Globalization in the Economy along with its Impacts

Globalization in the Economy along with its Impacts
Globalization in the Economy: Understanding, Positive & Negative Impacts is a process of economic and trade activities, where countries throughout the world become a market force that is increasingly integrated with no obstacles to the country's territorial boundaries.

Understanding Globalization
Globalization is a term that has a relationship with increasing interconnectedness and dependence between nations and people throughout the world through trade, investment, travel, popular culture, and other forms of interaction so that the boundaries of a country can be.
The word "globalization" is taken from the word global, which means universal. Globalization does not yet have an established definition, except for just a definition of work (working definition), so it depends on which side one sees it. Globalization is defined as all processes that refer to the unification of all citizens of the world into a global community group. Some view that globalization is a social process, or historical process, or a natural process that will bring all nations and nations of the world increasingly attached to one another, realizing a new order of life or co-existence unity by removing geographical boundaries, economy and culture of the community.
Economic globalization is a process of economic activity and trade, in which countries around the world become a market force that is increasingly integrated with no obstacles to the country's territorial borders. Economic globalization requires the removal of all restrictions and barriers to the flow of capital, goods and services. When economic globalization occurs, the boundaries of a country will become blurred and the link between the national economy and the international economy will be even tighter. Globalization of the economy on the one hand will open up market opportunities for products from domestic to international markets competitively, on the contrary it also opens opportunities for the entry of global products into the domestic market.

The Characteristics of Globalization
The following are some of the characteristics that indicate the growing phenomenon of globalization in the world.
Changes in the concept of space and time. The development of items such as mobile phones, satellite television and the internet shows that global communication is happening so fast, while through mass movements such as tourism allows us to feel many things from different cultures.
Economic markets and production in different countries become interdependent as a result of growing international trade, increasing influence of multinational companies, and the dominance of organizations such as the World Trade Organization (WTO).
Increasing cultural interaction through the development of mass media (especially television, film, music, and international news and sports transmission). at this time, we can consume and experience new ideas and experiences about things that cross a wide range of cultures, for example in the fields of fashion, literature and food.

Increased joint problems, for example in the environmental sector, multinational crises, regional inflation and others.
Kennedy and Cohen concluded that this transformation has brought us to globalism, a new awareness and understanding that the world is one. Giddens asserted that most of us are aware that we actually take part in a world that has to change uncontrollably, which is characterized by tastes and interests about the same thing, changes and uncertainties, and possible realities. Correspondingly, Peter Drucker mentions globalization as an age of social transformation.

Global Capitalism
Global capitalism is an effort to gain profits and accumulate capital without borders or barriers in the form of the state. In its development, global capitalism has become part of the daily life of some people in various parts of the world. For example in the use of information and communication technology, a person will feel something is missing if one day does not see TV, read the newspaper, or read e-mail. With this information and communication technology, one can easily move thousands and millions of dollars across national borders in seconds by simply pressing the Personal Computer button.
This global capitalism also changes the way people see things. For example, money is not only a medium of exchange but also a commodity like other commodities. The existence of a profession of foreign exchange traders proves this. Furthermore, the money that is usually seen as paper sheets, in the hands of financial institutions is now developing into more sophisticated forms such as bonds, stocks, commercial notes, etc. and the transactions that they do are not based on the present (now), but can also be transactions for the future. So you can imagine how complicated the velocity of money in this world.

The development of increasingly globalized capitalism can encourage various new conditions such as:
The creation of various innovations that gave rise to existing products. This condition causes an abundance of products at relatively cheaper prices, thereby increasing competition.
The relocation of multinational companies to take advantage of a country's comparative advantage, in order to win the competition. For example relocation of labor-intensive industries to get jobs with lower wages. In this process a variety of multinational companies emerged, namely companies with branches in various countries.
The flow of internationalization and capital turnover which is very fast which penetrates the boundaries of time and space. This revolving capital moves not only in productive sectors but also in speculative ones.
The formation of a new world order driven by international institutions and international forums such as the IMF, World Bank, WTO, and so forth. Simultaneously these international institutions and forums are campaigning and directing the world towards a new policy framework that supports the liberal regime and global free trade. The rules of liberalization, deregulation, and privatization are rife throughout the world.
From those who hold a negative view, consider that globalization is not of much benefit or even detrimental. Investments in the form of foreign investment will drain the resources owned by a nation with the greatest benefits that are not enjoyed by the nation.
In addition to the negative views of global capitalism, there is also a positive outlook. This view basically states that foreign investment is considered to be able to allow access to technology, management, and marketing. In addition, capital flows also make it possible to close the gap between savings and investment, thereby enabling higher economic growth.

Capitalism in the World
The understanding of capitalism that we expect should be accompanied by a requirement that everything must function socially. In other countries that are very and very capitious, capital is always made to function socially through taxation, instruments of distribution of wealth and income, social security systems, labor systems and many other devices, regulations, institutions and so on, which make capital social functioning. The social function does not reduce the fact that our economy is based on capitalism.
Individual property rights are recognized and their use must not conflict with the interests of the community. So that in the end the potential, initiative and creation of every citizen can develop fully within limits that do not harm the public interest. So far it can be said that the world has entered into global capitalism. In the pre-crisis period the role of foreign investment (PMA) tended to increase. The bigger problem with the presence of foreign capital in the world is whether the overall benefits obtained by foreign investors in the world are shared equally between foreign investors and the nation of the world.
It is always said that foreign capital brings in capital, technology transfer, management capability transfer and job creation. The above facts give lessons that global capitalism opens opportunities to develop the economy. However, global capitalism can also damage the world economy.

Impact of Globalization

Impact of Globalization
Globalization for the world nation where the people have multi ethnicity and multi culture creates difficult challenges that can threaten the integrity of the nation and the nation. The first challenge is the pressures that come from outside both in the form of economic, political and cultural. Dependence on international economic forces causes the world nation to not be able to let go of these forces, despite the fact that what the world nation gets from these dependencies is not always sweet.
Economic dependence will spread to political dependence. The second challenge is the emergence of a tendency to strengthen groups based on ethnicity or ethnicity in society. The strengthening of groups based on ethnicity is not impossible to make the oath of youth "one homeland one nation and one language" remain a mere historical document. Dissatisfaction with community groups over the policy of the central government will easily and immediately lead to the threat of demands for "independence" from the unitary state of the World Republic.

According to Tanri Abeng, concrete manifestations of economic globalization take place in the following forms:
Globalization of production, in which companies produce in various countries, with the aim that production costs become lower. This is done either because of low labor costs, cheap import duties, adequate infrastructure or because of a conducive business and political climate. The world in this case is the location of global manufacturing.

Globalization of financing. Global companies have access to obtain loans or make investments (either in portfolio or direct) in all countries in the world. For example, PT Telkom in expanding its telephone lines, or PT Jasa Marga in expanding the toll road network, has utilized a BOT (build-operatetransfer) financing system with international business partners.
Globalization of the workforce. Global companies will be able to utilize workers from all over the world according to their class, such as the use of professional staff drawn from workers who already have international experience or unskilled labor that is usually obtained from developing countries. With globalization, the movement will become easier and free.
Globalization of information networks. The people of a country easily and quickly get information from countries in the world because of technological advances, including through: TV, radio, print media, etc. With an increasingly advanced communication network has helped expand markets to various parts of the world for the same goods. For example: KFC, levi’s jeans, or hamburgers hit the market everywhere. As a result, the tastes of the world community - both those who live in cities or in villages - lead to global tastes.
Trade Globalization. This is manifested in the form of reduction and uniformity of tariffs and the elimination of various non-tariff barriers. Thus trading and competition activities become faster, tighter, and fair.

Globalization in the Economy
The Impact of Globalization in the Economy, Globalization provides many choices of the products we want, which of course are adapted to the needs and prices we can afford. For example, we can compare the price of a shoe with a particular brand, both in terms of quality and price we want. Globalization has brought urban and rural communities into a consumer society. Things that need to be considered from the adverse effects of globalization, namely if the image (image) of foreign products is always better than domestic products will be fatal. This failure will be a boomerang for domestic products which of course will be unable to compete, both in terms of quality and quantity of products produced. How not, we are always behind the technology used compared to foreign industrial countries that are more advanced. Not to mention that human resources are on average lower quality than industrial countries (developed countries).

Positive Impacts of Economic Globalization
In this impact the opening of the international market, opportunities for employment are more open and the country's foreign exchange also increases. That way it can improve the nation's economy so that it will advance and enhance a sense of nationalism towards the nation and state, the following positive effects of globalization in the economic field are:
The market is very open for export products (with a note that world export products can compete in the international market), thus the opportunity for the world authorities is very open in creating quality products that are needed by world markets.
Easy to access investment capital from abroad.
It is easy to get goods that are needed by the community and not yet produced in the world.
Event events will increase so as to be able to open up employment opportunities and also become a venue for the promotion of World products.
With the existence of tangible forms of economic globalization, globalization certainly has an impact on people's lives in the form of both positive and negative impacts. Positive impacts of economic globalization include:
Global production can be increased This view is consistent with David Ricardo's 'Comparative Advantage' theory. Through specialization and trade the factors of world production can be used more efficiently, world output increases and society will benefit from specialization and trade in the form of increased income, which can further increase spending and savings.

The Negative Impact of Economic Globalization

The Negative Impact of Economic Globalization
In this case the elimination of love for domestic products because many foreign products circulating in the World. The negative impact on the nation's generation is a lifestyle that tends to imitate western culture. The negative impact of globalization also causes social inequality between the rich and the poor due to free competition.
This can lead to disputes between the rich and the poor. In addition, another negative impact is the formation of individualism that causes a sense of ignorance to others even to the nation, following the impact of globalization in the economic field, namely:
Increasing the prosperity of people in a country Freer trade allows people from various countries to import more goods from abroad. This causes consumers to have more choices of goods. In addition, consumers can also enjoy better goods at lower prices.
Expanding markets for domestic products Freer foreign trade allows each country to obtain a much wider market than the domestic market.
Can get more capital and better technology capital can be obtained from foreign investment and especially enjoyed by developing countries because of the problem of lack of capital and experienced experts and educated staff mostly faced by developing countries.
Providing additional funds for economic development Industrial sector development and various other sectors are not only developed by foreign companies, but mainly through investments made by domestic private companies. These domestic companies often need capital from banks or the stock market. funds from abroad, especially from developed countries that enter the money market and the domestic capital market can help provide the needed capital.

The entry of foreign workers
The loss of the world product market due to losing competition with foreign products
Businesses in the world will die because many imported products in the world market
In addition, economic globalization also has a negative impact on the lives of the world's people including:
Inhibiting the growth of the industrial sector, One of the effects of globalization is the development of a freer foreign trade system. This development has caused developing countries to no longer be able to use high tariffs to provide protection to emerging industries (infant industry). Thus, freer foreign trade creates obstacles for developing countries to advance the domestic industrial sector more quickly. In addition, the dependence on industries owned by multinational companies is increasing.
Worsening the balance of payments of globalization tends to increase imported goods. Conversely, if a country is unable to compete, then exports do not develop. This situation can worsen the balance of payment conditions. Another adverse effect of globaliassi on the balance of payments is that net payments for factor income from abroad tend to experience a deficit. Increased foreign investment causes the flow of investment payments (income) abroad to increase. An underdeveloped export can have a negative impact on the balance of payments.

The financial sector is increasingly unstable One of the important effects of globalization is drainage
investment (capital) portfolio that is increasingly large. This investment mainly includes the participation of foreign funds into the stock market. When the stock market is rising, these funds will flow in, the balance of payments will increase and the value of money will improve. Conversely, when stock prices on the stock market decline, domestic funds will flow abroad, the balance of payments tends to get worse and the value of the domestic currency slumps. This instability in the financial sector can have a devastating effect on the stability of overall economic activity.
Worsen the prospect of long-term economic growth If the things stated above apply in a country, then in the short term economic growth becomes unstable. In the long run this kind of growth will reduce the speed of economic growth. National income and employment opportunities will grow slower and unemployment problems cannot be overcome or worse. Finally, if globalization has a negative effect on a country's long-term economic growth prospects, the distribution of income will become more unfair and the socio-economic problems of the community will get worse.

The Role of Government in Economic Globalization
To deal with global capitalism, the government needs to do the following things including:
The need to immediately eradicate KKN seriously. The reduction of KKN to very minimal conditions is a big capital to face the era of global capitalism. Next, we need a planned step to get the maximum benefit.
The government needs to put in place a policy framework to enable the movement of resources towards sectors that have bright prospects. This is done through policies that are not distorting investors' decisions, including allowing them to measure the level of risk accurately.
Strive for changes that occur gradually, so as to give time for economic actors engaged in non-competitive industries to switch to more competitive industries.
Prepare human resources so they can take advantage of open opportunities. This includes, for example, by seeking certification of internationally recognized expertise and training to obtain the certificate. From the impact of globalization, tips can be taken in dealing with globalization, namely: in the field of the economy of the world the nation needs to implement article 33 of the 1945 Constitution by building cooperation with economic actors consisting of cooperative business entities, state-owned enterprises and private-owned enterprises. Regions must be empowered to be able to produce regional superior products that can be appointed as national superior products. Thus, the nation's competitiveness that is needed in the free market era can be created

Understanding Central Bank Monetary Policy for Inflation

Understanding Central Bank Monetary Policy for Inflation
Understanding Monetary Policy
Monetary policy is a process that regulates a country's money supply to achieve certain goals; as well as curbing inflation, and reaching full or more prosperous workers. Monetary policy may involve setting a margin reguirement loan standard, capitalizing with banks or even acting as a last resort borrower through negotiations with other governments.
Monetary policy is basically a policy that has the goal of achieving internal balance (high growth, equitable development, price stability) and external balance (balance of payment balance and achievement of macroeconomic objectives, namely maintaining economic stability that can be measured by employment opportunities, stability of the family and a balanced international balance of payments.
If the stability in an economic activity is disrupted, then monetary policy can be used to restore (stabilization measures). The influence of monetary policy will first be felt in the banking sector, then transferred to the real sector.
Monetary policy is an attempt to achieve a high level of economic growth on an ongoing basis while maintaining price stability. To achieve this goal the Central Bank or Monetary Authority seeks to balance the supply of money with supplies of goods so that inflation can be controlled, full and smooth employment opportunities are achieved in the supply / distribution of goods.

Conducting monetary policy is one of them but not limited to the following instruments:
interest rate
Statutory Reserve Requirement
intervention in the currency market
as the last place for banks to borrow money if experiencing liquidity problems.
Types of Monetary Policy
The regulation of the amount of money circulating in the community is regulated by reducing or increasing the amount of money in circulation. Monetary policy can be classified into two, namely:
Expansive monetary policy (Monetary expansive policy)
It is a policy to increase the amount of money in circulation. The policy was carried out to overcome unemployment and increase people's purchasing power (public demand) when the economy is experiencing a recession or depertion. This policy is called easy monetary policy (easy money policy).

World Bank Monetary Policy
World Bank Monetary Policy
Monetary contractive policy
It is a policy to reduce the amount of money in circulation. This was done when the economy experienced inflation. Also called a tight money policy.

Monetary policy can be carried out by implementing monetary policy instruments, namely:
Open Market Operations
Open market operations are a way of controlling money in circulation by selling or buying government securities. If you want to increase the amount of money in circulation, the government will impose purchases of government securities. However, if you want to reduce the money supply, the government will sell the government's valuable terms to the public. Government securities namely World Bank Certificates (SBI) and Money Market Securities (SBPU).

Discount Rate
The discounted facility is a regulation of the number of outstanding units by playing the interest rate of the central bank at commercial banks. Commercial banks sometimes have a shortage of money so they have to borrow from the central bank. To make the amount of money increase, the government lowered the central bank's interest rate, and vice versa raised the interest rate to make money circulating less.

Reserve Requirement Ratio
The mandatory reserve ratio is what regulates the amount of money in circulation by playing with the amount of bank reserve funds that must be deposited with the government. To increase the amount of money, the government reduced the mandatory reserve ratio. To reduce the money in circulation, the government raised the ratio.

Moral Appeal (Moral Persuasion)
Moral appeal is a monetary policy separately regulating the money supply by appealing to economic actors. For example, urging banks to give credit to be careful in issuing credit to reduce the money supply and to urge banks to borrow more money from the central bank to increase the money supply to the economy.

Monetary Policy Objectives
The World Bank has a goal of achieving and maintaining the stability of the value of the rupiah. This goal as stated in Law No. 3 of 2004 article 7 concerning the World Bank.
The purpose of the stability of the value of the rupiah, among others, is the stability of the prices of services and goods that are reflected in inflation. To achieve this goal, since 2005 the World Bank has implemented a monetary policy framework with inflation as the main target of a monetary policy (Inflation Targeting Framework) using a free floating exchange rate system.

Inflation and Unemployment

Inflation and Unemployment
Indea regarding the relationship between inflation and unemployment was relatively new, approximately in the late 1950s. Systematically this relationship was just introduced by AW Phillips in 1958 from the results of a field study of the relationship between rising wage rates and unemployment in Britain in 1861 - 1957.
Curves that show this negative relationship are often called the Phillips curve (according to the name of the inventor). The curve is in line with the situation in England in the period 1861 - 1957. The year in which the unemployment rate is low is also the year in which the rate of increase in wages is high, and vice versa the year in which unemployment is high, the rate of increase in wages is low.

Policy Relating to Output
An increase in output can reduce the rate of inflation. The increase in the amount of output can be achieved for example with a policy of reducing import duties so that imports of goods tend to increase. Increasing the number of goods in the country tends to reduce prices.

Price Determination and Indexing Policy
This is done by determining the price ceiling, and based on a certain price index for salaries or wages (thus the salary / wages in real terms are fixed). If the price index rises, salary / wages are also increased.

Implications of Wisdom
Until the late 1950s the main problem of macroeconomic policy was to achieve simultaneously price stability and high employment opportunities.
But some thoughts at that time doubted the achievement of the two goals together - together. The Phillips curve can explain this pessimistic state. Price stability and high employment are two things that cannot happen together.

Basic theory
The Phillips curve is obtained solely on the basis of empirical studies, there is no theoretical basis. Lipsey in 1960 tried to fill the basis of his theory. For this purpose he uses as a basis for his explanation the theory of the labor market.
Thus, the natural rate of unemployment (UN) is a rate of unemployment in which there is wage stability (W = 0). There are several Lipsey statements about the Phillips curve using the labor market theory into two, namely, first, supply and demand for labor determine the wage level, second the rate of change in the wage rate is determined by the amount of excess demand for labor.

Estimation (Expectation)
This forecast or expectation problem arose in the mid-1970s and was a breath of fresh air in macroeconomic development. The trade-off between inflation and unemployment is questionable. The oil crisis that occurred in the mid-1970s led to what is called stagflation (inflation and inflation), inflation and unemployment rising together.

Adaptive Estimation (adaptive expectation)
Before the mid-1970s the dominant theory in the reduction of these expectations was adaptive. According to this theory the expected price will be based on past prices. If the current estimated price is not the same as the actual actual price, the individual will use the error in this estimate to improve his estimate in the future.

Inflation and Economic Development

Inflation and Economic Development
High levels of inflation will not promote economic development. Costs that continue to rise cause productive activities to be very unprofitable. So the capital owner usually prefers to use his money for speculative purposes.
Among other things this goal is achieved by the buyer of fixed assets such as land, houses and buildings. Because entrepreneurs prefer to carry out investment activities of this nature, productive investment will decrease and the level of economic activity decreases. As a result more unemployment will come into being.

Effects on Income (Equity Effect)
The effects on income are uneven, some are disadvantaged but some are benefited by inflation. Someone who gets fixed income will be disadvantaged by inflation. For example a person who earns a fixed income of 500,000.00 per year while the inflation rate of 10%, will suffer a loss in decline in real income for the inflation rate, which is  50,000.00.

Efficiency Effects
Inflation can also change the pattern of allocation of factors of production. This change can occur through an increase in demand for various types of goods which can then lead to changes in the production of certain goods, resulting in inefficient allocation of production factors.

Effects on Output (Output Effects)
In analyzing the two effects above (Equity and Efficiency Effects) an assumption is used that the output is fixed. This is done so that the effects of inflation on the distribution of income and the efficiency of certain outputs can be known.

Community Inflation and Prosperity
Aside from having adverse effects on the country's economic activities, inflation will also have the following effects on individuals for the community:
Inflation will reduce the real income of people with a steady income.
Inflation will reduce the value of wealth in the form of money.
Worsen the distribution of wealth.

How to Prevent Inflation
By using Irving Fisher MV = PT, it can be explained that inflation arises because MV rises faster than T. Therefore, to prevent inflation, one of the variables (M or V) must be controlled. How to regulate the variables M, V and T can be done using monetary, fiscal or policy policies related to increased production.

Monetary Policy
The target of monetary policy is achieved through the regulation of the money supply (M). One component of the amount of money is demand deposits (demand deposits). Demand deposits can occur in two ways first if someone puts cash into the bank in the form of demand deposits and then the second if someone gets a loan from the bank not received cash but in the form of demand deposits.
Another instrument that can be used to prevent inflation is open market politics (selling / buying securities). By selling securities the central bank can suppress the development of the money supply so that the inflation rate can be lower.

Fiscal Wisdom
Fiscal policy concerns the regulation of government spending and taxation which can directly affect total demand and thus affect prices. Inflation can be prevented through a decrease in total demand.
Fiscal policy in the form of reducing government spending and increasing taxes will reduce total demand, so that inflation can be suppressed.

Types of Inflation According to Their Nature

Types of Inflation According to Their Nature
The inflation rate can differ from one country to another or within one country at different times. On the basis of the large inflation rate, it can be divided into three categories, i.e.

Creeping (creeping inflation)
Characterized by a low inflation rate (less than 10% per year). Price increases are slow, with a small percentage and in a relatively long period.

medium inflation (galloping inflation)
The rate is relatively large in a relatively short period of time and has a very accelerating effect (prices on a weekly or monthly basis) the effect on the economy is greater than creeping inflation.

high inflation (hyper inflation)
is the most severe inflation as a result - prices go up 5 or 6 times. People no longer want to save money because the value of money has fallen so sharply that it wants to be exchanged for money so that the velocity of money is getting faster and prices are accelerating. Usually this situation arises when the government experiences a budget deficit that is spent and covered by printing money.

9. Rimsky K. Judisseno
According to Rimsky K. Judisseno revealed that inflation is one of the events in which monetary is shown from a tendency of rising prices for goods in general. In this event, a decrease in the value of the currency is occurring.

10. S. Sukirno
According to S. Sukirno revealed that inflation is a process when a price increase that applies to the economy.

11. Weston and Sopeland
According to Weston and Sopeland revealed that inflation is a state of the economy that is being hit by an increase in the highest price level and cannot be prevented or controlled again.

12. Winardi
According to Winardi revealed that inflation is a period of a certain period, which occurs when a buying power against monetary unity decreases. In terms of inflation, it can arise if the value of money deposited will circulate more than the amount of goods or services offered.

13. Gerald J. Thuesen and W. J. Fabrycky
According to the two revealed that inflation is a condition that illustrates a change in the price level in an economy. There is no country that has never experienced inflation, even developed countries have experienced inflation at any time.

Types of Inflation According to the Cause
The inflation rate can differ from one country to another or within one country at different times.

Demand-pull inflation
This inflation stems from an increase in total demand (aggregate demand), while production is in a state of full employment or nearing full employment. In a state of almost full employment, an increase in total demand in addition to an increase in price can also increase output.

Cost-push inflation
In contrast to demand-pull inflation, cost-push inflation is usually characterized by rising prices and falling production. So, inflation is accompanied by a recession. This situation arises usually starts with a decrease in the total supply (aggregate supply) as a result of increased production costs. This increase in production costs can arise due to several factors including:
successful trade union struggles to counter wage increases
A monopolistic industry, managers can use their power in the market to determine (higher) prices.
Increase in prices of industrial raw materials.
Effects arising from inflation
The Following Are The Effects Of Inflation.