Globalization

Globalization has been one of the most hotly debated topics in international economics over the past few years.

There are three familiar responses to globalization. First, that its novelty is grossly exaggerated. Globalization, the argument runs, has been around for a long time. The current phase is merely an intensification of a well-entrenched process, the basic features of which are much the same as before.

The second response is that globalization is not only novel but also extensive, touching everything, transforming everything within its reach. Therefore, it must be treated as the central organizing category of contemporary discourse. When evaluated, this response branches into two further sub-responses: either globalization (over-optimistically) is a universal remedy for all the problems of the world, or (over-pessimistically) it is the cause of all its maladies. The concern is that it has increased inequality and environmental degradation. However, the meaning of globalization is growing integration of economies and societies around the world, Poor and third word countries consider globalization as economical and cultural colonization and to some extent greed of developed nations is responsible to this.

The third response is an intermediate one, which sees globalization as introducing new structures without altogether displacing older patterns. From this point of view, globalization is a dynamic, open-ended and contradictory process that generates forces working in different, often opposite directions. Nevertheless, India has achieved a lot from Globalization. Using flows of goods and services, capital, people, and ideas, countries like India and China to grow rapidly with reduction in the poverty.

According to economist John Dunning, Multinational enterprises invest abroad for there reasons. First, they try to capture ownership-specific advantages (O) for instance patent rights, process and other strengths not available to competitors. Then they exploit location advantages (L): examples of this are presence of natural resources, cheap labor or cheap inputs. Lastly, they exploit internalization advantages (I) this is because some assets are better owned or employed by the firm instead of being bought from the market for instance an R & d outfit or a management structure

From this building block, Dunning developed his theory of investment development path. Each country passes through five stages. The poorest countries that have nothing to draw foreign investment other than L advantage i.e. location of natural resources. As they get wealthier, a domestic market develops; it can be used as the magnet to attract foreign investment from multinational enterprises with O advantage. Eventually domestic firms come forward that can exploit domestic market just as well as foreign firms, and start using O advantage to invest abroad. In the fourth stage, outward investment comes to exceed foreign investment. In the last stage reached by the countries with highest incomes, both inward and outward investments are substantially balanced.





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