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ASSIGNMENT
HARMS OF GLOBALIZATION
Submitting February 23, 2012 Date:

PRESENTED TO:
MR. MUJEEB SARFRAZ

PRESENTED BY:
AKHTAR HUSSAIN CHUGHTAI (MB-09-22)

SUBJECT: Program:

SUPPLY CHAIN MANAGEMENT

MBA Marketing (Morning) 6th Semester

DEPARTMENT OF BUSINESS ADMINISTRATION BZU-BAHADUR SUB-CAMPUS,

LAYYAH
Kutchery Road Near Saddar Thana Layyah

WHAT IS GLOBALIZATION?
There are nearly as many definitions of globalization as authors who write on the subject. One review, by Scholte, provides a classification of at least five broad sets of definitions:

GLOBALIZATION AS INTERNATIONALIZATION.
The global in globalization is viewed as simply another adjective to describe cross-border relations between countries. It describes the growth in international exchange and interdependence.

GLOBALIZATION AS LIBERALIZATION.
Removing government imposed restrictions on movements between countries.

GLOBALIZATION AS UNIVERSALIZATION.
Process of spreading ideas and experiences to people at all corners of the earth so that aspirations and experiences around the world become harmonized.

GLOBALIZATION AS WESTERNIZATION OR MODERNIZATION.

The social structures of modernity (capitalism, industrialism, etc.) are spread the world over, destroying cultures and local self-determination in the process.

GLOBALIZATION AS DETERRITORIALIZATION.
Process of the reconfiguration of geography, so that social space is no longer wholly mapped in terms of territorial places, territorial distances and territorial borders. Although

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HARMS OF GLOBALIZATION AS A ECONOMICAL

LABOR MARKET DEVELOPMENTS
An important trend in labor markets in the advanced economies has been a steady shift in demand away from the less skilled toward the more skilled. This is the case however skills are defined, whether in terms of education, experience, or job classification. This trend has produced dramatic rises in wage and income inequality between the more and the less skilled in some countries, as well as unemployment among the less skilled in other countries. In the United States, for example, wages of less-skilled workers have fallen steeply since the late 1970s relative to those of the more skilled. Between 1979 and 1988 the average wage of a college graduate relative to the average wage of a high school graduate rose by 20 percent and the average weekly earnings of males in their forties to average weekly earnings of males in their twenties rose by 25 percent. This growing inequality reverses a trend of previous decades (by some estimates going back as far as the 1910s) toward greater income equality between the more skilled and the less skilled. At the same time, the average real wage in the United States (that is, the average wage adjusted for inflation) has grown only slowly since the early 1970s and the real wage for unskilled workers has actually fallen. It has been estimated that male high school dropouts have suffered a 20 percent decline in real wages since the early 1970s.

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In other countries, the impact of the demand shift has been on employment rather than on income. Except in the United Kingdom, the changes in wage differentials have generally been much less marked than in the United States. Countries with smaller increases in wage inequality suffered instead from higher rates of unemployment for less-skilled workers.

Does Import Competition Affect Wages?

Not surprisingly, people often link increased globalization to the decline in relative wages of less-skilled workers in the advanced economies. But does increased international trade, especially with developing countries, in fact worsen income inequality? There are two approaches to answering this question. One focuses on the role of the price of imports in lowering the prices of products and thus lowering wages. The second uses the quantity rather than the price of imports as a measure of the intensity of import competition.

Effect of Import Prices on Wages

Economic theory suggests that international trade affects the prices of products in both exporting and importing countries and this in turn affects the price of laborthat is, wageswithin countries by influencing the demand for labor. Changes in product prices brought about by competition from imports alter the profit opportunities facing firms. Firms respond by shifting resources toward industries in which profitability has risen and away from those in which it has fallen. Trade flows thus give rise to shifts in the demand for labor, as more workers are needed in newly profitable sectors and fewer in unprofitable sectors. If the supply of labor is fixed, these demand changes lead to a rise in wages, since workers will demand a premium for switching into more profitable industries. Theory also suggests that import competition lowers the price of products (such as apparel and footwear) made by low-skilled labor relative to the price of products (such as office machines) made by skilled labor, so that domestic firms shift toward producing skill-intensive goods. But have product prices in the advanced economies in fact changed in this way? If so, trade might have contributed to rising income equality, but it must first be shown that changes in

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product prices are the result of trade rather than other, purely domestic, influences. A great deal of research has been done on this question, and although the conclusions are not robust, there appears to be little evidence of larger price increases in skilled-labor-intensive products in advanced countries; if anything, price increases were larger in the unskilled-labor-intensive industries. Rapid technology change seems to have led to relative price declines in skill-intensive industries rather than the price decreases in unskilled-labor-intensive industries one would expect in the face of import competition from developing countries. In most cases, trade with developing nations has played only a small role, if any, in raising income inequality in the advanced economies.

Effect of Import Volumes on Wages

A second way of measuring how trade affects wages is to focus on the volume of trade and to analyze the factors embodied in these flows rather than the prices of imports. Trade can be viewed as effectively shipping from one country to another the services of the workers engaged in the production of traded goods. All else equal, imports add to the labor endowment of the recipient country and reduce the labor endowment of the shipping country. Data on U.S. trade flows have been analyzed to infer the quantities of labor embodied in trade flows. The United States tends to export skilled-laborintensive products and to import unskilled-labor-intensive products, so that the growing importance of trade in the U.S. economy has increased the effective supply of unskilled labor in that country relative to the supply of skilled labor. Analysis suggests that trade accounted for around 15 percent of the total rise in income inequality during 198085, but that effect diminished in later years. Further studies have shown, for the advanced economies as a whole, that trade with developing countries has led to about a 20 percent decline in the demand for labor in manufacturing, with the decline concentrated among unskilled workers. The results of these latter studies are subject, however, to some uncertainty because of the influence of labor-saving technology in the advanced

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economies. Other studies have estimated that shifts in product market demand, including the effect of imports, account for less than 10 percent of the increase in wage differential.

OTHER INFLUENCES OF TRADE

Trade can affect labor markets beyond shifting demand from unskilled to skilled workers and thus changing wages. One such effect is the influence of import competition on interindustry wage differentials, a phenomenon in which seemingly equivalent workers are paid more in some industries (for example, aerospace and petroleum) than in others. While the existence of these wage differentials is well established, there is less consensus about their cause. One explanation is that wage differentials reflect unobserved worker characteristics and are thus consistent with competition in the labor market. For example, Boeing may attract mechanics who are in fact more highly skilled, even though they appear to have substantially the same education and experience as mechanics in lower-paying industries. Another explanationwhich applies particularly to such unionized industries as autos and steelis that higher wages reflect profits shared with workers by firms earning above-normal profits in imperfectly competitive product markets, where union bargaining power allows workers to extract these benefits.

CAPITAL MOBILITY AND LABOR MARKETS

Capital flows that change a countrys stock of capital relative to labor potentially affect the relative price of labor. The volume of capital flows across borders has increased rapidly since about 1970, growing at a rate much higher than that of international trade in products. The claim is often made that outflows of capital from advanced economies have lowered wages in the advanced economies as multinational firms establish or expand overseas affiliates, to which the firms then "export" or outsource jobs.

Labor Mobility and Wages

Movements of labor from one country to another can also affect wages. An important issue in the advanced economies is whether immigration of lessskilled workers from the developing countries depresses the earnings of less-

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skilled natives. For the United States, one study has estimated that as much as a third of the overall increase in U.S. wage inequality can be attributed to increased immigration during the 1980s, an effect two to three times as large as that attributed to imports of goods. By contrast, other studies have found only small effects of immigration, but such studies have been criticized as investigating too restricted a geographical area. For example, although research had concluded that the 1980 boatlift of Cubans into Miami did not depress wages of less-skilled workers in that city relative to nearby cities, a later analysis revealed that in fact less-skilled natives adjusted to the influx of immigrants by moving out of Florida altogether.

TECHNOLOGY FLOWS AND WAGES

An inflow of technology can raise labor prices by increasing productivity. In general, one would expect wages across countries to equalize as technology and production techniques spread. Increased trade may contribute to innovation and the spread of technology, and thus indirectly affect wages. One potential channel through which technology flows from country to country is the transfer of technology by multinational firms from the parent to its affiliates. Higher foreign investment in a particular industry is usually associated with higher wages in that industry. A recent study of Mexico and Venezuela, however, indicates that foreign direct investment appears to raise wages only within the plants of the foreign affiliates; there is no evidence that the technology spills over to increase wages or productivity in domestically owned firms.

HARMS OF GLOBALIZATOIN AS A POLITICAL POINT OF VIEW

Globalization reduced the importance of nation states. Sub-state and suprastate institutions such as the European, the WTO, the G8 or the International Criminal Court, replace national functions with international agreement. Some

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observers attribute the relative decline in US power to globalization, particularly due to the country's high trade deficit. This led to a global power shift towards Asian states, particularly China that unleashed market forces and achieved tremendous growth rates. As of 2011, China was on track to overtake the United States by 2025.

HARMS OF GLOBALIZATION ON ENVIRONMENT

Environmental challenges such as climate change, cross-boundary water and air pollution and over-fishing of the ocean, require trans-national/global solutions. Since factories in developing countries increased global output and experienced less environmental regulation, globalism substantially increased pollution and impact on water resources.

Ecological
The advent of global environmental challenges that might be solved with international cooperation include climate change, cross-boundary water and air pollution, over-fishing of the ocean, and the spread of invasive species. Since many factories are built in developing countries with less environmental regulation, globalism and free trade may increase pollution and impact on precious fresh water resources.

Air
Global traffic, production, and consumption are causing increased global levels of air pollutants. The northern hemisphere is the leading producer of carbon monoxide and sulfur oxides. China and India substantially increased their fossil fuel consumption as their economies switched from subsistence farming to industry and urbanization

Forests
A major source of deforestation is the logging industry, driven by China and Japan.

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Societies utilize forest resources in order to reach a sustainable level of economic development.

Minerals
Without before 2012. more recycling, zinc could be used up by 2037, both indium and hafnium could run out by 2017, and terbium could be gone

HARMS OF GLOBALIZATION ON SOCIETY

The social dimension of globalization refers to the impact of globalization on the life and work of people, on their families, and their societies. Concerns and issues are often raised about the impact of globalization on employment, working conditions, income and social protection. Beyond the world of work, the social dimension encompasses security, culture and identity, inclusion or exclusion and the cohesiveness of families and communities. 1) There are various schools of thought which argue that globalization has led to an increase in activities such as child labor and slavery. In countries with little or no accountability, corporations employing children can work smoothly by bribing the officials, which may result in an increase in illegal activities. Critics opine that globalization has resulted in a fiercely-competitive global market, and unethical practices in business is a by-product of this. 2) Globalization may have inadvertently helped terrorists and criminals. At the heart of globalization is an idea that humans, materials, food etc. be allowed to travel freely across borders, but 9/11 was a ghastly reminder that people with evil intentions can use it as an opportunity and cause damage. 3) It is not only the developed nations that are complaining about the negative effects of globalization, people in developing nations - where

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most of the industries have been set up, have their own set of reasons against globalization. They often complain that their cities have been reduced to garbage-dumps where all the industrial waste is accumulated and pollution levels are sky-high. 4) Fast food chains like McDonalds and KFC are spreading fast in the developing world. People are consuming more junk food from these joints which has an adverse impact on their health. Apart from the health concerns, there is something else that globalization has been criticized for, and it is the accusation that it has opened floodgates for restaurants and eateries which are insensitive to the religious beliefs of the host nation. For example, a lawsuit had to be filed against McDonalds in India, after it was accused of serving beef in their burgers. 5) While the rich are getting richer, the poor are struggling for a square meal. If the current Occupy Wall Street protests are a reminder of how angry people are with the current set-up, then those who govern us should take notice, and work towards alleviating poverty. Ideally, globalization should have resulted in creation of wealth and prosperity, but corporate greed and corrupt government has ensured that money is not distributed equally. 6) When the first-known case of AIDS came up in America, only few would have traced its origin to Sub-Saharan Africa. Globalization bought people from various countries together, and this is perhaps the reason that a virus from a jungle was transported to almost every country in the world.

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HARMS OF GLOBALIZATION ON CULTURE

Globalization can be criticized as contradicting some essential principles of Islam. Culturally, western-driven globalization spreads culturally non-neutral technology such the internet0, satellite, TV, and Hollywood/Bollywood films throughout the world, including the Islamic world. The cultural content of these modern innovations are often criticized by conservative Muslims for promoting drug use, violence, youth and womens liberation, extramarital sex, and romantic love. This may undo the social fabric of Muslim societies, social conservatives worry, and access to at least the negative aspects of these technologies should be limited. Further more, the West is criticized as an immoral and degenerate force in the world, and thus the Muslim Middle East should distance itself from it.

GLOBALIZATIN AS AN ISLAMIC POINT OF VIEW

Cultural identity is at great value in the Middle East. For this reason, Arab and Muslim intellectuals have been deeply concerned about maintaining their cultural identity and independence in the face of globalization, especially as it is seen by most as equivalent to Americanization. Muslims have always been proud and sensitive about their religion because Islam is not only a faith but also a law, a sharia that regulates all aspects of their life, including economic transactions, marriage and divorce, and matters of state. According to Fauzi Najjar, the Arab intelligentsia is divided into three different attitudes toward globalization:

The first group consists of those who reject it as the highest stage

of imperialism and a cultural invasion threatening their cultural heritage and national identity.

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The second group of Arab thinkers welcomes globalization as the

age of modern science, advanced technology and global communications. It calls for interaction with globalization in order to benefit from its positive opportunities individuality.

without

necessarily

losing

the

Arab-Islamic

cultural

The third group he says naively calls for finding a middle ground,

an appropriate form of globalization that is compatible with the national and cultural interests of people. There is also a minority who strongly advocates globalization. In their opinion, globalization has become the discourse of the age and Dr. Fuad Zakariya, an Egyptian professor of philosophy, is amongst them. He argues that those who oppose globalization in fact do not understand its meaning and implications fully and reminds his compatriots that there are certain problems that can only be tackled at a global level.

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REFERENCES
1) Matthew J. Slaughter and Phillip Swagel 1997 International Monetary Fund September 1997 See also http://www.imf.org/external/pubs/ft/issues11/
2) See

at globalization.html Policy,

http://www.buzzle.com/articles/negative-effects-of-

3) Najjar, Fauzi (2005), The Arabs, Islam and Globalization. Middle East

Vol. 12, No. 3, (Fall 2005)

See also http://en.wikipedia.org/wiki/Middle_East_and_globalization

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