A globalization myth:

THE MYTH:

On of the myth about globalization is, that it brings prosperity for every participating country. However, some argue that this is not the case. The counterargument goes, that only the developed nations benefit from exploiting the resources (such as the workforce, raw-materials and cultures) of the underdeveloped nations.

THE OPINION:

In respects to labour Globalisation has led to many multi-national companies moving some operations overseas. Many companies are locating their call-centres to low wage areas. A lot of manufacturing for multi-national corporations is now being conducted in low wage areas, more specifically, Asia. The question is: Is globalisation hurting economies in general or is it simply redistributing wealth amongst more people?

There has been a lot of scrutiny on the factories, which have been set up in some low wage countries such as China and Vietnam. They claim that there is a huge amount of mistreatment of the workers, and the conditions that workers work in are extremely poor.

For example, Nike is one organisation that has received a huge amount of criticism for the factories in which they produce their products.  Such as accusations of child labour, 60 hour working weeks with forced overtime, physical abuse of workers and pay levels below national minimum wage rates.

In 2005, Nike conducted an audit of all their factories and published a document of over 100 pages on what they had found; “The company said it audited hundreds of factories in 2003 and 2004 and found cases of "abusive treatment", physical and verbal, in more than a quarter of its south Asian plants.” 

Obviously it is unacceptable for any worker to receive this treatment in their place of work, especially by such a huge multi national company like Nike. However, Nike was the first company in that sector to publish details of their factories. Since then, they claim they have strived to improve the standards of the working conditions. 

On the other hand, it should not be confused that only multi-national companies mistreat the workers and the local factories do not. Local factories, more often than not, will operate under the same or even worse conditions. In fact, Nike workers are treated well in comparison to the local factories.

Even though there is a level of mistreatment in the factories relative to other factories in the area, the workers receive a much better deal than they would have in a local factory. It has been found that workers can earn up to 3 times as much in multi-national factories as they would in the local factories. This was examined more in detail for a Nike factory set up in Vietnam.

“Ten years ago, when Nike was established in Vietnam, the workers had to walk to the factories, often for many miles. After three years on Nike wages, they could afford bicycles. Another three years later, they could afford scooters, so they all take the scooters to work. Today, the first workers can afford to buy a car.” 

This shows that even though initially looking at these factories set up in low wage countries it is a bad thing due to the poor treatment of workers. This is compared to the conditions in western countries when we compare this to what the workers are used to they are actually being benefited greatly. Through the provision of the jobs for these people, they are able to make a living for themselves. This conclusion does not include child labour which regardless of conditions is unacceptable.

We are here however neglecting the effects of these factories on the local workers based in the organisations home countries who lose their jobs due to the fact the company move their operations overseas. This could be seen in 2009 when HSBC cut 1,200 UK jobs and relocated them to offshore great unemployment problems in countries such as the UK currently. This could be partly due to the movement of many jobs to areas within Asia. It could be argued that through globalisation, the increased competition from overseas competitors companies have to cut costs hugely to stay competitive. One way in which to do this is by moving the operations to low wage countries. 

These movements are not all one-way though. Recently due to the rise of the Chinese economy, some Chinese companies have set up operations in the UK. This has created jobs after years of taking so many away. For example 170 jobs have been recently created in Birmingham by a Chinese lighting company. Their establishment of a £5million factory has been built in the area. (The Birmingham Mail, 2011)

In conclusion, the working conditions in an emerging economy seem to be much worse than in a western economy. Especially local factories seem to exploit workers and treat them without human dignity. On the other hand, even in the western world, overall employment rates are dropping since large corporations move their operations abroad. So who is worse off – an emerging and upcoming underdeveloped economy, or a developed but decreasing economy?

EXAM RELEVANT EXTENSION: 

IGSC would like to thank our fellow students for the in-depth and thought provoking comments and we would like to give some feedback on some of the points which really stuck out to us when reading back over the comments.

Firstly, we would like to come back to the comment by 40040587 who talked about the specialization theory proposed by David Ricardo. You agree to the theory that if every country would specialise in what they are good at, it will benefit from globalisation and exchange their product or service on the market, creating efficiency and productivity.
But have you thought about the associated costs and loss of jobs in all the other industries that will decrease in size due to the specialisation in one industry? We don't think that every country has one industry or sector that is large and profitable enough to produce and generate enough profits to keep a whole country alive and feed all inhabitants. Further, since some industries produce products that are generally more expensive than others, for example mechanical or industrial engineering products are more expensive on the market than products for our daily needs.

Another interesting comment was made by 51438060Doglover: “I think that the bad working conditions are largely due to those countries' less developed economy and society, poor state of human right and people's obsolete values, rather than the presence of MNCs.”
In our opinion, it is not solely the less developed economy or society in these countries that make those working conditions acceptable there. Especially for MNCs setting up facilities in developing countries it should be clear that they try to offer better conditions than local factories. In Western countries, those working conditions and environment are not acceptable and just because they are the norm in developing countries is in our opinion not a good enough excuse for MNCs not to try to improve them. Further, it is not only due to the less developed economy or society, nor due to the state of human rights that MNCs can in fact employ such bad conditions. It is also about incentives and how bears responsibility in the end. For companies that have subcontractors in developing countries, once bad working conditions are uncovered, saying it is not their fault nor responsibility since they do own the company is easy. However, this should not be possible and there should be either economic and human incentives be given to improve those bad working conditions.

Furthermore we would like to refer to 51822505smilyface’s comment: 
“Despite the fact that globalization may not brings prosperity directly 
to every of us, I think globalization does still help to improve our life”
In this respect we would like to further clarify and substantiate the reasoning, which is indeed correctly reflecting our global economic achievements of the last 60 years. 
One of the achievements of globalization can certainly be accounted to the World Trade Organization (WTO). The general aim of the WTO was to liberate trading across national borders. Most certainly, the member states agree that the liberalization of trade will improve direct foreign investments and distribute wealth to emerging economies. In other words, without globalization it would be much more difficult to bring capital to an emerging economy. Not having capital does not bring the opportunity to invest into promising business opportunities. This also includes factories. 
Hence, globalization per se has definitely improved economies around the world. The “big picture” is that in an overall perspective, globalization has brought wealth to more people. Of course, when looking deeper into the microeconomic subsections, misery and exploitation are problematic side factors.

As a closing argument, and as a strong opinion, it is our belief that an economy itself needs to learn from its mistakes. These mistakes also include human mistreatment and exploitation at the workplace. There are multiple factors to be considered when doing business abroad. Political instability, social norms and values, networks and connections - all of these factors need to be aligned in order to improve working conditions. This is not an easy process. 
Just as Europe and the United States of America needed a long time to fight injustice at the workplace, so will the emerging economies today need time to improve. It is a long process for which western nations must fight, local nations must fight and global organizations such as the WTO must fight for. Integrity is a very difficult definition and a constantly ongoing process. Even today, western societies struggle with ethical behavior and integrity. We shall fight for the best so that our future generations do not do the same mistakes that we did today.

Works Cited

Griffin, J. (2011, August 03). New Chinese factory creates 170 jobs in Birmingham. Retrieved January 29, 2012, from Birmingham Mail: http://www.birminghammail.net/news/top-stories/2011/08/03/new-chinese-factory-creates-170-jobs-in-birmingham-97319-29168673/

Malispina, A. (2006). Critical Perspectives on Globalisation. New York: Rosen Pub Group.

O'Sullivan, A. (2009, March 26). HSBC moves jobs to overseas call centres. Retrieved January 28, 2012, from This is Money: http://www.thisismoney.co.uk/money/saving/article-1670745/HSBC-moves-jobs-to-overseas-call-centres.html

Teather, D. (2005). Nike lists abuses at Asian factories. Retrieved January 28, 2012, from guardian.co.uk: http://www.guardian.co.uk/business/2005/apr/14/ethicalbusiness.money