What is Globalization Anyway?

Alex Gray

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Globalization – a phenomenon that has defined the world's economy in recent decades –
is under pressure. As Donald Trump prepares for his tenure in the White House, he talks of
dismantling a whole history of globalized trade that he sees as having had a catastrophic effect
on the global economy.
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His strategy so far has involved tearing up established trade agreements, such as NAFTA,
and burying others that are yet to get off the ground. One of these is the Trans-Pacific
Partnership, which he has slammed as “a potential disaster for our country.” The incoming
president's pledge to "make America great again" is based partly on challenging countries such
as China by limiting imports and boosting exports.
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But the backlash against globalization is not confined to the United States. In the United
Kingdom, the Brexit vote saw a majority of citizens prioritize immigration controls over
membership of the world’s biggest trading bloc. Those who wished to remain in the EU accused
those who wished to leave off being protectionist, even racist – but much of the concern over
immigration stemmed from fears (real or imagined) over the number of new people arriving on
British shores and what it would mean for jobs, the economy and British life as they knew it.
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If globalization is facing a fundamental threat, perhaps now is a good time to remind
ourselves of exactly what it is.

How globalization works

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In simple terms, globalization is the process by which people and goods move easily across
borders. Principally, it's an economic concept – the integration of markets, trade and investments
with few barriers to slow the flow of products and services between nations. There is also a
cultural element, as ideas and traditions are traded and assimilated.
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Globalization has brought many benefits to many people. But not to everyone.

Storm in a coffee cup

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To help explain the economic side of globalization, let's take a look at the well-known
coffee chain Starbucks.
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The first Starbucks outlet opened its doors in 1971 in the city of Seattle. Today it has
15,000 stores in 50 countries. These days you can find a Starbucks anywhere, whether Australia,
Cambodia, Chile or Dubai. It's what you might call a truly globalized company.
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And for many suppliers and jobseekers, not to mention coffee-drinkers, this was a good
thing. The company was purchasing 247 million kilograms of unroasted coffee from 29 countries.
Through its stores and purchases, it provided jobs and income for hundreds of thousands of
people all over the world.
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A farmer holds organic coffee beans at a coffee field in the mountains of Peru's central
jungle city of Chanchamayo August 11, 2008. Coffee production in Peru, the world's largest
exporter of organic coffee, is booming as growers focus on quality, develop niche markets and
find ways around walls that can block growth.
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But then disaster struck. In 2012, Starbucks made headlines after a Reuters investigation
showed that the chain hadn't paid much tax to the UK government, despite having almost a
thousand coffee shops in the country and earning millions of pounds in profit there.
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As a multinational company, Starbucks was able to use complex accounting rules that
enabled it to have profit earned in one country taxed in another. Because the latter country had
a lower tax rate, Starbucks benefited. Ultimately, the British public missed out, as the government
was raising less tax to spend on improving their well-being.

How did globalization happen?

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We might think of globalization as a relatively new phenomenon, but it’s been around for
centuries.
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One example is the Silk Road, when trade spread rapidly between China and Europe via
an overland route. Merchants carried goods for trade back and forth, trading silk as well as gems
and spices and, of course, coffee. (In fact, the habit of drinking coffee in a social setting originates
from a Turkish custom, an example of how globalization can spread culture across borders.)
What drives it?

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Globalization has speeded up enormously over the last half-century, thanks to great leaps
in technology.
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The internet has revolutionized connectivity and communication, and helped people share
their ideas much more widely, just as the invention of the printing press did in the 15th century.
The advent of email made communication faster than ever.
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The invention of enormous container ships helped too. In fact, improvements in transport
generally – faster ships, trains and airplanes – have allowed us to move around the globe much
more easily.

What's good about it?

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Globalization has led to many millions of people being lifted out of poverty.
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For example, when a company like Starbucks buys coffee from farmers in Rwanda, it is
providing a livelihood and a benefit to the community as a whole. A multinational company's
presence overseas contributes to those local economies because the company will invest in local
resources, products, and services. Socially responsible corporations may even invest in medical
and educational facilities.
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Globalization has not only allowed nations to trade with each other, but also to cooperate
with each other as never before. Take the Paris Agreement on Climate Change, for instance,
where 195 countries all agreed to work towards reducing their carbon emissions for the greater
global good.
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This chart, however, shows that global attitudes towards globalizing forces aren't all that
good. It shows that, in fact, in all but a couple of countries polled, people believe life was better
in the old days.

What's bad about it?

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While some areas have flourished, others have floundered as jobs and commerce move
elsewhere. Steel companies in the UK, for example, once thrived, providing work for hundreds of
thousands of people. But when China began producing cheaper steel, steel plants in the UK closed
down and thousands of jobs were lost.
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Every step forward in technology brings with it new dangers. Computers have vastly
improved our lives, but cyber criminals steal millions of pounds a year. Global wealth has
skyrocketed, but so has global warming.
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While many have been lifted out of poverty, not everybody has benefited. Many argue
that globalization operates mostly in the interests of the richest countries, with most of the world's
collective profits flowing back to them and into the pockets of those who already own the most.
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Although globalization is helping to create more wealth in developing countries, it is not
helping to close the gap between the world's poorest and richest nations. Leading charity Oxfam
says that when corporations such as Starbucks can legally avoid paying tax, the global inequality
crisis worsens.
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Basically, done wisely (in the words of the International Monetary Fund) globalization
could lead to "unparalleled peace and prosperity". Done poorly, "to disaster".

Source: Gray, A. (2017). What is globalization anyway? World Economic Forum. Retrieved from
https://www.weforum.org/agenda/2017/01/what-is-globalization-explainer/