задания по английскому языку (магистратура) / Globalization_1_2

GLOBALISATION

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WHAT IS MEANT BY GLOBALISATION?

For centuries, globalisation has increasingly knitted together the world and created unity out of great diversity. Coca Cola, Disney and McDonald's symbolize the process, along with Sony, Shell Oil and IBM. They are products known and consumed from Ulan Bator to Little Rock — and also powerful companies that drive globalisation forward, creating new laws, new business practices, new ways to eat and drink, new hopes and dreams. Optimists look forward to a global village, linked together by the Internet, and benefiting from ever-increasing material well-being. Pessimists see a frightful corporate tyranny destroying the environment, and sweeping away all that is healthy and meaningful to human existence.

Globalisation is often understood more through its effects than by trying to pin down a precise definition. Globalisation reflects the way that we see economic forces at work at the global level of the world economy, rather than simply focusing on processes within a single economy, and such global effects happen on at least three levels: national economies, firms and individual consumers.

At the national economy level, we might refer to the way that national economies are becoming more closely integrated with each other. One obvious example of this is the way that countries within Europe have become more closely integrated in recent years, both with the single market measures of 1992, and more recently the establishment of the single currency area.

Trade between countries had been expanding long before these developments, of course. Tariffs and other impediments to trade had been gradually reduced under the auspices of the General Agreement on Tariffs and Trade (GATT) in the period after the Second World War. This process has been continued under the guidance of the World Trade Organisation (WTO). All these moves have meant a more integrated and interdependent global economy.

At the firm level, many product markets have become more open to international influences. Firms have grown through mergers and acquisitions, such that many markets operate as global oligopolies, dominated by small numbers of very large multinational firms. This trend is apparent in markets such as car manufacturing, oil processing, pharmaceuticals, airlines and many others. Thus a firm that might be considered to be large within its domestic market may find itself a small player in the global market.

Individual consumers may also consider themselves to be part of the global economy. Of course, part of this is seen in the variety of countries whose products line the shelves of the supermarkets. But even more noticeable is the way that the rise of the Internet has opened up new opportunities to consumers to access products from global sources.

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FACTORS THAT EXPLAIN THE RISE OF GLOBALISATION

Institutional factors at the national level

The trend towards greater integration of national economies, through the formation of trading blocs or moves towards monetary union, is clearly an important factor that has enhanced interdependence of national economies in recent decades. Although driven partly by economic forces, these are largely institutional changes that have enabled greater economic integration.

But to what extent would the institutional changes have occurred without the expected economic benefits? It is not enough to say that tariffs were reduced because GATT insisted, or that the European single market was launched in 1992 because the member nations of the EU thought it was a good idea at the time. Instead, we must take the opportunity to highlight the economic underpinning these institutional changes.

For example, in order to set a scene for the workings of GATT and the WTO, we may need to highlight the law of comparative advantage and the arguments in favour of allowing trade to occur between nations. If there are gains to be reaped from specialisation in line with comparative advantage, then the reduction of tariffs may be one way of making nations better off.

Capital mobility

The improved mobility of physical and financial capital may enable comparative advantage to be taken even further. A multinational corporation may be able to fragment its production to take most advantage of market conditions on a world-wide basis. For example, it may be able to locate the labour-intensive part of its production process in countries with a relative abundance of labour in order to minimise costs on a global scale.

Economies of scale

At the heart of many of these arguments is the notion that there are economies of scale to be reaped by expanding production. A firm that is operating in a global market, and is thus producing on a large scale, may be able to tap economies of scale that would not be available to it if it were confined to its domestic market. This was certainly one of the key arguments underpinning the 1992 single market measures in Europe, and has been cited by companies as a key rationale for merger activity.

For example, airlines have argued that their strategic alliances - or full-blown mergers in some cases - are justifiable because of economies of scale, achieved by sharing airport facilities and enabling more efficient ticketing arrangements. Pharmaceutical giants have argued that economies of scale are vital in enabling research and development activities to be viable. The giant oil companies have argued that there are economies of scale arising from risk-sharing in oil exploration activities.

Evidence has suggested that not all mergers have been successful in increasing market share of the merged enterprise. Many mergers fail because of managerial problems that arise when trying to merge companies from different cultural backgrounds. It is possible that some of the economies of scale in production may be offset by managerial diseconomies, as larger firms may be more difficult to manage and administer. Nonetheless, the possibility of economies of scale remains a strong argument in favour of globalisation.

The Internet

Another major factor that has been cited as an explanation for globalisation is the growth of the Internet. This may influence the situation at a number of levels.

One major benefit of the Internet from a firm's perspective is that it greatly eases the process of communication within an organisation. A multinational company operating in locations in different parts of the world is able to communicate easily, quickly and cheaply within its far-flung empire. This may go some way towards overcoming the problem of potential managerial diseconomies. The multinational may also be able to communicate more quickly and effectively with its suppliers.

Also, companies may be able to communicate more readily with their customers. Consumers are able to order goods and services online, and firms may be more able to respond flexibly and effectively. One famous example is that of Dell Computers, which takes orders online and produces computers to the individual specification of their customers. Such a process would not have been possible without the Internet.