The Controversy Over Business Globalization

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  • 0:03 What Is Globalization?
  • 0:41 The Case Against Globalization
  • 1:53 The Case for Globalization
  • 3:06 Making Your Own Decision
  • 3:30 Lesson Summary
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Lesson Transcript
Instructor: Anthony Aparicio

Tony taught Business and Aeronautics courses for eight years; he holds a Master's degree in Management and is completing a PhD in Organizational Psychology

The growth of the global economy has led to questions about its effects and benefits. This lesson will examine some of the main arguments on both sides of the controversy over business globalization.

What Is Globalization?

In business, the term globalization describes the interactions among individuals, companies, and world governments that involve the production and sale of goods and services. Globalization involves labor issues, investment strategies, humanitarian projects, and other efforts that build and support international commerce. Technology, such as telephones, internet, and air travel has helped to bring people around the world closer together. Each day, our world seems to get smaller with people and countries becoming increasingly interdependent upon each other, and business globalization is part of that process.

The Case Against Globalization

You may have seen people in the news talking about how globalization causes the use of sweatshops in third-world countries where the working environment is unsafe and the pay is below our standards. Sweatshops refer to factories where people work for very low wages, in poor conditions, and for long hours each day. Companies, especially in the clothing industry, have become infamous for their use of cheap labor in other countries to make their products.

In other countries, some people earn twenty cents per hour and have to live on less than three dollars a day. The low cost of labor allows companies from developed countries, such as the United States, to earn much higher profits by using foreign workers to produce goods. At the same time, these US companies are taking jobs away from American citizens. Look at the number of manufacturing plants in the United States that have closed and how many people who have lost their jobs because the work was outsourced.

Outsourcing occurs when work is sent to other countries to be completed by low-wage workers. The finished product is sent back to the host country to be sold. Many industries, such as call centers, payroll, customer service, information technology and many medical specialties, are being outsourced to other countries where the labor is much cheaper.

The Case for Globalization

Advocates of business globalization argue that it is not a zero-sum game, which requires one side to lose in order for the other side to gain. Globalization can be a win-win situation for all who are involved, but it often takes time, people, and government assistance.

When the North American Free Trade Agreement (NAFTA) was enacted, many people thought that American companies would rush to outsource all of their work to the cheaper labor market in Mexico and the U.S. economy would be crushed. We now see that since 1994, when NAFTA came into effect, the U.S. economy has not suffered from the agreement and that Mexico has gained in economic strength. The U.S. may have lost many of the lower-wage, unskilled jobs, but those jobs were replaced by higher wage, skilled, and semi-skilled positions.

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