Critical Literature Review
Introduction
Redding (1999) defines that globalisation as the increasing integration between the markets for goods, services and capital and at the same time the breakdown of borders.
Other researcher found that the process of globalisation not only includes opening up of world trade, development of advanced technologies such as communication, internationalisation of financial markets, growing importance of multi-national corporations (MNCs), population migrations and generally increased mobility of persons, goods, capital, data and ideas but also critical problems such as infections, diseases and pollution (Braibant, 2002).
Thus, from many point of views, globalisation is seen to be the borders between countries, governments, the economy and communities, increasing liberalization and openness of markets, particularly through the elimination of barriers to trade in goods and services and the development of integrated international financial market. PRUS (2001) simplified the term of globalisation as a process of increasing connectivity, where ideas, capital, goods, services and people are transferred across country borders.
Labour and employment
Positive Impact
However, the process of globalisation can bring more jobs opportunities in host country when MNCs move their production operation into developing countries. According to Rama (2003), job creation only will occur in export-processing zones where large amount of work forces are required in order to keep the production running.
A good example of jobs creation would be Coca-Cola decided to invest in Malaysia with a new bottling plant, consist of $301 million investment. They stated that this investment will able to create 600 to 800 jobs at the plant with 8,000 jobs connect with local suppliers (Agence France-Presse, 2010).
Negative Impact
Woods (2000) stated that the government of developing countries start to compete with each other by deregulate their policy to attract foreign direct investment (FDI) and multi-national corporations (MNCs). Hence with lower the wages and taxes rates enable the investors to avoid the risk of losing their capital invested in developing country.
Research done by The Economist (2001) and Woods (2000) and found that when the government of developing countries increasing minimum wage and labour safety standards in order to protect local workers’ rights, this might could cause MNCs relocate their operation to another developing countries, where that particular country’s labours, who were probably willing to accept low wages by any standards, lack of union representative and legal protections such as child labour and other gross labour that abuses by global companies.
Technology transfer
Positive Impact
Transfers of technology depend on resource available by MNCs with the ability to achieve the level of technology development in order to make them competitively in global market. Usually developing countries unable to do research and development on their own as the technologies that required implementing the competition strategy are most likely to come from other countries through technology transfer (Stewartet al., 2003). Hipkin and Bennett (2003) stated that the extent of developing countries, participation in global economy depend on their ability to respect where the importance of technological transfer cannot be overemphasized.
There are ten modes of technology transfer which has been identified by Peter Buckley (1985, citied in Transnational Corporations and Technology Transfer to Developing Country) but the most conventional form will be whole-owned subsidiaries. This form is also known as FDI where MNCs can lower their transaction cost (Cantwell and Dunning, 1994).
Hence technology transfer to subsidiary in other country allow developing country to learn the operation of new technology. Sometime subsidiary didn’t allow local firms to learn but they somehow find their way to obtain the technology such as hiring operator from that particular subsidiary (Mansfield and Romeo, 1980).
Negative Impact
However globalisation can also bring negative impact to developing country. Certain MNCs transfer their technology to developing country as those technologies might cause health problem to employees as well as local citizens.
Good example would be Bhopal disaster caused by America MNCs’ subsidiary, Union Carbide India Limited that produces pesticides. Sophisticate technology bought into India but the leakages of chemical caused more than 500,000 people suffer from the disaster (Eckerman, 2005).
Social impact
Positive impact
Globalisation can bring good and bad effect to developing countries. Developing able to reduce the amount of population that live below poverty level with the help of globalisation as the effect of job creation has been achieved (Lee and Vivarelli, 2006). Local citizens are able to get a job and ensure the survival of their family and improve their living standard.
Negative Impact
In this era of globalisation, social aspect is tightly related to the effect of the waves of globalisation such as living standard, career, families and their communities. In this case, globalisation are claimed that it is a method to organise someone’s life which consist of assimilation, communication among people, organisation, and the government as well in other part of the world.
Hence, it was also called the method that used driven by global trade and investment aided by information technology. Besides, this issue is also directly inter-related with some other issues such as unemployment, disparity and scarcity, and environment as the chain effect of the waves of globalisation (Globalisation 101, 2002).
The inter-relationship between the technology and economic is very critical and it succeeded in consisting the rise of the theoretical approaches where the centrality of changes in technology have been accepted and the dynamic force of the term innovation in the elements of economical changes (Freeman, 1998; von Tunzelmann, 1995). According to Nussbaum and Sen (1993), investment in technology appears to have an optimistic link to wider philosophy in developing economic interests which include social choices and freedom capability in longevity and education.
Globalisation on impact of the countries’ economy
Positive Impact
According to Baghwati (2004) globalisation is playing the significant role of enhancing economic affluence by offering new hope to developing countries. Gangopadhyay and Chatterji (2005) saying that globalisation has been characterised as a reduction in trade barriers such as free flow of goods, services and labour from one country to another.
Richardson (2000) contends with these views as, the effect of this is increasing the trade which turn into increased income for developing countries and serves as an opportunity to stabilise their economies by taking the advantages of trade. This statement is true and has been proving by (Richardson, 2000; Dierks, 2001) that globalisation has greatly reduced the trade barriers between countries through adjustment of tariffs and import duties.
Negative Impact
The rise in globalisation has increased capital flow into developing countries’ economies. Foreign Direct Investment injects capital into developing countries in terms of stabilizing the countries’ economic. This is also a benefit that increased the countries’ financing through loans and grants from developed countries (Aurifeille, 2006). However, there will be net capital inflow that could lead to negative effects on trade.
Chan and Scarritt (2001) noted that the large capital inflows were caused by the appreciation of exchange rates and inflationary pressures that impact on the country’s current account. This means that globalisation in improving the countries’ economy could actually stop the progress of the economy unless the host countries’ balance of payment focuses on the foreign plant where the export is more than import.
The adjustment in trade barriers has lead to the promotion of specialisation to developing countries because they are able to concentrate on the production of commodities which can be produced at the least cost (Aurifeille, 2006). Developing countries fully use the advantage of globalisation to enhance their income through trading goods which they can produce most effectively.
Such development is giving developing countries an opportunity to obtain goods that prove expensive to produce in their own countries. Corsi (2009) saying that, competition is always an effective way of enhancing innovation to produce better quality goods. Thus, globalisation had enhanced competition as the flow of goods and services between countries has becomes easier.
Globalisation impacts on economic and environment
Negative Impact
Economic and environmental problems show few signs of improvement for a large share of the world’s people but when comes to external debt levels, weak export and real income growth, it often enter a mutually destructive relationship with environmental and resource degradation which linked to the agriculture and urban activity. The important connection between economic and environmental problems can be clearly seen in the widespread social and economic impacts towards soil erosion, deforestation, urban congestion, unmanaged chemical such as heavy metals, air pollutants, solid and liquid industrial and residential waste (Long, 1990).
According to Huber (1982) and Simonis (1989), ecological modernisation was one of the primary modes of sustainable development which comprised both a theory and a policy or political programme based on the view that comprehensive political and economic change could be implemented to achieve a less material and energy-intensive economy through the application of integrated and preventive resource and pollution-reduction strategies.
This technologically-intensive mode of production would not be a viable option for lower income nations because the intensive technological basis of ecological modernization suggests that its effective operation and flow-on benefits are probably beyond the reach of poorer nations. Indeed, rapid global technological progress has often resulted in the Intensification of uneven development rather than enhanced opportunities for the poor (Freeman, 1987). The post-materialist solution for technologically advanced economies would
Conclusion
Although globalisation can help developing countries to grow and become developed countries through different kind of benefits enjoyed by them but at the same time globalisation can bring disaster to developing countries, even can bring the whole country collapse in few months times.
Research done by scholars indicated that globalisation can be a benefit to developing country but at the same time it’s also a threat to developing country. However the net benefits enjoyed by developing countries is greater than net cost paid as shown in this literature view can say that globalisation can actually bring benefits to developing countries.