Saturday, April 18, 2009

Risk of Globalization !

In my Last 2 years of MBA, I’ve heard people from all kinds of industry and profession, one consistent view put forward by all of them – Globalization is the best thing which can happen to the world. We gain from trade, the dependency on other economies even reduces dangers of War and destruction, the economies should open up and trade more freely than ever.

Even in economics ‘ The Theory of Comparative advantage ‘ by Mr David Ricardo states that a nation should  produce what it is good at and import rest from other countries of the world . Most of the economics taught in business school is pro globalization and as long as it was working nobody was even questioning it.

Aren’t we compromising on the process of diversification by excessive globalization? When all the economies go burst simultaneously the compounded effect becomes a much bigger demon than we can handle. Sub Prime crisis with the origination is USA is now hitting even the poorest of the poor country which is connected to the globalized world. The confidence of the industry had denigrated to such a level now that even when a particular company is doing well they are not taking risk of entering into fresh projects.

Look at the way over rural economy is doing, the consumption pattern is intact as these people don’t know much about recession or subprime crisis .For them the world is still the same and they still face the same credit crunch and pay higher interest rates as they used to do in boom times. It is this rural economy which is slightly diversified and not directly connected with the globalized world which is driving the demand in India and may bring it out of trouble.

Globalization can be really good if we can devise a mechanism which can restrict the amount of damage to the significant lesser part of the globe.


SiD said...

Well, in support of Globalization, I would say that though the negative effect is magnified in a globalized world but the chances of that negative impact happening is significantly reduced... because it is a matter of concern for all the related parties and hence there is increased focus from everyone involved, thus reducing the probability of such an occurrence.
No doubt, incidents will happen and some negative fallout will definitely be there but there are much more positives to be gained out of it.. and as you said in case of prevention of wars - the benefits are not just economic!!

SiD said...

On the rural economy model... I think it is driving the demand- right.. but may be it is the percolation effect of the positives which urban India has gained in the past years that is trickling down to the rural establishment..
E.g. Development is being done on new kinds of seeds and new types of machines - which are helping in improving the efficiency of people in rural India and giving them the power to have an impact on the demand...

Ankit said...

Good Arguments buddy. My only concern is that in the past decade we have seen 3 global crisis , dont you think the integrated world is increasing the risk .