1SALFORD BUSINESS SCHOOLMsc. International Banking & FinanceSustainable BankingHow does globalization impact on the environment, banks, businesses, andordinary people; who are the winners and losers?Submitted to: Dr. Mike CoulburnSubmitted by: Waseem Al-TaherID: @ 00184118Semester 2, January intakeSubmission date: 17 August 2009E-mail address: firstname.lastname@example.org
2IntroductionGlobalization is one of the key issues for the 21stcentury. The twenty century has witnessedincredible advances in telecommunications, transportations, and information technology(computers, internet and satellite).This has helped the world to become more global, thus the wide world has become a “smallvillage” or global village. This meant that globalization has lowered the largest part of barriersbetween countries. Thus, some argue that relatively all people around the world should havesame culture, education. In addition goods and services should flow with smallest amount ofbarriers between countries, like if they live in one room. However, is this reality?The growing importance of globalization has powerful force on more dependence countries oninternational markets. In addition, it strong ties them to the global world, because if they do not,subsequently will be isolated in term of businesses, trade, technology, education, media... etc.However, the rapid growth of globalization has serious effected the global world; it might bebeneficial, but not for all, and nothing without cost.The aim of this paper is to ascertain how the forces of globalization affects the environment,banks, businesses, and ordinary people, as well as it will discuss the benefits and some of thecosts.Moreover, it attempts to indentify the term globalization form deferent’s points of view, pluswhether globalization is important for prosperity or not.
3Globalization conceptDespite the increasing usage of term globalization among educated and ordinary people in therecent years, plus what have published and the thousands of conferences and books which havetalked about it and discussed its risks and advantages, it stills unclear doctrine.In fact, globalization phenomenon is not easy to be defined, because it is involve in variousaspects of life, plus its definition depends on the way it has viewed.Some consider globalization as new stage in economic development; some view it as dominationand empire by the west, particularly the united state (Roukis & Zarb, 2006, p. 970), in whatcalled Americanization, or the era of the Mcdonaldization. Although this is to some extent couldbe true, but the globalization concept is much wider than being only Americanization.It is estimated that the US accounts for two-thirds of the media images worldwide (Roukis &Zarb, 2006, p. 977),thus, it cannot be ignored that American are good in marketing and theydominate the media which has helped in spread out the Mcdonaldization and dollarizationculture associated with westernization.However, while various definitions of term globalization have been suggested, this paper willuse the definition which had suggested by Malcolm waters the writer of globalization book,Malcolm defined the globalization as “the intensification of worldwide social relations whichlink distant localities in such a way that local happenings are shaped by events occurring manymiles away and vice versa” (Waters, 2001, p.4).However, its worthwhile to have a look at another definition.according to Roukis & Zarb, 2006, “globalization as mostly driven by powerful Thetransnational corporations, whose control of information gives them an enormous advantage,imparting primarily American cultural values, and unrestrained consumption” (Roukis & Zarb,2006, p. 976).
4Thus, it can be observed from these tow definitions that globalization concerns aboutcontraction of time and distance between civilization, nations, cultures, in addition it isdominating the great powers represented by big corporations or the multinational companies,whose control the information, as known who has the information has the power.However, it seems that the globalization has changed the world structure; also, some argue that ithas removed nation’s identity.
5Globalization impact on businessesFrom businesses point of view, globalization is the free flow of trade, capital, labour, goods andservices between countries (Passaris& Constantine, 2006, p.5), associated with deregulation andprivatisation, and this could be proven through many international agreements has taken placesuch as the GATT and WOT. However, is some international organization has positive impact onglobalization or it has helped of domination the great power represented by capitalization?As well as it means form the point mentioned earlier “as we live in one room “, that the prices ofgoods should be relatively same in all countries, in what refers to the Purchasing power paritytheory.Businesses and governments’ interests played a vital role in enhancing globalization and spreadit out.After the end of the Second World War, the world economy and the whole internationalframework have changed, that due to several reasons, for instance, there was an internationalmonetary conference was held at Bretton Woods in the United State and it had attended by 44countries to reform the world economy (Pilbeam, 1998, pg.278).Bretton Woods system depended upon U.S. dollar as a reserve currency (Das, 2003, pg.90),which meant more dependence countries on US dollar. This led to enhance the term ofdollarization; in addition it has enhanced the role of the United Sate as great power to impose itsculture and polices in term of business and trade.The great growth of multinational companies after 1950 (Scammell, 1980, pg.149), is the bestexample of globalize the businesses. While always these companies are looking to maximize itsprofit, thus it is always looking for a cheap labours and raw materials, which is available indeveloping countries; this has benefited the host countries in various ways for instance.Firstly, it helped to transfer the technology and the managerial skills to these countries whichspeed up its growth and development, secondly it has helped in reducing the unemployment
6level, thirdly it has enhanced the productivity in these countries by employee the poor in themultinational companies’ factories.Furthermore, there is another important benefit which is the significant contributions to taxrevenue which come from multinational companies to the host countries (Scammell, 1980,pg.155).The question now, how these multinational companies has benefited their home counties?Indeed, it does benefit both host and home countries, for instance, the greater mobility of goodsand services has meant that more people have access to a greater range of goods across mostindustries, and at a lesser price (Anon, 2005, P.5).Here should not be forgotten that the generated profits go to the home countries.However, some argue that multinational companies has bad impact on the host countries forseveral reasons, for example, it transfers the profit it gains to the home; in addition, it ruins andexhausts the natural resources in the host countries, which have bad impact on the environmentand the environmental life, -this will be discussed later in more details-. However people alwayscomplain.Despite the fact, that the multinational companies have an important role in enhancingglobalization in term of free trade, they have done the contrary in term of fair trade, throughabusing the poor in some developing countries such as India and Bangladesh, by let them workwith very minimum wages and poor conditions, and in some situation they work for free againstproviding them with only food.Thus, is there is place for ethics in globalization? Or it just concerns of maximising profits in anymethod.Moreover, these multinational companies have become more powerful than some governmentsand have the ultimate decision.On the other hand, globalization has a good impact on small businesses; it helps small enterprisesin expanding their businesses through opening new markets, and making exports and importseasier. In addition, it allows these enterprises to get their goods without the need to travel abroad
7seeking new goods, this has done through the revolution of information technology (onlinetrading), which has reduced the cost.In short, globalization has enhanced trading relationships between countries by melting downalmost all barriers, which has speeded up and simplified the flow of goods and services, inaddition it has created good opportunities for international investments to flow to developingcountries, which has a remarkable impact on developing countries through stimulated them toimprove their products and upgrading their productivity..
8Globalization impact on banksGenerally, globalization has vast impact on the international financial system, particularly banks.Mainly, it has vital contribution in improving the financial system in developing countriesassociated with large benefits and new opportunity for developed countries.Historically, globalize the financial system began with the first oil shock, which providedinternational banks with fresh funds to invest in developing countries (Schmukler, & Sergio,2004, p.1), the oil shock has provided international banks with sufficient fund to cover theshortage of the liquidity.Due to the dramatic increase of oil prices this crisis had placed the rest of the world into currentaccount deficit with OPEC members (Hallwood&MacDonald, 1986:171) which mean that OPECmembers in developing countries had a massive surplus.Due to the lack of the investment experience on developing countries on that time, this surplushad deposited in foreign banks in developed countries, on the same time, the developingcountries were in developing process and there were vast investments opportunities, thus foreignbanks had reinvested this money in the developing countries.This foreign banks investment has had promoted the financial system in the developing countriesthrough transferring the technology and the experience.
9Another main benefit of financial globalization for developing countries is that” the developmentof their financial system, which involves more complete, deeper, more; stable and better-regulated financial markets” (Schmukler, & Sergio, 2004, p.4).This could be an example of how globalization has integrated the global economy and effectivelyin addition it had absorbed the impact of the crisis and contributed in promoting both developedand developing countries. Thus the oil era has helped in spread out the globalization.Yet, there is an important question should be conceder in the future which is; who has got themost benefit of this enormous money, the developing countries which is still developingcountries or the developed countries which had took this money (the oil) and “reinvested” in thedeveloping countries?Also globalization has created more financial opportunities for local borrowers and lenders and awidespread use of international financial intermediaries (Schmukler, & Sergio, 2004, p.1).Moreover, it has created more financial investment opportunities through advanced financialinstruments which allow better risk diversification within and across countries (Schmukler, &Sergio, 2004, p.1).In fact, revolution of technology and accessing information from wherever around the worldhas helped in reducing information asymmetry, which has reduced lending risks.From the concept “small village” or like we live in one room, globalization has speed upsimplify transferring money and capital flow around the world.In addition, Computerizations of banks has helped speed up the bank transactions.Moreover, ATMs (Automated Teller Machines) made bank transactions easier to common thanfew years back which has reduced the risk of carrying banknote, as well as it allows people towithdraw money from all over the world from any bank as they deal with their local banks.
10Although, globalization has vast impact on promoting banks and financial system, it has negativespillover effects in events of crises.The current financial crisis will be remembered as one of the negative impact of the globalizationon banks and financial system.While the crisis started as a result of the collapse of Lehman Brothers bank in the United State, ithad transferred very quickly to affect all banks and financial systems around the world as a resultof globalization. As the whole global financial system in the era of globalization works as onbody, thus it is not surprising that the collapse will affect other financial institutions as a result.Some argue, that allowing foreign banks to work into domestic markets usually concerns that,the competition from foreign firms will weaken domestic bank (Peek & Rosengren [n.d.], p.147).Thus, the question now, is the current financial crisis has put end to the financial globalization?To answer this question should be considered, why after the current financial crisis each countrystarted to put more regulation on its financial system, and started to what extent going back to thenationalism, by nationalize some big banks like what happened in the UK with RBS(The RoyalBank of Scotland) which meant the globalization represented in the capitalization has felt downin save the global financial system.
11Globalization impact on environmentEnvironment is the biggest loser of globalization.The Aggressive consumption is one of key features of globalization. Thus the rapid growth oftechnology, open markets, the availability of products with low cost and China, plus many otherglobalization elements associated with the massive consumption has enormous negative impacton the environment and the environmental life.The impact of the industrial revolution on the Human beings in guarantee standard of living, hasled to pollute the environment, which is harmful to human life and damages the globalenvironment.The majority of people argue that the revolution of transportations have simplified theMovement and the trade flows in term of exports and imports, but they do not realize how muchenvironmental problems it has created which damaged the planets and animals life and certainlyharmful the human body.On other hand, the advanced technology has developed an affordable and reliable supply ofenergy as an alternative power source to solve the world’s energy crisis such as the bio diesel(Green Power Corporation).In fact, the tragically activities of the multinational companies in addition to what they arecausing for climate and land, unfortunately, have harmful impact on the environment. Forexample, their exaggerated uses of natural resources have reduced the amount of land availablefor other animals and plants, which makes it difficult for some species to survive (BBCWebsite); also they are indirect reason for climate change.
12In addition, in the era of globalization, non-renewable energy resources and raw materials arebeing used up rapidly, which led to produce more waste which creates more pollution (BBCWebsite).
13Globalization impact on ordinary peopleTo understand how globalization has affected the ordinary people, just imagine what if yourgrand grandmother has come to the life again, what changes would she says.In fact, globalization has an incredible impact on the way we live and think. Furthermore,globalization has contributed in promoting all aspects of life, from education systems, healthcare; fighting poverty, creating jobs, spread out the meaning of the democracy particularly in thelate developed countries, human rights and the principle of equality between all nations ineverything, to the great change in cultures and identity whether its negative or positive.However, if what have written in the few lines above is true and the globalization has brought allthese benefits. Thus, what about Africa famine, Palestinian genocide from Israel, the rapidlyspreading of epidemics and civilizations conflict? All these sides should be considering to depthour understanding to the globalization.However, in era of globalization multinational companies has benefited the most from currentfree trade by creating more jobs in developing countries, transferring new technologies whichenhanced their productivity and upgrading the standard life.Furthermore, the growth in exports and imports which caused by a free trade agreements createsmore jobs in some courtiers, but on the same time it has also contributed to rising anunemployment level among ordinary people such as factories workers in many countries whetherin developing or developed countries, which has caused by the flows of bargain good (Scott,2003, p.2).Education has the lion share of globalization benefits. Globalization gives an equal chance foreach individual to improve his or her educational levels (Stromquist, 2005, p.12).Everyone evens the poor in developing world, has an easy access to the information andknowledge trough the new technology such as internet, satellites, and media. For instance, anyone with the era of globalization can read the newest researches and published paper fromwherever source around the world. In addition, revolution of transportation has shrunken the
14distance between countries, which help students to travel abroad easily to study what they areinteresting in at any university around the world which could not be available in their homeuniversities. Overall, levels of education have increased throughout the world (Stromquist, 2005,p.12).In globalization stage television programms are floating from all over the world to all countriesvia satellite. Thus, thousands of foreign –made programms are displaying in local television.These programms handle tow faces one is positive and the other could be negative.These programs are useful because it is allowing people to know and understand severalcultures; also it gives very and varies information and knowledge, which led to understand howother think, which has shrunken the gap between different cultures.Despite the fact that foreign –made programms give good and wide information it could bedamaging the local cultures because it is imposing the globalization culture (between practicesAmericanization culture), its well known that the United Sate of America and the great powers inthe west are dominating the media.However, this does not mean that the west culture is not good; this culture has countless positiveprinciples should be learned to the east and the reversal is right. But in some cases it threatensthe local identity for those countries especially for the new generations, and generally, no onewants to lose his identity. Furthermore, different identities and cultures have a vital role inenriching humanity and civilization.
15ConclusionIn conclusion, globalization has three main elements, first, revelation of technology andtransportation second, capitalization and the liberalization, third, the great powers associatedwith the multinational companies.The private sector has become the most important engine of economic growth and the publicsector has shrunk in importance and influence. Besides that the economic profile has been drivenby technology.In short, globalization has restructured the way we live, work, learn, trade and the relationshipsbetween people and countries, plus its contribution in contraction time and space.Generally, globalization is good, but it cannot success in the long run as long as it is dominatingthe great powers on the world.And finally globalization cannot be controlled, it is something we cannot end or start and no oneis strong enough to hold up only its benefits..
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