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IMPACTS OF GLOBALIZATION
A global system has emerged from local economies, accompanied by a shift in the balance of power from the economic powerhouses of the industrialized world to emerging market giants.
the world’ s population has grown hugely and most people now live in cities. Hundreds of millions have moved out of extreme poverty and similar numbers have joined the global middle class, adopting in the process more resource-intensive diets and lifestyles. There are significant opportunities for business as a result of these changes but climate change, resource constraints, water scarcity and many other factors also remind us that we are approaching- if we have not already exceeded- the planet’ s ability to satisfy our appetite for growth. That is why the central challenge of our age- decoupling human progress from resource use and environmental decline- will also be one of the biggest sources of future success for business. The corporate world was involved in creating these challenges and needs to know how to deal with them, not least because we now live in a hyper-connected and more transparent world where corporate behaviour is increasingly held to account in the court of public opinion.
Over the last 20 years, the amount of money flowing across borders grew at more than three times the rate of global GDP. International trade and foreign investment more than tripled; trade natural resources grew six-fold; and internationally-traded financial assets such as bank loans, bonds, and portfolio equity soared by a factor of 12 to 1. These figures translated into stronger economic growth across the world and enormous opportunities‘ for business through the development of new markets and access to labor. Businesses benefited from exceptionally low interest rates, which allowed them to borrow cheaply and drove a major increase in trade, mergers and acquisitions. Cheap commodities and cheap labor led to a surge in economic growth in the industrialized world without the inflation that usually accompanies such growth.
At the same time, the emerging markets providing these resources also grew much more quickly, taking millions of people out of poverty and creating new markets for companies in both the developed world and emerging markets. Living standards rose rapidly, but they did so unequally and to the detriment of the environment in many areas.
However, globalization also made the financial sector more volatile as illustrated by the 2008 US subprime mortgage market shock, international credit collapse, and global recession- the impacts of which continue to be felt. The financial crisis accelerated the shift of economic, financial and political power toward the developing world, in particular to dynamic emerging market nations such as China, India and Brazil. Being present in these low-cost and highgrowth middle-income economies has come to be seen as increasingly central to corporate success. Additionally there are other factors affecting movement towards globalization as well. A huge factor was the prospect of real time internet marketing and the cementing of global trade and finance solidarity that digital connectivity made instantly available to firms.