits have increased. This has created more and more inequality. Moreover, during inflation,
money income increases no doubt but real income falls. And this leads to a fall in the standard of
living of the poor people since their purchasing power falls.

No doubt, inequality has increased due to rise in prices. During inflation workers in the or-
ganised sector get higher wages which partly offset the effect of price rise. But wages and
salaries of workers in unorganised sectors (such as agriculture and small-scale and cottage
industries) do not increase. So their real income (purchase income) falls. This is how inequality
in the distribution of income increases between the two major sectors of the economy —
organised and unorganised.

3. Tax Evasion:
In India, the personal income tax rates are very high. High tax rates encourage evasion and
avoidance and give birth to a parallel economy. This is exactly what has happened in India
during the plan period. Here, the unofficial economy is as strong as (if not stronger than) the
official economy. High tax rates are responsible for inequality in the distribution of income and
wealth. This is due to undue concentration of incomes in a few hands caused by large- scale tax
evasion.

The main reasons are the following:

1. Unemployment:
The main reason for low level of income of the majority of Indian people is unemployment and
underemployment and the consequent low productivity of labour. Low labour productivity
implies low rate of economic growth which is the main cause of poverty and inequality of the
large masses of people. In fact, inequality, poverty and unemployment are interrelated. Since
sufficient employment could not be created through the process of planned economic
development, it was not possible to increase the income levels of most people.
2. Inflation:

Another cause of inequality is inflation. During inflation, few profit earners gain and most wage
earners lose. This is exactly what has happened in India. Since wages have lagged behind prices,
profits have increased. This has created more and more inequality. Moreover, during inflation,
money income increases no doubt but real income falls. And this leads to a fall in the standard of
living of the poor people since their purchasing power falls.

No doubt, inequality has increased due to rise in prices. During inflation workers in the or-
ganised sector get higher wages which partly offset the effect of price rise. But wages and
salaries of workers in unorganised sectors (such as agriculture and small-scale and cottage
industries) do not increase. So their real income (purchase income) falls. This is how inequality
in the distribution of income increases between the two major sectors of the economy —
organised and unorganised.

3. Tax Evasion:
In India, the personal income tax rates are very high. High tax rates encourage evasion and
avoidance and give birth to a parallel economy. This is exactly what has happened in India
during the plan period. Here, the unofficial economy is as strong as (if not stronger than) the
official economy. High tax rates are responsible for inequality in the distribution of income and
wealth. This is due to undue concentration of incomes in a few hands caused by large- scale tax
evasion.

4. Regressive Tax:
The indirect taxes give maximum revenue to the government. But they are regressive in nature.
Such taxes have also created more and more inequality over the years due to growing
dependence of the Government on such taxes.
5. New Agricultural Strategy:
No doubt, India’s new agricultural strategy led to the Green Revolution and raised agricultural
productivity. But the benefits of higher productivity were enjoyed mainly by the rich farmers and
landowners. At the same time, the economic conditions of landless workers and marginal
farmers deteriorated over the years. Most farmers in India could not enjoy the-benefits of higher
agricultural productivity. As a result, inequality in the distribution of income in the rural areas
has increased.

Reducing Inequality:
Various measures have been adopted by the Government during the plan period to reduce in-
equality in the distribution of income.

Four important measures are the following:

1. Payment of Bonus:
Firstly, the payment of bonus (called annual payment) has been made compulsory in every
industry.

2. Ceiling on Land Holding:

Secondly, a ceiling on landholdings has been imposed in the rural areas. Each household (or
family) is allowed to hold a certain amount of land. Any surplus above this is taken over by the
Government and is redistributed among the landless workers and marginal farmers. Moreover, in
1976 a ceiling on urban property has also been imposed.

3. Self-Employment Projects:
Moreover, various self-employment projects have been taken both in rural and urban areas to
solve the growing unemployment problem.

4. Transfer Payments:
Finally, various types of transfer payments (such as unemployment, compensation, soft loans,
pensions to freedom fighters, concessions to senior citizens, etc.) have been made for improving
the welfare of certain weaker sections of the society.

Case study of Viraj Profiles Limited

Viraj Profiles Limited founded by Mr Neeraj Raja Kochher ( Chairman & Managing Director)
in the year 1991 in Tarapur MIDC (Tal. & Dist. Palghar).It was started as a small induction
furnace to manufacture utensil grade steel for domestic markets with employee strength of 150
people. Over the years the company expanded its operations across the globe, increased its
product portfolio and today the company boasts of employee strength of 9000. Under the
leadership of Mr. Neeraj Kochher , Viraj has expanded its foot prints across 6 “Skill
Development : The Key to Economic Prosperity” GLOBALISATION IN INDIA-A

CHALLENGE CASE STUDY OF VIRAJ PROFILE CO.

–( TARAPUR MIDC) 140 continents, more than 90 countries and is currently serving to more
than 1300 satisfied customers. Now it is the second largest manufacturer of stainless steel long
products in the world and is ranked number one in stainless steel flanges.

Fundamental in ensuring the continuous growth of the organisation, Mr Neeraj Raja Kochhar
has transformed the company into, one of the fastest growing business houses in India, is
currently a major player in the global stainless steel market with a capacity of 528,000 tonnes per
annum and with an annual turnover of over US $ 1.5 billion.

Over the last 20 years the Co. has achieved over 90 product certifications and approvals in the
petrochemical, food and beverage, construction, pharmaceutical, defence and marine industries.

Vision of the Company:

• To be counted amongst the most respected and preferred enterprises globally.

Mission of the Company:

• To be one stop shop for stainless steel engineering products.

• To be the first preference of the global market leaders.

• Up gradation and adaption of latest technology.

• Product and market development for maximizing value.

• Delivering operational excellence.

• Continual growth through customer service, innovation, quality& commitment.

• Plough back income to diversify into stainless steel projects.

• To be a responsible & abiding Corporate Citizen.

• Committed for a greener environment.

• To be the organization of choice & a great place to work.

• Openness to backward & forward integration to sharpen.

Viraj Profiles specializes into the production of :

• Stainless Steel Wire Rods

• Stainless Steel Wires

• Stainless Steel Fasteners

• Stainless Steel Bright Bars

• Stainless Steel Profiles

• Stainless Steel Flanges

Viraj has recently commissioned its fully automatic Section Rolling Mill with an annual capacity
of 180,000 tons per annum.

Other than the manufacturing facilities based in Tarapur, Viraj Profiles Limited also
encompasses its own Logistics Division knows as Vaishno Logistics CFS. With its main fleet of
trucks and container yard close to manufacturing facilities and a Container Freight Station at
JNPT NhavaSheva port, the company is almost self-reliant in terms of transportation. The
division also offers services to other exporters and importers.

Mrs. Renu Kochhar, Managing Director

Mrs. Renu Kochhar joined Viraj Profiles Ltd in 2001 as Director of the Profiles Division, A
clear achiever with the desire to absorb and develop new skills, Mrs Kochhar left no stone
unturned whilst learning and implementing production processes; researching market demand;
understanding and attaining worldwide quality standards; developing strategies; integrating new
technology and personally visiting customers abroad. Apart from these key responsibilities, Mrs
Kochhar also leads various other functions like Corporate Communication, Corporate Social
Responsibility and Human Resources. A very compassionate woman at heart, Mrs Renu Kochhar
pays special attention to the activities related to CSR wing of the company. It is her deep interest
in the activities which saw the establishment of Viraj Shri Ram Centennial School at Boisar.In
the year 2010, she was declared the “BUSINESS WOMAN OF THE YEAR” at the Madhavrao
Scindia Leadership Awards (MSLA) in Kanpur

Global Network of the company

Viraj enjoys a strong global foot print which is spread across 6 continents, more than 90
countries and serving around 1300 customers globally. Today Viraj is one of the largest
exporters of Stainless Steel Long Products in India and it exports nearly 90 percent of its
production. A very dominant player in export market, the company has its own offices in some
of the main business towns in different countries and has a strong network of Agents and Sales
Representatives catering to the rising demand of its products. A thrust on international business
over the years has seen export growing steadily.

The Company has felicited with the following Awards:

1)Viraj Profiles Limited was recognized for achieving "Highest Exports" as an Export
Orientated Unit and received an award by SEEPZ in 2009.
2) Viraj has been awarded with Top Exporter Award, Silver Trophy in the year 2013 and 2014.
3) EPC India Regional Award: On 29th September 2010, Viraj Profiles Limited received the
SEEPZ-SEZ Highest Exporter Award among EOU’s.

4) In April 2010 Viraj Profiles Limited was announced as the winner of the SEEPZ Highest
Exporter Award

5) All manufacturing facilities of Viraj are ISO certified and have the latest machineries and
technologies in place to offer the best quality products to their customers.

6) Regional Highest Exporters Trophy 2003-2004.

7) Co.have won over 90 product certifications and approvals in the petrochemical, food and
beverage, construction, pharmaceutical, defense and marine industries.

CONCLUSION

In this challenging environment Viraj Profile Co. is continuously making growth because of
some following reasons:-

Its performance oriented culture, qualified and experienced HR professionals, aims to encourage
employees to perform beyond their roles and responsibilities,upgradation and adaption of latest
technology, product and market development for maximizing value , Delivering operational
excellence, Continual growth through customer service, innovation, quality and commitment .
Their safety and wellbeing facilities for employees such as Medical Insurance, Pick up and Drop
facility, periodic health camps, Doctor on campus, hostel facilities etc , Professional Growth ,
Adequate well trained and motivated manpower, Adequate container/cargo handling equipment,
M&R Facility, World Class Fire Fighting equipments etc.

Suggestions to make Globalization successful

1) The globalisation has brought exceptional opportunities for human development for all, in
developing as well as developed countries. Under the commercial marketing forces, globalisation
has to be used more to promote economic growth to yield profits.
2) India should pay immediate attention to ensure rapid development in education, health, water
and sanitation, labor and employment so that under time-bound programes the targets are
completed without delay.

3) A strong foundation of human development of all people is essential for the social, political
and economic development of the country.

4) Initiative by government for training to small scale entrepreneurs.

5) The government should take immediate steps to increase and create additional employment
opportunities in the rural parts, to reduce the growing inequality.

6) There should perfect strategy for a sustainable and productive growth.

7) Mere growth of the GDP and others at the macro level in billions does not solve the chronic
(unending) poverty and backward level of living norms of the people at the micro level. The
growth should be sustainable with human development and decent employment potential. The
welfare of a country does not percolate from the top, but should be built upon development from
the bottom.

The Good, The Bad, And The Ugly Side Of Globalization

The Good Globalization

Globalization, the increasing integration and interdependence of domestic and overseas

markets, has three sides: the good side, the bad side, and the ugly side.

The good side of globalization is all about the efficiencies and opportunities open
markets create. Business can communicate efficiently and effectively with their partners,
suppliers, and customers and manage better their supplies, inventories, and distribution
network. Local producers can sell their products in distant markets with the same ease
and speed as in their home country. Sony Corporation (NYSE:SNE), for instance, can
sell its TV and game consoles with the same ease in New York as in Tokyo.
Likewise, Intel(NASDAQ:INTC), Apple (NASDAQ:AAPL), and Cisco (NASDAQ:CSCO)
can sell their high tech gear with the same ease in Tokyo as in New York.
The good side of globalization is also about easy credit and rising leverage, as money
flows easily across local and national boundaries, and creditors fail to distinguish
between good and bad borrowers, boosting aggregate demand; setting the world
economy into a virtuous cycle of income and employment growth; and easy credit and
leverage fuel financial bubbles that feed into a euphoria that perpetuates the virtuous
cycle.

REASONS OF GOOD GLOBALIZATION

This massive increase in trade was kicked off in 1948 by the General Agreement on Tariffs and
Trade, which began the liberalization process of lowering tariff and non-tariff barriers. As a
result, autarkic national economies became more integrated and intertwined with one another.
The World Bank reports that openness to trade—the ratio of a country's trade (exports plus
imports) to its gross domestic product (GDP)—has more than doubled on average since 1950.

Immigration has also contributed significantly to economic growth and higher wages. Today
some 200 million people, about 3 percent of the world's population, live outside their countries
of birth. According to the Partnership for a New American Economy, 28 percent of all U.S.
companies started in 2011 had immigrant founders—despite immigrants comprising roughly 13
percent of the population. In addition, some 40 percent of Fortune 500 firms were founded by
immigrants or their children.

All of this open movement of people and stuff across borders pays off in many measurable ways,
some obvious, some more surprising.

Longer, Healthier Lives

A 2010 study in World Development, titled "Good For Living? On the Relationship between
Globalization and Life Expectancy," looked at data from 92 countries and found that economic
globalization significantly boosts life expectancy, especially in developing countries. The two
Swedish economists behind the study, Andreas Bergh and Therese Nilsson, noted that as
Uganda's economic globalization index rose from 22 to 46 points (almost two standard
deviations) over the 1970–2005 period, average life expectancy increased by two to three years.
Similarly, a 2014 conference paper titled "The long-run relationship between trade and
population health: evidence from five decades," by Helmut Schmidt University economist Dierk
Herzer, concluded, after examining the relationship between economic openness and population
health for 74 countries between 1960 and 2010, that "international trade in general has a robust
positive long-run effect on health, as measured by life expectancy and infant mortality."
Women's Liberation
A 2012 working paper by University of Konstantz economist Heinrich Ursprung and University
of Munich economist Niklas Potrafke analyzed how women fare by comparing globalization
trends with changes in the Social Institutions and Gender Index (SIGI), which was developed by
the Organisation for Economic Co-operation and Development (OECD). SIGI takes several
aspects of gender relations into account, including family law codes, civil liberties, physical
integrity, son preference, and ownership rights. It's an index of deprivation that captures causes
of gender inequality rather than measuring outcomes.

"Observing the progress of globalization for almost one hundred developing countries at ten year
intervals starting in 1970," Ursprung and Potrafke concluded, "we find that economic and social
globalization exert a decidedly positive influence on the social institutions that reduce female
subjugation and promote gender equality." They further noted that since globalization tends to
liberate women from traditional social and political orders, "social globalization is demonized,
by the established local ruling class, and by western apologists who, for reasons of ideological
objections to markets, join in opposing globalization."

Less Child Labor

A 2005 World Development study, "Trade Openness, Foreign Direct Investment and Child
Labor," by Eric Neumayer of the London School of Economics and Indra de Soysa of the
Norwegian University of Science and Technology, looked at the effects of trade openness and
globalization on child labor in poor countries. Their analysis refuted the claims made by anti-
globalization proponents that free trade induces a "race to the bottom," encouraging the
exploitation of children as cheap laborers. Instead the researchers found that the more open a
country is to international trade and foreign investment, the lower the incidence of exploitation.
"Globalization is associated with less, not more, child labor," they concluded.
Faster Economic Growth
A 2008 World Bank study, "Trade Liberalization and Growth: New Evidence," by the Stanford
University economists Romain Wacziarg and Karen Horn Welch, found that trade openness and
liberalization significantly boost a country's rate of economic growth.

The authors noted that in 1960, just 22 percent of countries representing 21 percent of the global
population had open trade policies. This rose to 73 percent of countries representing 46 percent
of world population by the year 2000. The study compared growth rates of countries before and
after trade liberalization, finding that "over the 1950–98 period, countries that liberalized their
trade regimes experienced average annual growth rates that were about 1.5 percentage points
higher than before liberalization" and that "investment rates by rose 1.5–2.0 percentage points."

Higher Incomes
Trade openness boosts economic growth, but how does it affect per-capita incomes? A 2009
Rutgers University-Newark working paper, "Trade Openness and Income-a Re-examination," by
economists Vlad Manole and Mariana Spatareanu, calculated the trade restrictiveness indices for
131 developed and developing countries between 1990 and 2004. Its conclusion: A "lower level
of trade protection is associated with higher per-capita income.

BAD GLOBALIZATION

The bad side of globalization is all about the new risks and uncertainties brought about
by the high degree of integration of domestic and local markets, intensification of
competition, high degree of imitation, price and profit swings, and business and product
destruction. Corporations that previously have been enjoying the benefits of
globalization, now face unstable and unpredictable demand and business opportunities
and their products quickly become commodities, leaving them little or no pricing power
and under constant pressure by new competitors that undermine profitability.

The bad side of globalization is also about tight credit, deleverage, and declining money
flows across local and national boundaries, as creditors tighten credit to both good and
bad borrowers, depressing aggregate demand; setting the world economy into a vicious
cycle of income and employment declines; and euphoria is succeeded by pessimism and
a burst of asset bubbles, perpetuating the downward spiral of the world economy.

The ugly side of globalization is when nations and local communities try to escape the
vicious cycle of income and employment declines through simultaneous currency
devaluations; and by raising trade barriers that in essence put an end to globalization
and a beginning to trade wars, as was the case in the 1930s.

In the last quarter of the century and for the most part of the first decade of this century,
the world has seen the good side of globalization. In the last four years, the world has
seen the bad side of globalization. We do hope and pray that the world won’t see the ugly
side of it.