Category: Globalization

Consequences of Globalization

Niraj made a post, “The Developing World Like Globalization”:http://www.nirajweb.net/mt/niraj/archives/001603.html few days back citing the Pew Global Attitude Survey explaining why globalization is popular among poor nations. The Economist has an article which tells the same. The lesson learned is that:
bq. “Liberty’s great advance:”:http://www.sulekha.com/redirectnh.asp?cid=312143 The countries that have succeeded in raising living standards rapidly, over long periods, have followed many varieties of economic policy and have lived under many different forms of government. What they have had in common, though, has been a policy of opening their economies to trade and to foreign capital. Countries that have opened their borders in this way have seen their incomes per head grow rapidly?much more rapidly than either the existing rich countries or those that have not globalised, either by choice or through lack of opportunity.
The article has a graph which shows that more globalized countries have a higher annual rate of GDP growth. Swaminathan S Iyer has an article in Times of India which tells how foreign capital is now transforming India into a global auto power.
bq. “Unanticipated consequences of FDI:”:http://www.sulekha.com/redirectnh.asp?cid=312131 But only after the biggest multinationals entered India did they seriously look at and help upgrade India?s tiny ancillary companies, which were (and in many cases still are) too small and unknown to meet global demand. MNCs will nurture your small and medium companies, and convert them into giant exporters. Ford, for instance, is using small and medium companies that most readers have never heard of, such as Cooper Tire, Visteon, and Synergy Dooray. A medium company called Motherson Sumi has won a huge export order of $125 million for dashboard components.
Global Auto Power is a strong word to use for a country which has only “0.1 percent”:https://varnam.org/archives/000127.html of the 1 Trillion dollar auto parts market. But there are many positive signs in terms of employment which would not have been possible otherwise. The lessons is that “attract FDI and you will create exports, often in unexpected areas”.

Instapundit on outsourcing

Glen Reynolds, aka “InstaPundit”:http://www.instapundit.com has a column up at TechCentral where he looks at the movement of labor from United States to Third World countries (which I prefer to call developing nations). He wonders why liberals are opposed to this
bq. “Outsourcing and Elections:”:http://www.techcentralstation.com/1051/techwrapper.jsp?PID=1051-250&CID=1051-062503A It’s true that corporations do this in order to maintain profits — but they usually are pressed to do that by downward pressure on prices, brought about by competition, which means that they’re not earning a windfall out of the deal, and the savings are passed on to consumers, another group that liberals are supposed to like. So it’s odd that opposition to outsourcing would attract interest from “liberal” groups, though it clearly has.
He mentions India as one of the countries where most of the Tech jobs are vanishing. Today “Oracle has big plans for India”:http://www.sulekha.com/redirectnh.asp?cid=311943. But it is not just the tech jobs that are moving to India. Soon it will be the place where “cartoons”:http://economictimes.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=35363 are made, and where your next “auto part”:https://varnam.org/archives/000127.html comes from.

Asia, an attractive investment

There are various conspiracy theories regarding globalization, with the most popular one being that it is run by the White House. This is regularly repeated in various article in mainstream Indian media. But according to Thomas Friedman in his book “The Lexus and the Olive Tree”:http://www.amazon.com/exec/obidos/ASIN/0385499345/jksobservat-20/102-6833280-6166532, the investment decisions are made by global investors who are looking for countries which can give better returns on their investment. So if United States does not give good returns on investment, then the global investor will move his money to any country which does.
bq. “Investors Flock to Cheap Asian Stocks:”:http://www.sulekha.com/redirectnh.asp?cid=311826 Foreign funds have been flowing into regional stock markets, with Taiwan in particular a favored destination and tech stocks among the most sought after assets. Of the five markets Nomura tracks, Thailand was the second most popular market, with stocks worth US$384 million bought by foreign investors since the start of the year. But in the last month more money has poured into Taiwan and South Korea. Within the Asia Pacific region, excluding Japan, fund managers were most positive on Taiwan stocks over the next 12 months, followed by India, South Korea, China and Indonesia. But they were underweighting Hong Kong, Malaysia, New Zealand, the Philippines, and especially Australia.

India and Globalization

The automotive industry is now turning to India for manufacturing low-cost, high-quality components.
bq. “Carmakers Around World Are Turning to India for Parts”:http://www.nytimes.com/2003/06/20/business/worldbusiness/20PART.html: The demand has come even from China, a rival to India in low-cost manufacturing. And the orders are flowing throughout India’s auto parts industry, to subsidiaries of Ford, General Motors, Toyota Motor and other major carmakers; to global auto parts leaders like Delphi and Visteon; and to homegrown auto parts makers, including Bhart Forge and Hi-Tech Gears.
The auto parts exports is not comparable to the software industry yet. They are only 0.1 percent of the 1 trillion auto parts industry. The competition now is with countries like Mexico and Brazil which are the other low-cost manufacturing centers for auto parts.
A side effect of this globalization could be an improvement to the Indian legal system to provide stronger support for international business contracts.

How Globalization can eliminate Bandhs

“How BPO is changing India”:http://www.sulekha.com/redirectnh.asp?cid=311406
bq. One Bangalore bandh over Cauvery waters sent shock waves through the industry (a call centre should normally never close down), bringing forth so many queries from clients that chances are the political class will in future decide never to have bandhs.
Yet another evil of globalization. You will have to change your work culture, else due to the “democratization of finance”:https://varnam.org/archives/000117.html, the investment meant for your country can easily go to another country. That was why the IT minister of Karnataka told this to the Nasscom BPO Summit, “We will accept whatever your recommendations are and adapt our policy to the changing times”.