It is impossible to discuss in one paper all concepts and issues that relate to the winners and losers of globalization, but , this paper briefly discusses who the pronounced winners and losers of globalization are in today’s world economy. The paper pays close attention to the factors that account for the successes and failures of the winners and losers of globalization respectively. To start with, globalization, as Hill and Hernandez described in their book of Global business today, refers to “the shift toward a more integrated and interdependent world economy,” (Charles W.L. Hill & William Hernandez- Requejo, P 33). Broadly speaking , it is clear that the world Is moving towards ‘a global village’ due to the decline of barriers to cross-border trade and investment, and advances in transportation and telecommunication technology.
However, this does not mean globalization led to a better world for all. Looking into the impact of globalization worldwide, it is profoundly true to say that we have two categories: Winners and Losers . The parties in either category can be viewed as competitively advantaged or disadvantaged by the process of globalization. Briefly , let us first address who we assume to be the winners of globalization. We have many different parties who we believe that they competitively have the upper hand in today’s global market- Developed nations( The U.S and European countries), large firms who produce exportable goods, consumers who buy imported goods, Entrepreneurs who work for profit, companies endowed with highly skilled and educated personnel, countries that enjoy political stability and favorable government rule, and nations that have favorable economic policies, to name only a few- these are some of the parties that seem to dominate the global economy and enjoy the fruits of globalization in today’s world.
Above all, a few countries in the world dominate global economy and are seen to have greatly benefited from globalization. The U.S. , for instance, is estimated to produce about 25% of the the global GDP. In 2009, the U.S. central intelligence agency reported that the U.S. GDP was valued to be over $ 14.4 trillion. ( factbook,www.cia.gov). On the other hand, those who feel like they were cut off from the many privileges of globalization include: some poor -developing nations (most Africa & South America), domestic firms that produce importable goods, consumers of exportable products, workers who work only to earn wages, small firms that lack skilled personnel, and countries that have political instabilities or under the rule of Totalitarian government, and those who experience unfavorable economic policies.
Many will argue that having possession of some factors of production such as capital, land and labor in abundance accounts for the success of the winners of globalization. Yes I couldn’t agree with them more, but, looking at it deeply, I strongly agree with Amartya Sen who said that “development should be seen as a process of expanding the real freedom that people experience. Hence development requires the removal of impediments of freedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation, neglect of public facilities as well as the intolerance of repressive states ,” ( page,91).
Winners of globalization have been successful because they succeeded in removing these impediments. Conversely, the loser of globalization’s failures can be accounted for a number of factors: “Totalitarian government, economic policies that destroy wealth rather than facilitate its creation, endemic corruption, scant protection of property rights and war,” (P.60). Hill and Hernandez also pointed out some “40 or so highly indebted poor countries (HIPCs) that are trapped in a cycle of poverty and debt which inhibits economic development,” (P.61). Overly, as the trend towards globalization worldwide increases some countries’ economies grow more rapidly while others are dragged into the sidelines. The predominant factors that determine the destiny of the winners and losers of globalization are more of the freedoms, and opportunities that people enjoy than the process itself.
Charles W.L. Hill & William Hernandez- Requejo. (2011). Global Business Today (7 ed.). McGraw-Hill/Irwin.
Paul Krugman follows-up his column "Divided over Trade" (see the post below this one) with a discussion of the winners and losers from trade:
Notes on 5/14 Column, "Divided Over Trade", by Paul Krugman, Money Talks: A few notes on trade and wages.
Many people think that Economics 101 says that trade is good for everyone. Alas, it isn't so. Way back in 1941 Paul Samuelson and Wolfgang Stolper pointed out that even the most conventional economic analysis suggests that some group within a country - and possibly a large group - actually loses from trade. It's even in Wikipedia.
Intuitively, here's the logic. Imagine that America exports stuff that is produced mainly by college-educated workers, while those industries that compete with imports mainly employ less-educated workers. Now suppose the price of imports falls. Then in order for import-competing industries to cope, the wages of less-educated workers have to fall — in fact, they have to fall more than the price of imports, because other costs of import-competing production, namely the wages of highly educated workers, will actually rise. So if import prices fall, say, 10 percent, wages of less-educated workers will fall, say, 15 percent.
But don't these workers gain from cheaper imports? Yes, but not enough. Imports are only part of what people consume, so while wages fall more than import prices, the overall cost of living falls less than import prices — say, 15 percent fall in wages, only 5 percent fall in the cost of living. Trade reduces the real wages of low-education workers.
So why did people like me say in the '90s that globalization wasn't a big problem for U.S. workers? Because the numbers didn't look big enough. Bill Cline of the Institute for International Economics posted a pretty good overview of that discussion here.
Since then (Cline's numbers ran through 1993), however, the numbers have grown. You can get a sense of the changes from the World Trade Organization data. U.S. imports from China, Mexico and the "six Asian traders" went from about 3 percent of G.D.P. in 1995 to almost 5 percent in 2005. What's more, the center of gravity of those imports has shifted to the lower wage countries. Estimates of labor costs are calculated by the Bureau of Labor Statistics, Table 1 and p. 5 for China.
The growth of China's exports, in particular, has undermined one of the arguments I and others (including Cline) made for not worrying too much: we thought the low-wage manufacturing exporters would, as their own education levels increased, place less pressure on low-education workers here. Well, the original group of exporters did move "upscale" — but along came China (and to a lesser extent Mexico), taking their place and then some. The overall wage rate of U.S. trading partners relative to the U.S., calculated in that B.L.S. report, rose through 1990, but it has stagnated since then — and the index doesn't include China. Add that in, and our trade is increasingly with low-wage countries. So the problem has gotten bigger.
As I said in the article, however, the big problem is what to do about it. And a return to protectionism would just have too many negative effects.