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2009-11-22 BACK
Globalization or Deglobalization
Globalization or Deglobalization This article originally appeared in the Texarkana Gazette on November 22, 2009 Dr. Mohammed Ashraful Haque, Professor of Finance, Texas A&M-Texarkana College of Business The word "globalization" has become a very popular term over the last few years. It is used over the last few decades to describe emerging business practices dealing with the activities of the firms of the world within and between nations. It will continue to be the dominant practice for the next century. Because of this, we see a few key developments and trends have emerged in the world economy because of increased globalization. The developments are the emergence of globalized financial markets, the addition of the Euro as a non-national global currency, trade liberalization and economic integration within the global community, and large scale privatization of state-owned enterprises in many countries of the world, including Eastern Europe. The rapid growth and integration of capital and financial markets were due to government action from major countries. They began to deregulate the capital and financial markets. In 1980 Japan decided to deregulate the foreign exchange market and in 1985 a small number of foreign brokerage firms were admitted to the Tokyo stock exchange. The London stock exchange followed suit in 1986 by admitting foreign brokerage firms as full members. In 1975 the United States eliminated fixed brokerage commissions and London followed with the "Big Bang" in October 1986 by eliminating fixed brokerage commissions. The deregulation of the financial and capital markets led to increased competition in financial services, leading to new innovations such as currency futures and options, multicurrency bonds, international mutual funds, country funds, exchange traded funds and foreign stock index futures and options. The growth and emergence of the global financial markets were facilitated by advances in computer and telecommunications technology. Globalization has both advantages and disadvantages. The impact of globalization has been to compel each nation to compete in the world market. This gives us a movement towards one global price for goods and services. This is beneficial for consumers but not so helpful to some industries that cannot compete in the world market, such some U.S. manufacturing industries. However, globalization has helped many emerging economies. This is an opportunity for U.S. companies to be efficient and learn to survive global competition. This will eventually benefit U.S. consumers who can count on better quality products at lower prices. So, the consumer benefit has been the biggest winner of globalization and inefficient industries have been the biggest loser. Free trade always helps consumers because it allows each nation to produce what it can produce most efficiently and effectively. This is known as the theory of comparative advantage. So, if we want to benefit our consumers, then globalization is the answer. Or, if we want to protect inefficient industries, then we should choose protectionists strategies aimed at de-globalization. The objective is to ultimately help consumers and make domestic industries more competitive. If an industry cannot be productive and compete in the free market, it deserves to be out of business and to make opportunities to use that capital for efficient industries and companies that can benefit the consumer. Just imagine what globalization has done to the electronic industry! Consumers can buy a big screen color TV for under $1000. About twenty years ago a 25" color TV cost over $1500. U.S. consumers can buy more fuel efficient and mechanically sound automobiles compared to fifteen to twenty years ago. The theory of comparative advantage states that each country should specialize in producing things that it can produce most efficiently and most economically. The U.S. auto industry is an example of an inefficient industry. It must either compete globally with other auto manufacturers or get out of business. Competing globally enhances the performance of the domestic industry. As a nation we are lagging behind in our domestic elementary and high school education. High school students in many countries including the Asian countries of Japan, India, and Korea score much higher in math and science. A mediocre education should not acceptable in the U.S. If we are to be a leader in global affairs, we must be prepared to compete in all spheres of life whether it is education or production of goods and services. Protectionism is not the answer. It is detrimental and benefits the protected industries and encourages inefficient operation. Globalization also requires the understanding of other cultures and history. In order to do business in other countries our human resources must be competent to do business in other countries efficiently, conforming to and understanding of local needs and expectation. Globalization can have a positive impact on our society and benefit society and consumers as a whole. Dr. Haque is Professor of Finance at Texas A&M University-Texarkana and can be reached at Mohammed.Haque@tamut.edu.
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Globalization or Deglobalization
Globalization or Deglobalization This article originally appeared in the Texarkana Gazette on November 22, 2009 Dr. Mohammed Ashraful Haque, Professor of Finance, Texas A&M-Texarkana College of Business The word "globalization" has become a very popular term over the last few years. It is used over the last few decades to describe emerging business practices dealing with the activities of the firms of the world within and between nations. It will continue to be the dominant practice for the next century. Because of this, we see a few key developments and trends have emerged in the world economy because of increased globalization. The developments are the emergence of globalized financial markets, the addition of the Euro as a non-national global currency, trade liberalization and economic integration within the global community, and large scale privatization of state-owned enterprises in many countries of the world, including Eastern Europe. The rapid growth and integration of capital and financial markets were due to government action from major countries. They began to deregulate the capital and financial markets. In 1980 Japan decided to deregulate the foreign exchange market and in 1985 a small number of foreign brokerage firms were admitted to the Tokyo stock exchange. The London stock exchange followed suit in 1986 by admitting foreign brokerage firms as full members. In 1975 the United States eliminated fixed brokerage commissions and London followed with the "Big Bang" in October 1986 by eliminating fixed brokerage commissions. The deregulation of the financial and capital markets led to increased competition in financial services, leading to new innovations such as currency futures and options, multicurrency bonds, international mutual funds, country funds, exchange traded funds and foreign stock index futures and options. The growth and emergence of the global financial markets were facilitated by advances in computer and telecommunications technology. Globalization has both advantages and disadvantages. The impact of globalization has been to compel each nation to compete in the world market. This gives us a movement towards one global price for goods and services. This is beneficial for consumers but not so helpful to some industries that cannot compete in the world market, such some U.S. manufacturing industries. However, globalization has helped many emerging economies. This is an opportunity for U.S. companies to be efficient and learn to survive global competition. This will eventually benefit U.S. consumers who can count on better quality products at lower prices. So, the consumer benefit has been the biggest winner of globalization and inefficient industries have been the biggest loser. Free trade always helps consumers because it allows each nation to produce what it can produce most efficiently and effectively. This is known as the theory of comparative advantage. So, if we want to benefit our consumers, then globalization is the answer. Or, if we want to protect inefficient industries, then we should choose protectionists strategies aimed at de-globalization. The objective is to ultimately help consumers and make domestic industries more competitive. If an industry cannot be productive and compete in the free market, it deserves to be out of business and to make opportunities to use that capital for efficient industries and companies that can benefit the consumer. Just imagine what globalization has done to the electronic industry! Consumers can buy a big screen color TV for under $1000. About twenty years ago a 25" color TV cost over $1500. U.S. consumers can buy more fuel efficient and mechanically sound automobiles compared to fifteen to twenty years ago. The theory of comparative advantage states that each country should specialize in producing things that it can produce most efficiently and most economically. The U.S. auto industry is an example of an inefficient industry. It must either compete globally with other auto manufacturers or get out of business. Competing globally enhances the performance of the domestic industry. As a nation we are lagging behind in our domestic elementary and high school education. High school students in many countries including the Asian countries of Japan, India, and Korea score much higher in math and science. A mediocre education should not acceptable in the U.S. If we are to be a leader in global affairs, we must be prepared to compete in all spheres of life whether it is education or production of goods and services. Protectionism is not the answer. It is detrimental and benefits the protected industries and encourages inefficient operation. Globalization also requires the understanding of other cultures and history. In order to do business in other countries our human resources must be competent to do business in other countries efficiently, conforming to and understanding of local needs and expectation. Globalization can have a positive impact on our society and benefit society and consumers as a whole. Dr. Haque is Professor of Finance at Texas A&M University-Texarkana and can be reached at Mohammed.Haque@tamut.edu.
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