Economic globalization/SHIN MIN KYEONG

1. summary

Amidst the cacophony of opinions on economic globalization, there is a clear consensus that the business corporation . specifically the transnational corporation (TNC) . is the central actor: the primary shaper of the global economy.

The development of companies with interests and activities located outside their home country was part and parcel of the early development of an international economy.

 As essentially colonial and merchant capitalists, they created vast business empires at a world scale.

However, the first firms to engage in manufacturing production outside their home country did not emerge until the second half of the nineteenth century. Nevertheless, by the eve of World War I, in 1914, considerable numbers of US, UK and some continental European manufacturing companies were becoming increasingly transnationalized (see Dunning 1993). Since then, and especially during the past 50 years, the number of TNCs in the world economy has grown exponentially.

Most of that activity is generated by a much smaller number of very large TNCs: the top 100 (less than 0.2% of the total number of TNCs worldwide) accounted for 14% of the sales of foreign affiliates worldwide, 12% of their assets and 13% of their employment in 2002. (UNCTAD 2004: 9)

There are what have come to be called global corporations. The reasons why business firms extend their operations outside their home countries, and how they do that, are complex and highly contingent on particular circumstances.

Despite recent developments in TNC activity, much of their investment continues to be market oriented.

A firm may have reached saturation point in its domestic market (an issue clearly related to the overall size of the national market). Increasing profitability may well depend, therefore, on being able to expand its market beyond its home territory.

The geographical unevenness of markets is one major set of reasons why firms engage in transnational investment. The second set of reasons derives from the fact that the assets that firms need to produce and sell their products and services are also geographically very unevenly distributed and, therefore, may need to be exploited in situ.

Initially, it was the attraction of cheap . and usually unorganized . labour that was the primary attraction for firms in certain industries, such as textiles, garments, footwear, toys and consumer electronics. The so-called 'New International Division of Labour’.

There are two major ways in which firms develop transnational activities: one is through what is known as 'greenfield’ investment; the other is through engagement with other firms, through either merger and acquisition or some form of strategic collaboration.

Advocates of strategic alliances claim that by cooperating, firms can combine their capabilities in mutually beneficial ways.

Contrary to much of the received wisdom on the global economy, place and geography still matter fundamentally in the ways in which firms are produced and in how they behave. All business firms, including the most geographically extensive TNCs, are 'produced' through an intricate process of embedding in which the cognitive, cultural, social, political and economic characteristics of the national home base play a dominant part.

There are inherent obstacles to convergence among social systems of production of different societies, for where a system is at any one point in time is influenced by its initial state.

By the very nature of their dispread geographical spread across different political, cultural and social environments.

In addition to the question of a TNC’s organizational architecture there is the related, though not identical, issue of the geographical configuration of its activities. Developments in transportation and communications technologies, as well as in production process technologies, have facilitated the transformation of the geographical extent over which a TNC can separate out its different functions as well as their precise geographical configuration.

Changes to a firm’s geographical configuration often occur as a result of the firm’s decision on what to produce for itself, in-house, and what to externalize to independent suppliers. The geographical extent of such transnational production networks is highly variable. In fact, few such networks can be described as being truly ‘global’. A marked recent trend, however, is for such networks to have a strong regional dimension, that is, networks organized on a multinational scale of groups of contiguous markets (Rugman and Brain 2003).

There is, in other words, a territorial asymmetry between the continuous territories of states and the discontinuous territories of TNCs and this translates into complex bargaining processes in which, contrary to much conventional wisdom, there is no unambiguous and totally predictable outcome.

2. opinion

The inequality of globalization is related to the geographical inequality of economic development. As long as the profit comes from buying and selling cheaply, relying on the difference between production cost and selling price, capital accumulation is bound to depend on the time and space difference of the production element price or quality, as noted by Kartani Gojin. In other words, the time difference between the labour's employment costs and the price of the produce produced later by the labour force, or the geographical differences in price/characteristics of labour, land, raw materials, funds, etc. Countries or businesses are actively trying to create and maintain these differences, which is one factor in the development of geographical inequality in the economy. For example, in the 1960s and 1980s, the Korean nation tried to curb wage increases through blatant labor oppression to keep low export prices, while import barriers allowed local companies to profit exclusively from the domestic consumer market. Thus, capitalistic globalization has a tendency to homogenize social, cultural, political and economic conditions, as well as to promote differentiation or maintain existing differentiation. What is actually happening is therefore a mixture of Western culture/standard and local culture/standard rather than unilateral globalization to meet Western standards, and outside culture and culture are accepted and digested in a local context.

Now, given that differences between countries, regions and cultures are still significant in this so-called era of globalization, we can see that there may be other alternative time and space structures besides globalization, and there will also be many different forms of globalization itself reflecting the unique context of each country, region and culture. For example, in the U.S., which places more importance on prices than quality of labor on industrial production organizations and has strong influence on financial capital, the U.S. actively pushed for overseas relocation of manufacturers and overseas investment of financial capital, but in Japan, which places importance on quality of labor and has strong influence on manufacturing industries, it is inevitable that it will be more prudent to relocate manufacturing companies abroad. In Europe, meanwhile, the above-mentioned multinational corporate strategy (production and sale completed within national boundaries) seems to be quite dominant, rather than the transnational corporate strategy. It can also be fully observed that the reduction, de-regulation, investment liberalization, privatization and market opening of state intervention, which is characterized by neo-liberalistic globalization and called the so-called "global standard," are not applied consistently. For example, in the U.S., the government does not actively intervene or allow foreigners to easily privatize industrial sectors that are strategically important (e.g., defense, information and communication industries, etc.). Thus, globalization is the process of transnational re-structuring of space and space in various forms.

After all, neo-liberalistic globalization, the U.S. and its sympathetic powers, transnational capital, and transnational governing bodies such as the World Trade Organization, the International Monetary Fund and the World Bank are described as one special political and economic project and strategy as a result of restructuring under the market opening and "global standard" that forces a small number of interests on weak countries as inevitable. It is not just a given, an independent variable that explains our future mechanically. Globalization is not inevitable and depends on struggle and negotiation. Of course, because their power is so strong, it may seem as if neoliberal globalization is inevitable in some ways. But it should be remembered that what makes it seem all the more inevitable in a country of considerable economic size like Korea is domestic politicians, bureaucrats and capital who sympathize and cooperate with this particular logic of globalization. So instead of just accepting the logic of politicians and businesses that globalization benefits and if it doesn't, we should first ponder who will benefit and who will lose.