Globalization

Globalization

Introduction

Today’s business environment is changing at a breaking pace. The rampant pace of global competition, the speeds of technological developments, rapidly changing demographics, and the incredible increase in information technology have resulted in a business environment that changes day to day, hour to hour. To remain competitive in such a dynamic environment, businesses must continually improve their human resource management systems and organizational changes. Managers must continually be looking for ways to improve all aspects of the employment relationships.

International Capital Flows

The extent of international flows of capital and of the information needed to make investment decisions can provide further evidence of international economic interdependence. Today, gross flows of short-term capital in particular are huge by long-term historical standards. In the gold standard era up until World War I, bonds were the dominant means of raising long-term capital. After the collapse of the Bretton Woods system in the early 1970s, syndicated bank lending became the dominant instrument. The position changed again in the 1990s as foreign-direct investment (FDI) grew exceptionally in importance, with equity finance, bonds and bank lending also playing a role. Different financial instruments have been used as indicators of international capital mobility, but financial crises arose in all of the periods mentioned. New and improved financial instruments or systems will be created and look upon as great tools of international flexibility. Although, history has proved nothing lasts forever.

International Flow of Labor

Technological advances have dramatically reduced the costs associated to international travel. The lower transportation cost of today has had an abundance of people traveling around the world far more than they use to. A large portion of all travel today is not only for leisure purposes, but rather international business trips and short-term stays in foreign countries are part of current globalization. The short-term business and holiday travelers, mentioned previously, are faced with light restrictions in many countries. However, public policy in many countries restricts the rights that individuals have to settle and work in a foreign country.

Long-term international migration is not occurring on a huge scale (by historical standards), in spite of the significant migration pressures that exist currently in our global economy where wages for workers with similar skills vary hugely between countries at different stages of development. Even though migration is not occurring on a huge scale, the number of workers from Mexico that have migrated to the US is quite high due to the fact that their wages have increased ten fold. Immigration into the US was much higher at the beginning of the 20th century than recently. During the late 1990s the US accepted approximately one million immigrants annually, including illegal immigrants and refugees. A large number of legal immigrants have also been accepted globally. Western Europe was at its height of accepting legal immigrants in the high growth decades that followed World War II. France and the UK accepted many immigrants from their former colonies. Germany also accepted large numbers of guest workers during this period. During a decade and a half, the portion of the workforce, which consists of foreign workers, doubled. However, this high number of immigrants drastically declined in the mid 1970s.

Public Policy

Public policy plays a crucial role in determining the extent to which countries and their companies participate in globalization. Public policy measures have the potential to reduce the interaction between nations, which would cause the reverse of globalization temporarily. Since World War II, industrialized countries have progressively opened their economies and a number of developing economies also began a process of external liberalization. Nevertheless, a significant group of countries, partly due to policy changes, are not participating in the process of globalization. However, people in very poor countries, such as the ones in the Sub-Saharan Africa, are much better informed about political conditions and standards of living elsewhere in the world due to dramatically improved communication technology.

International Firms Dealing with Globalization

The major benefits that globalization has brought to many have not come without costs. There are major policy challenges that remain to be resolved. These challenges include the leverage that national governments have in a world where competition may lead to a race to the bottom on social, environmental and other policies.