全球化 英文

Late-2000s Financial Crisis: A Price of Globalization?

1 Introduction

Generally Speaking, Globalization is a tendency of economic activity , and it is characterized by the transnational flow of trade and capital. It can facilitate economic growth and bring more fortune. However, what is the real meaning of Globalization? From now on, there doesn’t have a proper explanation. Is it Macdonald’s, Hollywood Movies, or some more shocking facts? For examples, the economic crisis that sweep across the globe, the ecological disasters that the sand storm from China makes the car in Fukuoka, Japan suffer disasters, the AIDS that derives from African hamadryas, but now it spreads to the whole world through harlots from Bangkok, Bombay , etc. All of these facts, Doesn’t th ey come into Globalization? Of course, they are. Therefore, Globalization is a rapier; it has its merits and demerits. This thesis is divided into two parts; the first part intends to analyze the pros and cons of the globalization and the second part intends to analyze if the current financial tsunami is a price of Globalization.

2 Pros and Cons of Globalization

2.1 Pros of Globalization

2.1.1 To Facilitate the Liberalization of Trade and Investment

The liberalization of trade and investment is one of the outcomes of globalization, and it is also the impetus of it. The most important content of World Trade liberalization is to reduce and abolish tariff barriers and non-tariff barriers. After the World Trade Organization has set up, trade in service, intellectual property and investment has been contained into multilateral rules for the first time, and to expand the field of multilateral liberalization and the process of international trade

liberalization become one of the core functions in the World Trade Organization. In additions, investment liberalization has become current trend of international investment development, and not only the developed countries but increasing number of developing countries adapts the measures of investment liberalization. The activity that brings in foreign capital in quantity and meanwhile, invests abroad actively makes the quantity of world direct investment grows rapidly and the investment activities are throughout the world.

2.2.2 Reduce the Rate of Unemployment

Increased economic globalization leads to increased employment opportunities for people in underdeveloped or developing nations. As corporations penetrate new markets around the world, they will hire people who live and work in these places. For example, the Wal-Mart from America in China should hire Chinese as shopping guiders, cashiers, etc. Thus, Chinese people have more chance to get a job. Additionally, when large nations--such as China or the United States--sign free trade agreements with smaller, less developed nations, corporations gain incentives to conduct business in these new markets, and then it will reduce the rate of unemployment to a large extent.

2.2.3 Beneficial to Increase Environmental Quality

As nations increase prosperity , so they increase environmental qualities. As economies grow, pollution falls. The phenomenon is due to market competition that places a premium on efficiency and innovation. Pollution results in waste of a resource. Additionally, corporations operating in wealthier nations spend necessary funds on pollution control mechanisms. In 1973, the American business sector spent approximately $31.9 billion on environmental mitigation. By 1993, the sector spent $59.3 billion on these efforts.

2.2 Cons of Globalization

2.2.1 Widen the Gap between the Rich and the Poor

Globalization, firstly , gives the developing countries a shock which is based on the unequal relationship. On the one hand, the international economic organizations are controlled by the developed countries and all the principles, institutions are made by them. On the other hand, the advantages in economy , technology , and management possessed by western developed countries are far better than developing countries. Therefore, developed countries are the biggest beneficiary in the globalization, and developing countries have long-term benefits; however, in short terms, these countries can hardly benefit. Therefore, globalization will widen the gap between the Rich and the Poor.

2.2.2 Reduce the Power of the Governments

Globalization has reduced the power of the governments to cope with the economic situation. The government of China and United States cannot stop the recession. They do not have much power over the economy. Even though the various governments tried hard to prevent their people from losing their jobs, they were not very successful. Globalization empowered the multinational companies. These companies are getting bigger and bigger. The governments do not have the power to stop the multinational companies from closing a factory here, and setting up another factory in other parts of the world. They do not have the power to stop the big companies from retrenching workers. As a result, the governments have to deal with the jobless people, while the big companies are still making money.

2.2.3 Spread of Diseases

Increase in flow of people will also result in spread of diseases, and thus make people more vulnerable to health issues. We do have many examples in history wherein outbreak of a particular disease happened in some part of the world, and before we could realize it spread throughout the world.

3 Current Financial Tsunami is a Price of Globalization.

Li Fengyun says that, “Under the background of globalization, the existence of transnational corporations and the blend of each country’s trade, culture, and economy make the financial crisis brought by subprime mortgage crisis spread to the whole world. I totally endorse her ideas, therefore, in my opinion, current Financial Tsunami is a price of globalization. Here, I will exemplify it through Iceland financial Crisis.

In the past decades, American interest rate is too low to cause the market liquidity overflow, and then a mass of capital flow into other countries, including Iceland. From this point, Iceland Crisis is in the influence chain of American financial crisis. It manifests that globalization make the money flow into Iceland and it becomes one of the reasons that lead to Iceland crisis, thus, Iceland financial crisis is the price of globalization.

Through several centuries, fishing is always the main economic backbone of Iceland. However, 6 years ago, Icelander discovers that they can get great fortune through financial industry , by virtue of fanatical speculative desire and the good condition of globalization, they borrow a mass of capital from abroad.

According to Associated Press, the Iceland financial industry’s foreign debts are more than 138.3 billion dollars. The data from American Bloomberg news agency shows that the foreign debts from the three big banks in Iceland sum up to 61 billion. Because of globalization, to borrow the foreign capital is much easier than before. Without globalization, Iceland’s foreign debts can’t be such large.

The three banks from Iceland is not the direct victim of American Subprime Crisis, they have avoided the collapse means like Lehman Brothers, but after the breakout of the American Subprime Crisis, the problem loans in the market for mortgages not only make credit squeeze in the American domestic financial marketing, under the background of highly globalization, it also makes the credit

crisis in the international market, therefore, the short-term loans on which the Iceland banks depend suddenly dried up.

At this time, the credit of the Iceland government doesn’t look trustful, although in the past 64 years, Iceland hasn ’t default any capital and interests, but the market considers Iceland as a country we can’t trust. The foreign reserves in the Central Bank of Iceland are only 4 billion dollars. Therefore, Iceland is abandoned by the capitalist.

In this way , globalization is one of the major reasons that lead to Iceland financial crisis, so the globalization is a price of Iceland Crisis and the Current financial crisis.

4 Conclusion

Summing it all up, there are not more advantages than disadvantages of globalization and vise versa. What can be said is that the process of globalization is inevitable. The pace globalization has gone through, while setting new standards and regulations has gone too far to be omitted. As dull as it may seem, the disappearance of various domestic matters and the expansion towards a global unity of economic sense might prove valuable for the future generations.

Work Cited

[1] Franklin Allen, Douglas Gale. Understanding financial crisis [M]. Beijing:

Renmin University of China Press, 2010, 01.

[2] 李凤云(Li Fengyun). 金融危机深度解读[M]. 北京:人民邮电出版社, 2009,02.

[3] 王曙光(Wang Shuguang). 金融发展理论[M]. 北京:中国发展出版社, 2010,06.