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.