Globalisation Assignment.docx

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Individual Assignment

LANKA

(BLB00012-3)

Globalisation and International Institutions

HF1631 IBM

HAND OUT DATE

: 13

th

_{July 2016}

HAND IN DATE

: 19

th

_{Sep 2016}

WEIGHTAGE

: 100%

INSTRUCTION TO CANDIDATES:

1. Students are advised to underpin their answers with the use of references. (Cited using the Harvard Name System of Referencing)

2. Late submission will be awarded zero (0) unless Extenuating Circumstances (EC) is upheld.

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Abstract

This report mainly focuses on Globalization concept and different views on globalization by various authors and institutions. It will discuss the debates to globalization about Hyper-globalists, Sceptics and Transformationalists views and the different perspectives of globalization (economic, political and social).

Key Words: Globalization, WTO, IMF, WHO, ILO, Hyper-globalists thesis, Sceptical thesis, Transformations thesis, Economic perspective, Social perspective, Political perspective.

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Acknowledgment

First I would like to thank my lecturer Miss. Shurmara Fernando for giving me the support and the courage to do this assignment and to complete this assignment successfully without any doubts.

On behalf of that I would like to take this opportunity to thank my friends for giving me maximum support and for encouraging me to work on this assignment when I faced many difficulties.

Finally, I would like to thank my parents for guiding me and for giving their encouragement to fulfill my dreams and their support for this report to do my best in this.

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-List of Tables

Table 1: Comparison of different institutions... 9 Table 2: Conceptualizing globalization... 12

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-Abbreviation

AI - Amnesty International

BPO – Business Process Outsourcing

ETCA - Economic and Technology Cooperative Agreement EU – European Union

FDI – Foreign Direct Investment GDP – Gross Domestic Product

GSP – Generalised Scheme of Preferences ILO – International Labour Organisation IMF – International Monetary Fund MNE – Multinational Enterprises

NGO – Non Governmental Organizations

SAARC – South Asian Association for Regional Cooperation UNICEF - United Nations Children's Fund

WB – World Bank

WHO – World Health Organization WTO – World Trade Organization

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1. Introduction

The concept of Globalization is vital for a country because it allows countries to benefit from economic interaction and collaborate in handling economic, social and political challenges in today’s world. Different Authors and Institutions have defined globalization in different ways because there is no one definition for globalization. In this report the author has compared the institutional and general definitions separately. As per the next step, the author has explained debates related to globalization in detailed. In the last section the author has described how small country like Sri Lanka have been impacted in terms of economic, political and social perspectives using costs and benefits for each perspective.

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2 What is Globalization

Various authors and institutions have defined globalization in different ways. According to Hamilton & Webster (2009), globalization refers to the social, economical, political, cultural and technological which links in various countries. In addition to that, globalization defined as a process or set of processes which considered as a change of the spatial organization of social relations and transaction (Held et al. 1999). As stated by Ohiorhenuan (1998), it is the wider and deeper linkages of national economies into a global market for goods and services, especially capital.

According to WTO globalization can be defined as the exponential growth of the concept of exchanging goods and services at a profit, similar to the one that took place with the 19th century industrial revolution. It is how societies have changed due to the advent of technology that has led to the integration of social and economic forces beyond traditional geographic boundaries (Wto.org, 2016).

In addition, as stated by IMF, Globalization is the increasing interaction and connectivity of economies around the world by exchanging goods, services, money, people and knowledge with each other. The technological developments that came about in 1980s made such international dealings quick and simple (Imf.org, 2016).

Also, as defined by ILO, globalization is the rapid integration of countries in the world fueled by the ease in which international trade, investments and capital flows take place. This has come about due to international activities such as trade of goods & services, capital flows (both long and short term), the role played by MNEs, the changes in production network at international level and the use of latest technology (Ilo.org, 2016). Finally, according to WHO, Globalization is the interdependence and interconnectedness of people and countries. WHO refers to two related elements; the opening of international borders to allow the movement of goods, services, people, ideas, money; and the changes in institutional (such as world bank, IMF, UNICEF actions) and policy (monitory , fiscal etc.) regimes by countries and economic regions (SAARC, EU etc.) that promotes and facilitates such movements (Wto.org, 2016).

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Table 1: Comparison of different institutions

WTO IMF WHO ILO

Economic Impact Recombining of economic forces Integration of economies around the world Interconnectedne ss of countries Economic integration between countries Timeline Historical stage The term began

to used commonly during 1980s No specific reference No specific reference What is exchanged Goods and services Movement of capital across borders. Implies that information and knowledge is shared Flow of goods, services, finance, people and ideas

Trade in goods and services, capital flows Social and cultural Impact Recombining social forces Cultural dimension of globalization Interdependence of people Social impact Reference to technology Technological revolution Reflection of technological advances No specific reference The application of new technology Beyond traditional boarders New territorial dimension Across boarders Across international boarders Production network on an international scale

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As illustrated by the listed definitions from the above Table 1, the four institutions agree that a large component of globalization is economic and social liberalization.

However, contrasting opinions are formed as regards to the timing of globalization. The WTO definition suggests that globalization is not a new phenomenon and its origins stretch to the distant past of 19th century and that it is nearly a continuation of old process. The IMF definition forms a similar opinion in that globalization is a historical process it speaks of a recent past date in back to 1980s. The ILO and WHO have not attached a timeline to globalization, however references to technology information sharing etc. may recognize globalization process as being part of the contemporary era. As it draws attention to the industrial revolution and market capitalism, it may seem that WTO refers to the exchange of only goods and services whereas the other institutional definitions suggest the movement of not only goods and services but capital, people, and knowledge.

All four institutional definitions draw reference to advances in technology which indicates that technology has played an integral role in the globalization process.

The four institutions collectively agree that the movement of goods, services, people etc. are not confined to traditionally define geographical boundaries, thus globalization has resulted in opening of international doors.

When comparing Authors definitions with institutional definitions, there is a gap between these definitions. According to authors definitions it talks about ‘links in different countries and economies’, whereas in institutions it has not mentioned specifically. Likewise in institutional definitions it talks about timeline, technology etc. but in authors definitions it is not mentioned. Therefore as per the recommendation there is no one specific definition for globalization but it is an involving phenomenon.

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3 Debates related to globalization

Hyper-globalist perspective is identified by the declining relevance and authority of nation-states, brought about mainly through economy logic of global market (Held et al, 1999). Supporters of this view see globalization as “bringing about a denationalization of economies through the establishment of transnational networks of production, trade and finance” (Held et al, 1999, p.3). According to this view free trade and investment across global markets allow people to share in the prosperity of a growing world economy

(Marston and Knox, 2011).

This view also suggests a period of global governance whereby institutions such as IMF, WTO, World Bank etc. tends intervene in the affairs of and threatens the sovereignty of the nation state. It also talks about global civil society where NGO's such as Greenpeace and Amnesty International play a larger role in global politics (Held and McGrew, 2003, p.38). At a cultural level, growth of cheaper travel and of mass media has led to dissemination of ideas, music, Art, food etc. from one culture to another. While the Hyper-globalist perspective sees these related events as positive, the perspective similarly accepts that globalization has created inequalities, however sees these remedied by the advance processes of capitalist market expansion.

Secondly in the Sceptics, whilst rejecting the notion of globalization as anything essentially new, believe that the golden age of globalization occurred at the end of 19th century and that the current processes show, at best, a regionalization (Held et al, 1999, p.5). From a cultural standpoint it can be argued that cultures have always mixed and shared ideas. The Sceptics have argued that the existing economic interdependence that describes the global system is not without precedent and would point to statistics from over hundred years ago to back up their claims (Held et al, 1999, p.5). They also argue that national governments are important to the regulation of international economic activity and the continuing liberalization of the global economy only can be facilitated by

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According to Transformationalist perspective there’s no single cause (market or economic logic) behind globalization and the processes of globalization result is not determined (Held et al, 1999, p.7). Similar to Hyper-globalist this group believes that globalization is changing societies, economies, etc. In contrast to Hyper-globalists and Sceptics this group makes no claims about the future of globalization, nor do they see globalization as a long term historical process (Marston and Knox, 2011).

This group of authors views the national governments as changing as supposed to waning as viewed by hyper-globalists and growing as viewed by Sceptics. In summary it can be said that the authors of Transformationalist perspective have a much less determinate understanding the process of globalization authors from the other perspectives (Held et al, 1999).

The three perspectives of globalization are summarized in the following Table 2. Table 2: Conceptualizing globalization

Hyper-globalists Sceptics Transformationalists

What’s New A global age Trading blocs,

weaker governance than in earlier periods Historically unprecedented levels of global interconnectedness Power of national governments Declining or eroding Reinforced or enhanced Reconstituted, restructured Pattern of stratification Erosion of old hierarchies Increased marginalization of South New architecture of world order Conceptualization of globalization As a reordering of the framework of human action As internationalization and regionalization As the reordering of interregional relations and action at a

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Dominant Features

Global capitalism Global governance Global civil society

World less interdependent than in 1890s “Thick” (intensive and extensive) globalization Driving forces of globalization Capitalism and technology

States and markets Combined forces of modernity

Dominant Motif Mass consumption

And entertainment

National Interest Transformation of political community

Historical Trajectory

Global civilization Regional blocks/clash of civilizations Indeterminate: global integration and fragmentation Summary Argument

The end of the nation-state Internationalization depends on state acquiescence and support Globalization transforming state power and world politics

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4 Costs and Benefits of globalization process in the

perspective of a small country economy

The integration of the world economy is gathering momentum. With the liberalization of the economy in 1977, Sri Lanka entered into the arena of globalization (Indraratna, 2001).

From an economics perspective, free trade capability can be viewed as a significant benefit of globalization. Trade barriers in the past prevented countries from exporting domestics goods/services and importing the ones not available locally. For example, Sri Lanka has benefited greatly by GSP plus concession in order to develop its apparel industry which is the greatest source of foreign income for the country (Reffai, 2015). The flipside of it being, international pressures such as human rights related requirements, NGO demands that is exerted on the government which may lead to negative political impact (Ft.lk, 2016).

Whilst free trade helps countries to grow their GDP, reduce unemployment etc. it also impacts the domestic infant industries which cannot compete both price and quality wise with more established MNEs, which begs the question as to who really benefits from globalization; is it the developed nations or developing countries such as Sri Lanka? Free trade has negative consequences such as contraband, drugs etc. entering the local market. But the biggest adverse impact of free trade is its impact on the trade deficit. Given that Sri Lanka is a developing nation its import value is considerably more compared to the export revenue, which in turn affects the balance of payments of the country. According to a recent newspaper article, the country is having a huge trade deficit which is a serious strain on the balance of payments. Given that last year’s trade deficit was expected to be around US$ 9B, this year’s trade deficit is expected to increase to about US$ 11B (Sanderatne, 2012).

From an economics perspective, capital movement is yet another benefit of globalization, especially for developing nations. Cash inflows, by way of Foreign Direct

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development projects, such as road development, ports development etc. carried out in Sri Lanka with the funding of Chinese, IMF loans and FDIs. For an example in 2009 Chinese funded worth of US$ 410 million for several projects in Sri Lanka such as development of international airport at Mattala, highways and new constructions etc. (Mfa.gov.lk, 2009).

The opponents may suggest that, this would make such countries financially more volatile due to the build-up of foreign debt. For an example Sri Lanka has a major debt issue. After more than 10 years of taking out large amount of loans to build large scale infrastructure most of which has not yet produced adequate returns, currently the country is struggling to make the payments (Shepard, 2016). The constant pressure in the form of periodic loan financing needs which may adversely impact the currency of the nation as well as negatively impact inflation and interest rates. The ease of capital movement has also seen an increase in financial crime such as money laundering and terrorism financing, which is a downside of globalization.

Globalization has contributed positively towards the development of the service sector of Sri Lanka, especially tourism and BPO industries have seen significant growth by opening the Sri Lankan shores to foreign entities and individuals. It not only has made way to foreign currency inflows, but has also created the opportunity for knowledge and skills sharing.

Globalization has also seeing significant movement of labor resources. Sri Lankans, including skilled staff opting to migrate to more developed and financially fruitful countries and thereby draining the country of its skilled labor pool. Upside being the migrant remittances which boosts the country's economy.

From a political perspective, drawing from the views of Hyper-globalists, global institutions and organizations such as IMF, NGOs continues to influence the political

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caused a rift among various internal political bodies (Kurukulasuriya, 2012). Global civil societies, a by-product of globalization, explains the divergence of activist groups (such as diasporas) that exert considerable pressure The Tamil diasporas have caused political havoc by questioning certain decision of the Sri Lankan government at the international circuit (Samath, 2009).

With reference to the sceptics view of globalization, which currently is viewed as regionalization at best, one must analyze the impact of over dependence on one region or country. The obvious benefits would in turn expose the economy to uncertainties of immense impact, which was evident from the after effects of the recent Brexit. The consequences of such over-attachment to given countries was a discussion point during the previous regime, where the Sri Lankan government fostered a rather unhealthy relationship which China and related entities, by isolating itself from the west whilst exposing itself to corruption, trade irregularities etc (Hariharan, 2015; Pattanaik, 2015). The ETCA between Sri Lanka and India is a classic example of a double edged sword with both economic and political implications, which one may say is an ultimate result of globalization (Keerthisinghe, 2016). Whilst it promotes free trade and knowledge sharing, it also has created great deal of insecurity amongst Lankan employees due to the potential job losses to Indian migrants.

From social perspective, the impact of globalization can be analyzed by deep diving in to the life style of people, more importantly ascertaining the quality of life. Sri Lanka has access to better variety of food, clothes, recreational activity (foreign travel) has enhanced the life style, thereby uplifting the social status of individuals in general (Gamage, 2016).

Another major social aspect is that globalization has influenced the social structure of different societies. Pre global-media (via internet, satellite TV etc) era saw social institutions with their own unique values, beliefs etc. in contrast, social institutions in the modern world are constantly influenced by various other cultures mainly due to the advent of technology plus free movement of people who in turn inculcate their values, beliefs in other societies. The phenomenon has enabled people in developing nations to

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modern day challenges. Opponents may argue against religious and cultural impact due to over-westernization.

The impact of globalization from a social perspective can be further explored by addressing education level of a nation. Sri Lankan's have now access to international universities via distance and online learning programs at concessionary prices, which in turn allows students to get a flavor of foreign culture as well. For example, Sri Lanka has made a massive progress in the field of distance education over the past few three decades. Opportunities for Sri Lankan students are increasing where they can access both national and international educational organizations through advanced technology (Wasala, 2010).

Growth of MNEs, owing to globalization, does bring up both environmental and social implications. Firstly, MNEs have attracted negative publicity due its labor practices (such as low wages, unpleasant working conditions etc.). Sri Lankan apparel giants that cater to leading global brands have been questioned in this regard. Secondly, the impact on scarce resources, pollution etc. are issues synonymous to MNEs.

5 Conclusion

As per the conclusion, globalization concept can be determined as important to this world, as the integration of the globe’s economies increasing into a single global market could create so many benefits for every individual. However, there can be few disadvantages as well when looking into both the sides. The debates related to globalization of Hyper-globalists, Spectics and Tranformationalists views are mentioned in detail. Finally, costs and benefits of economic, social and political perspectives in Sri Lanka were discussed by giving real world examples.

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6 Reference

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