Globalization

Globalization is the interaction and integration of individuals, organizations, and governments on a global scale. It is characterized by the cross-border movement of goods, information, employment, and culture.

Globalization allows businesses to find the most optimal inputs for their products, whether in relation to quality or cost-efficiency. Moreover, globalization paves the way for global investors to engage in various aspects like engineering, production, supply chain management, and logistics.

Features of Globalization

Recall that political cooperation and non-cooperation serve as a perspective to evaluate geopolitical entities, mainly those at the national or state level. However, globalization emerges primarily from economic and financial collaborations, driven predominantly by non-state actors like corporations, individuals, and organizations.

Globalization is characterized by economic and financial cooperation, such as active trade of goods and services, capital flows, currency exchange, and cultural and information exchange. Actors involved in globalization are inclined to look outside their country for access to new markets, talent, or education.

Anti-globalization or nationalism is the promotion of a country’s economic interests at the expense of or in opposition to those of other nations. Nationalism is characterized by limited economic and financial collaboration. Actors under this umbrella tend to prioritize domestic production and sales, minimize cross-border investments and capital movements, and limit foreign currency transactions.

Collaboration and globalization frequently go hand in hand (correlated). This means that political cooperation can promote or hasten globalization. Nonetheless, globalization also occurs in isolation.

Motivations for Globalization

Three potential gains from participating in globalization are:

1. Increasing profits: There are two ways in which this can happen:
   • Increasing sales: This can be done by selling one’s products or services in new geographical regions.
   • Reducing costs: This can be done by sourcing cheaper inputs from different countries.
2. Access to resources and markets: Companies looking for long-term access to resources such as people or raw materials may need to work together. They eventually end up globalizing to have access to these resources.
   
   
3. Intrinsic gain: An activity’s intrinsic gain is a byproduct or consequence that results in a benefit that overlaps profit. Accelerated productivity as a result of learning new techniques is a good example.

Costs of Globalization

Potential disadvantages of globalization include:

Unequal Accrual of Economic and Financial Gains

Jobs are created in a foreign country if a company moves a manufacturing plant to that country. Consequently, this may occasion job losses in the home country. In addition, the foreign country’s businesses may have to compete with the corporation for workers and resources.

Lower Environmental, Social, and Governance Standards

Companies that operate in low-cost nations frequently adhere to the local regulations in those nations. Globalization can deplete human, administrative, and environmental resources if standards are lower in one country than in another. Under such circumstances, businesses ultimately lower their production standards.

Political Consequences

Globalization can lead to income and wealth inequality, as some countries gain jobs while others lose them due to businesses moving abroad. This inequality can reduce political and economic cooperation.

Interdependence

Increased economic and financial cooperation could make businesses more reliant on foreign resources for their supply chains. This, in turn, could make countries more reliant on foreign countries for certain resources.

Threats of Rollback of Globalizations

There has been an international threat of deglobalization since 2008, when America started a series of “America First” initiatives. These policies have their roots in nationalism, isolationism, and worries for the security of the country and the economy. Multinational firms are reluctant to alter their procedures in the face of immediate conflicts brought about by these policies that might be settled in the long run.

Even with the ongoing discussions about deglobalization, it seems implausible to completely undo globalization. The following techniques are employed by these businesses to strengthen their supply chains:

1. Reshoring Essentials: Encompasses the creation of local supply chains for vital goods to address emergencies effectively.
2. Reglobalizing Production: Involves replicating and bolstering supply chains to ensure greater robustness in production networks.
3. Doubling down on Key Markets: Involves expanding production in countries with significant market presence while concurrently integrating external supply chains.

Question

Which of the following is least likely a motivation for globalization by non-state actors?

1. Intrinsic gain.
2. Currency exchange.
3. Access to resources and markets.

The correct answer is B.

Currency exchange is a characteristic of globalization but not necessarily a motivation for globalization by non-state actors.

A is incorrect. Intrinsic gain is a motivation for globalization by non-state actors. It is a side effect of an activity that generates a benefit beyond the profit itself. An example of an intrinsic gain is accelerated productivity that stems from learning new methods. Other motivations include increasing profits and access to resources and markets.

C is incorrect. Access to resources and markets such as talent and raw materials is a motivation for globalization by non-actors. Non-actors may also globalize to access market and investment opportunities.