Essay: BRIC countries are negatively affected by globalization

The internationalization of business has its roots in the mid-19th century. In Asia en Latin-America some entrepreneurs were engaged in transnational trading, banking and other business practices. These enterprises were the forefathers from emerging economies as we know them today. According to Yeung (1999, p. 3) internationalization refers to the ‘simple extension of economic activities across national boundaries.’ However, over decades, this trend has evolved to globalization, which involves ‘not merely the geographical extension of economic activity across national boundaries, but also and more importantly, the functional integration of such internationally dispersed activities’ (Yeung, p. 3). This economic integration results from the lessening of trade barriers, political developments that enable cross-border trade and the increased flow of goods and services, capital, labor and technology all over the world (Deresky, 2014, p. 4). In other words, transnational business has increased to a great extend and global competition and global business is now the new order. The global competition is driven by the phenomenon of an increasingly borderless world, through the technological advancements, but also through the rise of emerging markets. According to Deresky (p. 4) emerging markets now produce as much as trade, capital and knowledge flow as developed economies do. Emerging countries have gained in wealth and power and consumers worldwide profit from the globalization through an increasing amount of products and services available to them. However, the open markets and increasing capitalism due to globalization has also a great downside on developing countries, because it is often driven by western companies. ‘Globalization replaces domestic economic life with an economy that is heavily influenced or controlled from overseas’ (Jeffrey, 2002, n.p.). Increased poverty, income inequality, income uncertainty, ecological damage and financial capital outflows are aspects which contribute to the negative impact on developing countries. Therefore, I argue in this paper that developing countries are negatively affected by globalization. With developing countries I mean the ‘BRIC’ countries, which are Brazil, Russia, India and China, because these countries all experienced drastic trade liberalization the past decades, but have a low level of material well-being (Princeton.edu, 2014). Firms in developed countries have begun to realize the possibilities and potentials in emerging markets. The growing markets and increasing consuming middleclass have become interested for developed countries. However, the developing countries do not really benefit from these western practices in their markets because the Western, developed countries are increasingly dominating their markets. ‘Foreign competitors are encroaching on their traditionally assured territory and local businesses are faced with a situation in which they must pursue new strategies and tactics in order to survive and remain viable'(Srinivas, 1995, p. 28). The disadvantage of globalization is often referred to the benefits of advanced industrial countries, at the expense of many other countries and the people within them who are not sharing with those benefits. For example at the expense of the sovereignty, the well-being and the environment of developing countries (Deresky, 2014, p. 8). McMichael (2000) addresses these issues in his article about the urban environment and health in a world of globalization. ‘The social-economical stratification in developing countries is widened through the forces of the western multinational companies, many rural communities become marginalized both globally and nationally'(para 35) This is because people in many sectors are being taken over by large multinational companies, whereby local firms suffer. According to McMichael ‘results this in an inevitable downward spiral of environmental degradation, increased poverty, food insecurity, the stunting of children’s growth and increasing health risks from infectious diseases’ (para 35). In addition, he argues that ‘the fall of commodity prices and the low prices paid for low-end manufactured goods in a competitive global marketplace where trading loyalties no longer count, may consign exporting countries to continued poverty'(McMichael, para 35).