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Brief notes on Globalization and Industrial Relation

October 19, 2011

The origin of globalization can be traced to the period of colonization in the 16th century. While globalization means many things to many people, one measure of globalization is the economic integration across the globe in terms of free movement of capital, technology, products, and people.

In this sense, however, globalization remains a myth. If foreign trade and capital flows signify globalization, the world has seen more globalization during 1870-1914 than what we experience today. During those days, capital, trade, and labour were all free to move from one country to another.

Despite the formation of World Trade Organization and the reduction of tariffs, many non-trade barriers remain and 85% of the world’s resources, investments, and trade continue to be controlled by countries with about 15% of the population. The triad countries—North America, European Union, and Japan—dominate the world in terms of access to and control over investment, trade, and technology.

Gateways to Globalization

The following factors have helped in the advent of globalization:

I. The shrinking of time and space with the advent of information and communication technologies, the focus being on reduction of cycle time and factor costs of each and every aspect of business

II. Rapid integration of financial markets and freer movement of capital

III. The blurring of national state and national boundaries and the evolution of the World Trade Organization with substantially diminished tariffs and other restrictions

IV. Global production chains and integrated supply chains with outsourced manufacturing, business processes, and knowledge processes including R & D.

V. The new flexible production systems and new forms of industrial organization facilitated by information technology

VI. Flight of capital and industry in cases where there are restrictions on movement of skived labour

VII. Shift of labour intensive manufacturing in the north to low cost sites in the south

VIII. Global networking facilitating inter- and intra-company trade in transnational companies, which accounts for a significant share in the movement of global capital, technology, and products

Barriers to Globalization:

The barriers to globalization are many, some of which are listed below.

I. Not all countries are in a similar stage of development. There are glaring inequalities among countries and continents.

II. Although financial liberalization might help increase access to global financial resources, it is mostly speculative rather than stable capital. Many countries do not have appropriate institutions to deal with global financial flows, and the volatility associated with it, or to manage the equity and debt markets.

III. Several countries and continents remain technologically excluded because their access is not free and depends on the willingness of those who have the technology.

IV. The developed countries with saturated markets are seeking access to their products in the emerging markets of developing and transition economies. Developing countries face many barriers in terms of getting access for their products and services.

V. Developing countries have surplus labour. They are seeking free access to jobs in developed countries. Visa and other restrictions regarding the free movement of labour remain a formidable challenge for developing countries.

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