Reflective Marker: Key Drivers of Globalisation since the 1970s
Since being introduced to the concept of international business in week 1 of the course, I have gathered great insights with regards to the profound definition of globalisation as well as a clear perspective of what the entire concept entails. As defined in week 1’s class power point notes, globalisation is associated with the international integration in labour markets, products and services as well as capital markets (Mahony, 2016, Week 1 notes). Based on the integration in labour, commodity as well as capital markets as the benchmark, it is evident that globalisation is not a new phenomenon. Having gone through the work of Hill et al. (2013) as recommended by the course outline on the onset of the courser, I realized that there have been at least two episodes with respect to globalisation since the mid-nineteenth century.
From Hill et al. (2013) work, I have learned that the first episode started around the mid-nineteenth century and ended with the commencement of the First World War. The second episode started immediately after the Second World War and has continued up to today. As indicated in week one’s power slides on globalization it is evident that, both the episodes associated with globalisation witnessed both rapid trade and output growth (Mahony, 2016, week 1 notes). It is important to note that globalisation did not come by itself: there were forces behind it. This is clearly indicated in week-one’s notes, power slide 7, whereby I gathered there two main drivers that led to globalization: decline in trade and investment barriers as well as technological advancements (Mahony, 2016, week 1 notes). Therefore, in this reflective maker paper, I will reflect on some of the primary drivers associated with globalisation since the 1970s. Moreover, I will demonstrate how these drivers have changed the nature of international business.
As discussed in week-2 power slide notes, under the trade theory, it is often important for a country to engage in international trade as it helps the country to specialize in what it can produce best hence empowering its people economically (Mahony, 2016, week 2 notes). From the class discussions I learned that international trade began towards the end of the Second World War. Countries involved in the war such as Russia and Japan were exhausted economically as they had used a significant amount of resource in the war. To remain relevant in the world economy, powerful countries such the United States embarked on serious manufacturing and collaboration with other nations in order to grow its economy. Based on this conception, the expansion of world merchandise exports started to burgeon by an annual average of 8% by 1973 (Mutti, Grubert 2014, cited in Hill et., 2013). Also, from a Bruce’s (2016, week 4 notes) I gathered that that from 1970 to 1989, trade growth somewhat slowed due to significant inflation, which was caused by inadequate macroeconomic adjustment policies as well as monetary expansion.
From Hill et al., (2013) works, I gather that one significant factor that pushed for globalisation in the 1970s was the declining of trade as well as investment barriers which allowed for more foreign direct investments to take place in various countries. As Bruce (2016) clearly stated in his week 4 lecture, Foreign Direct Investment is usually important in a country’s business engagement internationally hence economic growth. Accordingly, it was interesting to learn that trade barrier in America as a continent between 1970 and 2000 decreased by 19%, while that of Oceania and South-East Asia decreased by 21% (Mutti, Grubert 2014, cited in Hill et., 2013). On the same note, I also found out that the trade and investment barrier in Europe decreased by 30%, and that of Central and Eastern Europe went down by 43% between 1970 and 2000. This indeed explains the reason for the witnessed rapid globalisation rate: the average international trade and investment growth rate of 40% has been witnessed since the 1970s to date. One major factor that pushed for the reduction of tariffs, was the introduction of General Agreement on Tariffs and Trade (GATT), which was a multilateral agreement that sort to regulate the international trade by reducing tariffs as well as other trade barriers (Hill et., 2013). GATT was tentatively successful as by 1977 more than 100 countries had joined the agreement thus agreeing to lower their tariffs associated with the trade. For example, by 1987 New Zealand had abolished its imports control by 20% hence attracting more foreign direct Investments (Hill, et al., 2013). Besides, in 193 more than 143 countries ratified the formation of the World Trade Organization (WTO) which further came up with rules as well as standards aimed at reducing tariffs as well as encouraging international trade. These developments were important as a significant number of corporations extended their businesses in foreign markets hence incorporating diversity in their organisation. From the statistics given in lecture 1, I learned that the world export increased from 5% in 1970 to 10% in 2010 (Hill et., 2013).
Another major driving force that fueled the rate of globalisation from the 1970s to date was the constantly evolving technological advancements. I remember one of my classmates arguing that the coming of the computer revolutionised the way business was done across the globe. It did not take long before I read week 1 power points notes and further did some research, that the first microprocessor was developed in 1971 (Mahony, 2016, week 1 notes). This commercial microprocessor or mini-computer was in a position to perform basic arithmetic concepts such as multiplication and addition. Later, the microprocessor was upgraded and could now be used to store data such as the company’s financials. Later, the computer was improved to do all computing associated with business financials and management hence increasing production for many firms. The automation of the production facilities via the use of computers in the late 1980s also helped in globalisation as more products were able to be exported hence the international trade. Moreover, the introduction of a mobile phone by the Motorola Company also increased globalisation as businesses could now make transactions both locally and internationally by the help of cell phones hence increasing international trade. The other significant innovation that changed the face of business communication was the introduction of the internet as well as the World Wide Web in the early 1990s.
I agree with Hill et al. (2013) who posits that the coming of the internet, as well as its increase, has brought individuals, countries as well as businesses together. Moreover, now businesses can communicate as well as market their products to a larger and diverse audience distributed around the globe at an insignificantly cheaper rate. Moreover, through the internet, customers can as well shop online and make online payments as well thus saving time and costs. The introduction of powerful aircraft has made it possible for goods to move from one country to the other quickly and at a cheaper rate. Ultimately, the above-delineated drivers which include the reduction of tariffs for trade and the advancement of technology are the key drivers of globalisation since the 1970s.
Bruce Fairhall, P. (2016). Week 4: Lecture on Foreign Exchange Market & Global Monetary System. [PDF notes] Retrieved from 6356S2 2016 ON-CAMPUS. [online] Learnonline.canberra.edu.au. Available at: http://learnonline.canberra.edu.au/mod/resource/view.php?id=1128862 [Accessed 8 Sep. 2016].
Hill, C.W.L., Cronk, T., Wickramasekera, R. 2013. Global Business Today (3rd Edition), McGraw-Hill, Australia.
Mahony,G. (2016). Week1: Lecture on Globalization [PowerPoint slides]. Retrieved from 6356S2 2016 ON-CAMPUS. [online] Learnonline.canberra.edu.au. Available at: http://learnonline.canberra.edu.au/mod/resource/view.php?id=1128862 [Accessed 8 Sep.
Mahony,G. (2016). Week 2: Lecture on Theories of trade, investment and internationalization [PowerPoint slides]. Retrieved from 6356S2 2016 ON-CAMPUS. [online] Learnonline.canberra.edu.au. Available at: http://learnonline.canberra.edu.au/mod/resource/view.php?id=1128862 [Accessed 8 Sep. 2016].
Mahony,G. (2016). Week3: Lecture on The political Economy of Trade and Investment [PowerPoint slides]. Retrieved from 6356S2 2016 ON-CAMPUS. [online] Learnonline.canberra.edu.au. Available at: http://learnonline.canberra.edu.au/mod/resource/view.php?id=1128862 [Accessed 8 Sep. 2016].