How does globalization impact on the environment, banks, businesses, and ordinary people; who are the winners and losers?

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SALFORD BUSINESS SCHOOL
Msc. International Banking & Finance
Sustainable Banking
How does globalization impact on the environment, banks, businesses, and
ordinary people; who are the winners and losers?
Submitted to: Dr. Mike Coulburn
Submitted by: Waseem Al-Taher
ID: @ 00184118
Semester 2, January intake
Submission date: 17 August 2009
E-mail address: was77@hotmail.co.uk

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Introduction
Globalization is one of the key issues for the 21st
century. The twenty century has witnessed
incredible advances in telecommunications, transportations, and information technology
(computers, internet and satellite).
This has helped the world to become more global, thus the wide world has become a “small
village” or global village. This meant that globalization has lowered the largest part of barriers
between countries. Thus, some argue that relatively all people around the world should have
same culture, education. In addition goods and services should flow with smallest amount of
barriers between countries, like if they live in one room. However, is this reality?
The growing importance of globalization has powerful force on more dependence countries on
international markets. In addition, it strong ties them to the global world, because if they do not,
subsequently will be isolated in term of businesses, trade, technology, education, media... etc.
However, the rapid growth of globalization has serious effected the global world; it might be
beneficial, but not for all, and nothing without cost.
The aim of this paper is to ascertain how the forces of globalization affects the environment,
banks, businesses, and ordinary people, as well as it will discuss the benefits and some of the
costs.
Moreover, it attempts to indentify the term globalization form deferent’s points of view, plus
whether globalization is important for prosperity or not.

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Globalization concept
Despite the increasing usage of term globalization among educated and ordinary people in the
recent years, plus what have published and the thousands of conferences and books which have
talked about it and discussed its risks and advantages, it stills unclear doctrine.
In fact, globalization phenomenon is not easy to be defined, because it is involve in various
aspects of life, plus its definition depends on the way it has viewed.
Some consider globalization as new stage in economic development; some view it as domination
and empire by the west, particularly the united state (Roukis & Zarb, 2006, p. 970), in what
called Americanization, or the era of the Mcdonaldization. Although this is to some extent could
be true, but the globalization concept is much wider than being only Americanization.
It is estimated that the US accounts for two-thirds of the media images worldwide (Roukis &
Zarb, 2006, p. 977),thus, it cannot be ignored that American are good in marketing and they
dominate the media which has helped in spread out the Mcdonaldization and dollarization
culture associated with westernization.
However, while various definitions of term globalization have been suggested, this paper will
use the definition which had suggested by Malcolm waters the writer of globalization book,
Malcolm defined the globalization as “the intensification of worldwide social relations which
link distant localities in such a way that local happenings are shaped by events occurring many
miles away and vice versa” (Waters, 2001, p.4).
However, its worthwhile to have a look at another definition.
according to Roukis & Zarb, 2006, “globalization as mostly driven by powerful The
transnational corporations, whose control of information gives them an enormous advantage,
imparting primarily American cultural values, and unrestrained consumption” (Roukis & Zarb,
2006, p. 976).

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Thus, it can be observed from these tow definitions that globalization concerns about
contraction of time and distance between civilization, nations, cultures, in addition it is
dominating the great powers represented by big corporations or the multinational companies,
whose control the information, as known who has the information has the power.
However, it seems that the globalization has changed the world structure; also, some argue that it
has removed nation’s identity.

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Globalization impact on businesses
From businesses point of view, globalization is the free flow of trade, capital, labour, goods and
services between countries (Passaris& Constantine, 2006, p.5), associated with deregulation and
privatisation, and this could be proven through many international agreements has taken place
such as the GATT and WOT. However, is some international organization has positive impact on
globalization or it has helped of domination the great power represented by capitalization?
As well as it means form the point mentioned earlier “as we live in one room “, that the prices of
goods should be relatively same in all countries, in what refers to the Purchasing power parity
theory.
Businesses and governments’ interests played a vital role in enhancing globalization and spread
it out.
After the end of the Second World War, the world economy and the whole international
framework have changed, that due to several reasons, for instance, there was an international
monetary conference was held at Bretton Woods in the United State and it had attended by 44
countries to reform the world economy (Pilbeam, 1998, pg.278).
Bretton Woods system depended upon U.S. dollar as a reserve currency (Das, 2003, pg.90),
which meant more dependence countries on US dollar. This led to enhance the term of
dollarization; in addition it has enhanced the role of the United Sate as great power to impose its
culture and polices in term of business and trade.
The great growth of multinational companies after 1950 (Scammell, 1980, pg.149), is the best
example of globalize the businesses. While always these companies are looking to maximize its
profit, thus it is always looking for a cheap labours and raw materials, which is available in
developing countries; this has benefited the host countries in various ways for instance.
Firstly, it helped to transfer the technology and the managerial skills to these countries which
speed up its growth and development, secondly it has helped in reducing the unemployment

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level, thirdly it has enhanced the productivity in these countries by employee the poor in the
multinational companies’ factories.
Furthermore, there is another important benefit which is the significant contributions to tax
revenue which come from multinational companies to the host countries (Scammell, 1980,
pg.155).
The question now, how these multinational companies has benefited their home counties?
Indeed, it does benefit both host and home countries, for instance, the greater mobility of goods
and services has meant that more people have access to a greater range of goods across most
industries, and at a lesser price (Anon, 2005, P.5).
Here should not be forgotten that the generated profits go to the home countries.
However, some argue that multinational companies has bad impact on the host countries for
several reasons, for example, it transfers the profit it gains to the home; in addition, it ruins and
exhausts the natural resources in the host countries, which have bad impact on the environment
and the environmental life, -this will be discussed later in more details-. However people always
complain.
Despite the fact, that the multinational companies have an important role in enhancing
globalization in term of free trade, they have done the contrary in term of fair trade, through
abusing the poor in some developing countries such as India and Bangladesh, by let them work
with very minimum wages and poor conditions, and in some situation they work for free against
providing them with only food.
Thus, is there is place for ethics in globalization? Or it just concerns of maximising profits in any
method.
Moreover, these multinational companies have become more powerful than some governments
and have the ultimate decision.
On the other hand, globalization has a good impact on small businesses; it helps small enterprises
in expanding their businesses through opening new markets, and making exports and imports
easier. In addition, it allows these enterprises to get their goods without the need to travel abroad

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seeking new goods, this has done through the revolution of information technology (online
trading), which has reduced the cost.
In short, globalization has enhanced trading relationships between countries by melting down
almost all barriers, which has speeded up and simplified the flow of goods and services, in
addition it has created good opportunities for international investments to flow to developing
countries, which has a remarkable impact on developing countries through stimulated them to
improve their products and upgrading their productivity.
.

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Globalization impact on banks
Generally, globalization has vast impact on the international financial system, particularly banks.
Mainly, it has vital contribution in improving the financial system in developing countries
associated with large benefits and new opportunity for developed countries.
Historically, globalize the financial system began with the first oil shock, which provided
international banks with fresh funds to invest in developing countries (Schmukler, & Sergio,
2004, p.1), the oil shock has provided international banks with sufficient fund to cover the
shortage of the liquidity.
Due to the dramatic increase of oil prices this crisis had placed the rest of the world into current
account deficit with OPEC members (Hallwood&MacDonald, 1986:171) which mean that OPEC
members in developing countries had a massive surplus.
Due to the lack of the investment experience on developing countries on that time, this surplus
had deposited in foreign banks in developed countries, on the same time, the developing
countries were in developing process and there were vast investments opportunities, thus foreign
banks had reinvested this money in the developing countries.
This foreign banks investment has had promoted the financial system in the developing countries
through transferring the technology and the experience.

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Another main benefit of financial globalization for developing countries is that” the development
of their financial system, which involves more complete, deeper, more; stable and better-
regulated financial markets” (Schmukler, & Sergio, 2004, p.4).
This could be an example of how globalization has integrated the global economy and effectively
in addition it had absorbed the impact of the crisis and contributed in promoting both developed
and developing countries. Thus the oil era has helped in spread out the globalization.
Yet, there is an important question should be conceder in the future which is; who has got the
most benefit of this enormous money, the developing countries which is still developing
countries or the developed countries which had took this money (the oil) and “reinvested” in the
developing countries?
Also globalization has created more financial opportunities for local borrowers and lenders and a
widespread use of international financial intermediaries (Schmukler, & Sergio, 2004, p.1).
Moreover, it has created more financial investment opportunities through advanced financial
instruments which allow better risk diversification within and across countries (Schmukler, &
Sergio, 2004, p.1).
In fact, revolution of technology and accessing information from wherever around the world
has helped in reducing information asymmetry, which has reduced lending risks.
From the concept “small village” or like we live in one room, globalization has speed up
simplify transferring money and capital flow around the world.
In addition, Computerizations of banks has helped speed up the bank transactions.
Moreover, ATM's (Automated Teller Machines) made bank transactions easier to common than
few years back which has reduced the risk of carrying banknote, as well as it allows people to
withdraw money from all over the world from any bank as they deal with their local banks.

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Although, globalization has vast impact on promoting banks and financial system, it has negative
spillover effects in events of crises.
The current financial crisis will be remembered as one of the negative impact of the globalization
on banks and financial system.
While the crisis started as a result of the collapse of Lehman Brothers bank in the United State, it
had transferred very quickly to affect all banks and financial systems around the world as a result
of globalization. As the whole global financial system in the era of globalization works as on
body, thus it is not surprising that the collapse will affect other financial institutions as a result.
Some argue, that allowing foreign banks to work into domestic markets usually concerns that,
the competition from foreign firms will weaken domestic bank (Peek & Rosengren [n.d.], p.147).
Thus, the question now, is the current financial crisis has put end to the financial globalization?
To answer this question should be considered, why after the current financial crisis each country
started to put more regulation on its financial system, and started to what extent going back to the
nationalism, by nationalize some big banks like what happened in the UK with RBS(The Royal
Bank of Scotland) which meant the globalization represented in the capitalization has felt down
in save the global financial system.

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Globalization impact on environment
Environment is the biggest loser of globalization.
The Aggressive consumption is one of key features of globalization. Thus the rapid growth of
technology, open markets, the availability of products with low cost and China, plus many other
globalization elements associated with the massive consumption has enormous negative impact
on the environment and the environmental life.
The impact of the industrial revolution on the Human beings in guarantee standard of living, has
led to pollute the environment, which is harmful to human life and damages the global
environment.
The majority of people argue that the revolution of transportations have simplified the
Movement and the trade flows in term of exports and imports, but they do not realize how much
environmental problems it has created which damaged the planets and animals life and certainly
harmful the human body.
On other hand, the advanced technology has developed an affordable and reliable supply of
energy as an alternative power source to solve the world’s energy crisis such as the bio diesel
(Green Power Corporation).
In fact, the tragically activities of the multinational companies in addition to what they are
causing for climate and land, unfortunately, have harmful impact on the environment. For
example, their exaggerated uses of natural resources have reduced the amount of land available
for other animals and plants, which makes it difficult for some species to survive (BBC
Website); also they are indirect reason for climate change.

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In addition, in the era of globalization, non-renewable energy resources and raw materials are
being used up rapidly, which led to produce more waste which creates more pollution (BBC
Website).

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Globalization impact on ordinary people
To understand how globalization has affected the ordinary people, just imagine what if your
grand grandmother has come to the life again, what changes would she says.
In fact, globalization has an incredible impact on the way we live and think. Furthermore,
globalization has contributed in promoting all aspects of life, from education systems, health
care; fighting poverty, creating jobs, spread out the meaning of the democracy particularly in the
late developed countries, human rights and the principle of equality between all nations in
everything, to the great change in cultures and identity whether its negative or positive.
However, if what have written in the few lines above is true and the globalization has brought all
these benefits. Thus, what about Africa famine, Palestinian genocide from Israel, the rapidly
spreading of epidemics and civilizations conflict? All these sides should be considering to depth
our understanding to the globalization.
However, in era of globalization multinational companies has benefited the most from current
free trade by creating more jobs in developing countries, transferring new technologies which
enhanced their productivity and upgrading the standard life.
Furthermore, the growth in exports and imports which caused by a free trade agreements creates
more jobs in some courtiers, but on the same time it has also contributed to rising an
unemployment level among ordinary people such as factories workers in many countries whether
in developing or developed countries, which has caused by the flows of bargain good (Scott,
2003, p.2).
Education has the lion share of globalization benefits. Globalization gives an equal chance for
each individual to improve his or her educational levels (Stromquist, 2005, p.12).
Everyone evens the poor in developing world, has an easy access to the information and
knowledge trough the new technology such as internet, satellites, and media. For instance, any
one with the era of globalization can read the newest researches and published paper from
wherever source around the world. In addition, revolution of transportation has shrunken the

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distance between countries, which help students to travel abroad easily to study what they are
interesting in at any university around the world which could not be available in their home
universities. Overall, levels of education have increased throughout the world (Stromquist, 2005,
p.12).
In globalization stage television programms are floating from all over the world to all countries
via satellite. Thus, thousands of foreign –made programms are displaying in local television.
These programms handle tow faces one is positive and the other could be negative.
These programs are useful because it is allowing people to know and understand several
cultures; also it gives very and varies information and knowledge, which led to understand how
other think, which has shrunken the gap between different cultures.
Despite the fact that foreign –made programms give good and wide information it could be
damaging the local cultures because it is imposing the globalization culture (between practices
Americanization culture), its well known that the United Sate of America and the great powers in
the west are dominating the media.
However, this does not mean that the west culture is not good; this culture has countless positive
principles should be learned to the east and the reversal is right. But in some cases it threatens
the local identity for those countries especially for the new generations, and generally, no one
wants to lose his identity. Furthermore, different identities and cultures have a vital role in
enriching humanity and civilization.

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Conclusion
In conclusion, globalization has three main elements, first, revelation of technology and
transportation second, capitalization and the liberalization, third, the great powers associated
with the multinational companies.
The private sector has become the most important engine of economic growth and the public
sector has shrunk in importance and influence. Besides that the economic profile has been driven
by technology.
In short, globalization has restructured the way we live, work, learn, trade and the relationships
between people and countries, plus its contribution in contraction time and space.
Generally, globalization is good, but it cannot success in the long run as long as it is dominating
the great powers on the world.
And finally globalization cannot be controlled, it is something we cannot end or start and no one
is strong enough to hold up only its benefits.
.

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