A paper presented for
BA570 International Business at
Eastern Oregon University
June 9, 2009

Hill defines globalization as, "The shift toward a more integrated and interdependent world economy" (2009, p. 7). Hill further indicates that, from a market standpoint, historically distinct and separate national markets are replaced by barrier free trade that diminishes or eliminates distinctions based on nationality. In a more general sense, "globalization" refers to the process of any shift from local to worldwide  ("Globalization," 2009). Globalization has resoundingly established itself and its continuation is inevitable; thus, we must continue to steer its trajectory in a positive direction.

In order to understand what globalization is, we should examine why globalization exists. Several factors have contributed to the shift toward globalization. Hill (2009) indicates that the post-war lowering of trade barriers was the first step toward globalization. This was a reaction to the financial devastation from the world wars of the 20th century (Cran, 2002). Trade barrier reduction was later followed by technological developments that made globalization a reality. According to Hill, these technology developments included microprocessors, telecommunication, the Internet, and transportation technology.

Hill understates the magnitude of contribution that computers and media have made on globalization, especially in the broad sense of the concept. By contrast, Friedman (2006) rightly emphasizes the importance of computers with an in depth and magnificent examination of the influence of technology:

While the fall of the wall eliminated a physical and geopolitical barrier--one that held back information, stood in the way of shared standards, and kept us from having a view of the world as a single unified community--the rise of Windows-enabled PC, which really popularized personal computing, eliminated another hugely important barrier: the limit on the amount of information that any single individual could amass, author, manipulate, and diffuse. . . .

It is impossible to exaggerate how important this was to the flattening of the world. (p. 54-55)

The US and global economy began expanding rapidly in the 1990s, largely paralleling the equally robust increase in computer purchases and use in households and businesses. The popularity of computer use spawned the development of digital software and information management. Computers and their applications not only stimulated the global economy from their sales, they also lead to efficiencies in the workplace, communication, information availability, and many other benefits that were, as Friedman argues, the main driving force for globalization. It was during the computer surge of the 1990s that Friedman argued in The Lexus and The Olive Tree (1999) that the world was engaged in a struggle between technology advance and a desire to retain identity and tradition. Within just a view years, Friedman authored The World is Flat (2006), in which he lauded the winning-out of technology that triggered full-scale globalization. Thus, Friedman's two books show how quickly globalization moves. 

Whereas lowering trade barriers led to the globalization of the economy, it truly was technology that allowed for multifaceted globalization. These computer- and media-driven networks allowed for quick and accessible worldwide communication. Friedman (2006) expounds on this in the first 4 of his "Ten forces that flattened the world:"

1. 11/9/89: The new age of creativity: When the walls came down and the Windows went up: The emergence of computers, software, and the Internet.
2. 8/9/95: The new age of connectivity: When the web went around and Netscape went public: The web browser as a standard reader for any content presented on an openly-publishable world wide web of information. 
3. Work flow software: The proliferation of software tools and standards allows for focusing on the product and creativity instead of counter productive struggles between companies over applications.
4. Uploading: Harnessing the power of communities: Development of creative commons and open source initiatives that allow for free flow of ideas and work, all freely available for everyone to benefit.

Because of the development of this expansive network that transcends geographic boundaries, media and communication have become the driving force that brings us together in the world. The markets have come together just as our lives have come together. In The Rise of the Network Society, Castells (2000) argues, much like Friedman later, that we are no longer an information society but a network society the operates horizontally rather than vertically. Friedman (2006) refers to the network in the following statement:

Globalization 2.0 was really the era of mainframe computing, which was very vertical--command-and-control oriented, with companies and their individual departments tending to be organized in vertical silos. Globalization 3.0, which is built around the convergence of the ten flatteners, and  particularly the combination of the PC, the microprocessor, the Internet, and fiber optics, flipped the playing field from largely top-down to more side to side. And this naturally fostered and demanded new business practices, which were less about command and control and more about connecting and collaborating horizontally. (p. 208)

There have now doubt been several contributions to globalization such as international regulating bodies, the financial collapse of communism, the rise of the United States, but computer and Internet technology has undoubtedly allowed the world to globalize.

Benefits

 A major benefit of globalization is the diminishing potential for war. In fact, the shift toward globalization was spurred by the devastating results of world wars (Hill, 2009). The major world powers reaction after World War II took place at Bretton Woods, when they established the groundwork for globalization of the economy. Friedman (2006) argues in his "Dell Theory of Conflict Prevention" that globalization will prevent war because multinationals corporations are financially vested internationally and the financial risk of war is too high for governments to risk. War would interrupt an all-important international supply chain. Since Bretton Woods, wars involving nations with developed economics are much less common and we have not seen the full scale wars that characterized most of the decades before globalization. The current war ravaged regions are mostly in the least developed nations such as those of Africa and Southeast Europe. Thus, the evidence so far supports Friedman's theory. Money may not be the root of all evil! Peace is a resoundingly positive benefit of globalization, even if the reason for it is merely financial.

Another globalization benefit on par with peace is the proliferation of knowledge. As noted earlier in this paper, globalization developed because computers, software, and the Internet technology allowed more worldwide connectedness. Today we have a nearly unfathomable amount of information readily available worldwide and the ability to disseminate information is quick and easy. Furthermore, Hill (2009) argues that outsourcing and importing by rich nations helps facilitate knowledge gain in developing countries. As their economies improve, access to education and communication technology come along with it. Still many countries in Africa and South America do not have access to this network of knowledge. Because globalization exists, there are coordinated efforts to help developing countries gain access such as through loans from the World Bank and private efforts like the Massachusetts Institute of Technology project to deliver hard drives full of college course information to Africa (Pope, 2007).

A good example that characterizes the new era of horizontal collaboration and knowledge is the Wikipedia (www.Wikipedia.org) community. Currently there is a good presentation for the entry on "globalization," with sections titled "Pro-globalization" and "Anti-globalization" ("Globalization," 2009). The information provided there was presented by anyone that wanted to contribute. Wikipedia serves as a model that characterizes globalization in the broad sense of the term. The Wikipedia example can be taken even further as a microcosm of globalization with recent demonstrations on threats to freedom. For example, China ("China unblocks Wikipedia," 2006) and Iran (Tait, 2006) has blocked or censored Wikipedia for extended periods of time. These kind of information blocks, or firewalls, can serve as virtual walls to globalization similar to the Berlin wall.

Current Economic "Crisis"

While the aforementioned benefits are positive, globalization is by no means a panacea for world problems. The financial slump in America started at the end of 2007 ("Surviving the slump," 2009) and continued to decline more sharply in 2008 when it became regarded as a crisis that persists today. The reasons for this crisis are uncertain, but the key point for this paper is that it that it started primarily in America. While America will have to deal with domestic financial problems during this crisis the problem is that, because of globalization, the rest of the world is hit even harder by America's problems. This is one real drawback of globalization, the world dependence on prosperity of a single nation's economy because it dominates the world economy.

An interdependent worldwide market exposes itself to an isolated event that can cascade throughout the world. This is of special concern for nations that would otherwise not be effected by economic problems in another country under a non-global system. For example, bad financial decisions or luck (like a natural disaster) can take place in one country and have a more drastic effect in another country that has no control or connection with the event. For example the economic crisis in Asia, partially caused by over speculation and governmental cronyism, had a negative effect worldwide (Fiedman, 1999; Hill, 2009). Because much of the world economy hinges on the United States, a tenuous economic situation occurs in most countries throughout the world, especially poor developing nations. 

Perhaps globalism is more to blame for giving us a false expectation that affluence is permanent. The financial success we have experienced in the last few decades made the 2008 setback appeared more devastating from a relative standpoint. Globalization was working so well it had set the bar too high. Were it not for globalization, we would not been as well off today, even with the economic collapse. So, perhaps the "crisis" is merely an issue of perception. What we are experiencing now is definitely is not as devastating as events like the oil embargo in the 80s, the world wars, or the Great Depression. What we had established through the success of globalization was a buffer. We are only at fault for our complacency and expectation (or faith) that we would indefinitely continue to enjoy unbridled economic gain. An example of our easily-triggered misconceptions occurred a few months before the economic crisis when Americans were hysterical about an increase in gas prices which many believed had reached "crisis" status. This hysteria was instantly quelled by and diverted to the financial downturn.

What we are experiencing today is simply a reduction in economic growth, perhaps rather temporary. It is difficult to find anything about globalization to blame for our current "crisis." Fortunately, the businesses that survive will come out of this recession leaner ("Surviving the slump," 2009). In turn, the lessons learned from this first challenge to globalization should help us improve. Perhaps in the future, economies will become more equitable so that the effects of localized problems in one nation have a less drastic effect worldwide.

There are certainly other pitfalls of globalization such as a growing disparity between the rich and poor, humanitarian concerns for cheap labor, and environmental problems but these are growing pains from globalization still being in its infancy. These current shortcomings can, and are, being rectified by collective efforts of citizens of the world, an overall increase in economic prosperity and knowledge, and global watchdog organizations.

Global Organizations

There are four major international organizations that oversee global economic concerns: the World Trade Organization (WTO), International Monetary Fund (IMF), the World Bank, and the United Nations (UN) (Hill, 2009). The United States government is also a de facto regulating organization.

The role of global organizations is to control and coordinate the economy, much in the same way that governments exert control of their national economies according to the John Maynard Keynes economic philosophy paradigm. The WTO regulates trade and resolves disputes among its 153 participating member nations. These nations account for 95 percent of world trade ("World Trade Organization," 2009), which demonstrates the widespread authority of the WTO. The IMF seeks to oversee the global financial system. The IMF is located near the Capital of the United States. Both the WTO and IMF have been criticized for bias toward the richest countries.

In light of the recent financial crisis, the importance of the role of the WTO and IMF are increasingly apparent. While these organizations focus on the financial aspects of globalism, it important that organizations control other aspects of globalization. This is where the The United Nations and US government step in as global watchdogs. The UN seeks to establish peace, harmony, and friendly relations among nations. Further stated in its charter (United Nations, 1945), its role in globalization includes solving economic problems but also social, cultural, and humanitarian problems such as freedom and respect for human rights.

The United States government basically established all of the above organizations and many are based in the US. While these organizations now have a more international influence, the US government still controls much of the global economy and technology. The US government controls global markets by controlling availability of the dollar, which is the most widespread currency worldwide. Furthermore, the US government controls other major influences such as tariffs, key international agreements (e.g. NAFTA, DR-CAFTA), multinationals, communication (e.g. FCC), the Internet (Friedman, 2006; "Internet Assigned Numbers Authority," 2009), and the trade deficit.

All of the aforementioned organizations are important for maintaining order in the continued development of globalism. In many regards the existence of a number of organizations helps to serve as a checks-and-balances system of world governance. This is especially important in the current economic situation. An example of control in action is the recent United States and European Union reaction to set up safeguards to protect against future economic crises ("The regulatory," 2009). Governments are heavily involved in control of the banking industry, and this involvement will increase because of the key role banks play in stimulating the global economy through lending and investment ("Rebuilding the banks," 2009). In short, global and international organizations should continue to oversee the global economy to serve as a steering mechanism consistent with Keynes economic philosophy that has dominated since the Great Depression (Cran, 2002).

Multinational Corporation Regulation

The multinational organization operates on the premise of financial growth. This is a faulty premise for globalization to operate due to the lack of ethical concern. Ideally, we would hope that ethical responsibility would be practiced by multinationals so a hands-off approach could be taken to allow market forces to play out. However, this is not the case. Furthermore, globalization is about more than just economic concerns, so multinationals should not be given free reign.

The role of international control has been taken by the United Nations and the United States, which serve respectively as the de jure and de facto governing bodies of the world. However, in the spirit of horizontal shift of control, world citizens must education themselves and others on ethical conduct. Perhaps some of these ills will be rectified if Friedman's (2006) belief that globalization will move from command-and-control oriented toward horizontally oriented connecting and collaborating. This will include an emphasis on justice, honesty, responsibility, and beneficence. This emphasis should pervade also in business whereby multinational leaders can emphasize and demonstrate moral responsibility. Multinationals that demonstrate good ethical behavior will gain more financially if they are scrutinized by international governing bodies and the people.

Conclusion

If Friedman (1999) is correct that globalization has established an entirely new international system, then it is likely that globalization is permanent. Fretting about existence of globalization may be futile. Instead, the people of the world should devote their attention to making the world system better. Because of technology, we certainly have the capability to mobilize in this regard. Friedman (2006) eloquently speaks of a great platform that characterizes globalization:

The convergence of the ten flatteners has created a whole new platform. It is a global, web-enabled platform for multiple forms of collaboration. This platform enables individuals, groups, companies, and universities anywhere in the world to collaborate--for the purpose of innovation, production, education, research, entertainment, and alas, war-making--like no creative platform ever before. This platform now operates without regard to geography, distance, time, and, in the near future, even language. Going forward, this platform is going to be the center of everything. Wealth and power will increasingly accrue to those countries, companies, individuals, universities, and groups who get three basic things right: the infrastructure to connect with this flat-world platform, the education to get more of their people innovating on, working off of, and tapping into this platform, and, finally, the governance to get the best out of this platform and cushion its worst side effects.

No, not everyone has access yet to this new platform, this new playing field. No, when I say the world is being flattened, I don't mean we are all becoming equal. What I do mean is that more people in more places have the power to access the flat world platform--to connect, compete, collaborate, and, unfortunately, destroy--than ever before. (p. 205-206)

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