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Do we really know what the term "global business" means? Globalization has become one of the biggest issues in the economic world today. Many people believe globalization is a good thing, and there are also many people who think it is bad. Some of the comparative advantages of globalization of international business are that the allocation of the worlds resources are more efficient, it will lead to lower prices for consumers, and it will also provide more choice for the consumers. Even though there are these noticeable advantages of free trade, there are still people who believe globalization is a bad thing. On January 13, 1998, Stephen Golub, professor of economics at Swarthmore College, led the sixteenth seminar in AEIs series, Understanding Economic Inequality.
His presentations sought to dispel fallacious but widespread views concerning the effects of competition from low-wage countries in international trade, including the view that such competition has significantly increased wages inequality in the U. S. The argument that low foreign wages has provided an unfair competitive advantage has been widely believed in the United States for at least 150 years. On the question of whether competition from low-wage countries is the cause of the widening income gap in the U. S. , many agree that wage inequality reflects greater demand for skilled labor, as evidenced by the growing wage premium earned by college students.
There are two possible causes of the increasing demand for more sophisticated skills: economic globalization and skill-biased technological change. Economic globalization does not increase the demand for relatively higher skilled labor, as would be expected from the theory of comparative advantage. But many studies of this issue conclude that trade with low-wage countries has played, at most, a secondary role in income inequality. The studies show that technological change is the main reason for the shift in demand for labor.
As a result, this article points out that globalization does not affect income inequality, therefore it is inevitable. Trade with low-wage countries is very small relative to the U. S. GDP. Globalization with these countries does not do what most economist report. In the next article, Globalization: Benefits and Responsibilities, U.
S. Ambassador Richard Hecklinger reports his views on globalization of international business. In his introduction, he states globalization is a phenomenon that touches every one of us. This statement is true because economic globalization causes many things to be better for consumers. Later in the introduction, Hecklinger says that the entire society has a responsibility to work together to take full advantage of globalization and to minimize any negative impacts it might have. In the first section -- Markets, Poverty, and Globalization -- he starts off by saying that open markets and rules-based trade are the best means we know of to lift the standard of living.
He points out that international trade and investment are essential to the prosperity and well being of our citizens. He showed a statistic of among developing nation that showed that from 1970 - 1990, economic growth rates were 4. 5 % for those who were opened to economic globalization, and less than one percent for those who blocked trade and investment. The second point he makes is that economic growth is the best and probably the only cure for poverty. In studies done, out of 125 countries with relatively close relationships in overall income, 108 of them had increased income among there poor. The global economy offers countries markets for the products, lowers prices and expands choice for consumers and domestic industries alike, creates jobs, and ultimately reduces poverty despite disruption to some sectors. Of course, open markets and competition will always allow some people to become rich, but disparity in income levels is less important than whether people are moving out of poverty, and whether they are given the opportunity to benefit from economic growth.
The third point he makes is that globalization does not mean the end of local business, ethnic identities, or national culture. In fact, revolutionary changes in transportation and communications obliterate many barriers to global market entry, creating countless opportunities for micro-entrepreneurs. These three points are the main reasons Mr. Hecklinger believes globalization of international business is a vital part of international economics and it is inevitable. Next, an article by Andrew Kohut shows the varying views people hold on globalization. In a Pew Research Center nationwide survey in April, 43 % of the respondents said that the future of global economics would help the average person while 52 % said it would hurt.
The survey shows that as the earnings of the families decreased, so did their belief that globalization would be beneficial. Another survey showed that, on the average, most American families are better financially now than they were a few years ago. But once again, they found that financial satisfaction is also decreasing as the family's income levels decrease. Wages also continue to be a source of concern. Only 39 % of people in developed countries say they earn enough money to lead the life they want.
With the expansion of globalization, 67 % of those people worry that good jobs will begin to move oversees, and that they will be left with jobs that do not pay enough. Although most people favor economic globalization, they also criticize the specific policies and agreements. To conclude his article, Mr. Kohut states that the dissatisfaction showed is less important than a more widespread public optimism about future economic gains. This seems to be one of the main benefits of globalization of international business. The next article, Economic Integration -- Benefits and Costs, shows two of the effects of international trade.
The first effect discussed is the static effect. First, they talk about how trade is created. In earlier studies done, imposing tariffs results in some efficiency losses to a countrys economy. Economic integration has the opposite result -- by removing tariffs, this loss becomes a gain. The removal of a tariff reduces the price back to the world price, which allows for cheaper prices for consumers.
Removing a tariff allows both the production distortion loss and the consumption distortion loss to be restored to the economy. These two areas now become gains. Economic integration can also lead to trade diversion. This is not in the best interest of all member countries. Trade diversion occurs when member countries are not the most efficient producers of a good. Member countries will still trade with the countries offering the best price, but the economic block can distort these prices.
By buying goods from member countries with a lower price, the importing country might get a less efficient product. The country with the higher price might produce those goods at a better quality, but others will not buy from them because of their price. There is also a dynamic effect of economic globalization. In this effect, integration leads to a larger market within the block, allowing countries to take advantage of economies of scale to reduce prices. Integration also allows for specialization by member countries. Rather than having all member countries producing a large variety of goods, they can agree to allocate production of certain goods to certain member countries.
This, again, means they can take advantage of economies of scale. All of this leads to the question of whether economic integration is best type of free trade. As you can see, the globalization of international business is an issue that has been argued for and against by many, however those arguments only prove that it is inevitable. Globalization of international business is a fundamental requirement for all the other types of globalization, it is the most necessary step in the on going process of globalization at large, and there is nothing that can stop this process. Bibliography Cameron, Duncan, Ten Reasons to Oppose the FTAA, web Davis, N, Economic Integration -- Benefits and Costs, web Finley, O, Globalization and the Poor Countries: Viewpoint of the IMF, web Hecklinger, R, Globalization: Benefits and Responsibilities, web Kohut, A, Labor Costs and International Trade, web Statistic Globalization, web Kohut, A, Americans Varying Views About Benefits of Globalization, web Czinkota, M, 1995.
The Global Marketing Imperative, Lincolnwood: NTC Business books. Daniels, J, 1993. Global Vision: building models for the corporation of the future, New York: McGraw-Hill. Dunning, J, 1993. The Globalization of Business, New York: Routledge Press. Harris, P, 1996.
Managing Economic Globalization, Houston: Gulf Publishing. Maddox, R, 1993. Cross Cultural Problems in International Business, Westport: Greenwood Publishing. Seblonka, P, 1998.
The Impact of Economic Globalization, New York: Random House. Winner, A, 1997. Economic Globalization: Look at Changing Business Environment, Michigan: Zondervan Publishers.
Free research essays on topics related to: economic globalization, trade and investment, economic integration, skilled labor, wage countries
Research essay sample on Trade And Investment Economic Globalization
