10. ethics lec 10
TRANSCRIPT
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12: Globalization and Business
Ethics1. Changes in World Economic Scenario Associated with
Globalization
2. Main drivers of Globalization
3. The Consequences of freemarket reforms:4. The Public and Private Costs of Trade Liberalization
5. Look at the Social Dimensions for SustainableSolution
6. Structural Adjustment Models7. Limited Impacts
8. Evidences
9. Rethinking Adjustment
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12.1 Changes in World Economic
Scenario Associated with Globalization
Globalization is the expansion of international
trade and foreign investment (by multinational
companies and corporations) and intensification
of links of national economies with globaleconomy through transactions movements of
capital, labor and technology.
Trade liberalization is the main vehicle ofglobalization.
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12.1.2 Shifts in Economic Policy
Shifts in economic policybroadly consistent
throughout the world and restoration economicequilibrium through
(a) Liberalization of markets
(b) Reduction in state control/intervention in the
economy,(c) Privatization of a broad range of enterprises and
reduction in government expenditures,
(d) Changes (reductions) in social services and
subsidies on consumer goods, and(e) Bringing changes under pressure from international
creditors, as well as by domestic designs ofstructural adjustment programs
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12.2 Main Drivers of Globalization
Transformation of a patchwork of nationaleconomies into a more integrated global
economy Development of global level institutions to
support and regulate it
Increase in international transactions (scopeand volume) and in a faster rate, especiallywith growth of outsourcing
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12.3.2 The Consequences of freemarket reforms
A minority of developing countries (India, China, Mexico,Chile) and majority industrially developed countries (withstrong initial economic base, abundance of capital and skilland technological leadership) are well placed and reaped the
benefits of globalization, while the poor, illiterate and
unskilled have lost out LDCs remain excluded from the benefits of globalization Indigenous people are particularly vulnerable, globalization
is a threat to local cultures, including indigenous cultures Women working in rural farms are grossly affected
No universal perception for the best approach to tradeliberalization could be established
Growth benefits from capital account liberalization (FDI,other capital flows) are small
Short-term speculative flows have been damaging
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12.3.3 The Public and Private
Costs of Trade Liberalization
International business, trade and investment create
disparity in income, especially in developing countries:
(a) some countries become more dynamic than others in
taking advantage of global trade opportunities throughstronger investment links that encourage absorption of
new production and managerial skills, improvement in
international competitiveness; and
(b) forces within countries use their growth opportunities
in differentiated pattern. These are public costs of trade
reforms.
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12.3.4 The Public and Private
Costs of Trade Liberalization
Adjustment is associated with change, which can bedisruptive and have different impacts on differentgroups/communities. Liberalization does not ensureincrease in employment and output since import
competing industries operating behind protecting wallsand government intervention may not be able to sustaincapacity utilization and in such case, both workers andthe entrepreneurs face hardships. These are private costs
of adjustment.The heavy social costs of globalization are associated with
the gap between the expectations from and the reality ofthe process.
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12.3.6.2 The Reality against theExpectation from Trade Liberalization
The reality shows that the consequences ofglobalization are dramatic:
Primary incomes of the poor are down
Number of people living below poverty went up
Social income (access to public services) hasdecreased
Targeted interventions meant to protect the poor and
the vulnerable groups from the worst aspects ofadjustments never reach all the poor and seldomreach most of the poor
Unemployment rates, inequality and poverty
intensified
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12.3.7 Globalization has Affected
Peoples Lives
The demonstrations are: change in economicstructure, relative prices, consumption patterns(which has a chain effect in terms of affecting
peoples jobs), livelihoods and incomes, and thelike. In many countries some groups of workers(e.g., in jute and textiles sectors in Bangladesh)are adversely affected by trade liberalization.
However, globalization increases globalinterconnectivity and the awareness of global andlocal disparities, improves democracy and forgesa greater sense of global community.
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12.5 Look at the Social Dimensions
for Sustainable Solution
Therefore, the social dimensions of globalization havebecome prominent part of the inter-regional andinternational negotiations and agreements. Little has
been achieved so far. Steps for achieving short-term
equilibrium hardly address social issues and are aimed at(a) bringing down the demand or (b) expanding thesupply through increased capacity utilization, whichrequires more knowledge of the economy and more
reflections of sequencing policy instruments of structuraladjustment measures. The obstacles in the process are:
Lack of global availability of resources
Constraints to investments stemming from
inefficiency in allocation of resources.
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12.5.1 Long-term Sustainable Solution
The problem requires addressing the following issues:
Reversing desocialization of social actors and the
community people who turn attention to coping with
growing economic hardship in their individual capacities,
allow (consciously or unconsciously) disruption of social
bonds and live in a situation where social tensions lead tonew forms of intra and inter-group conflicts;
Impact on women such as the loss of capacity of households
to provide safety nets to those who are economically
displaced by restructuring and forced to join labor force Complying with policy directives of donors and financial
institutions deepening social problems; and
Reversing the damaging trends that widen inequality and
increase poverty.
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12.7 The Avenues for Optimism
The avenues for optimism are:
Experience demonstrates the value and power ofdialogue as an instrument for change
There is ample scope of expanding the space for
dialogue aimed at building consensus for action Common grounds may be achieved through
listening patiently and respectfully to diverseviews and interests, and
Institutional efforts are gradually increasing toforge agreements among a broad spectrum ofactors on the course of action.
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12.8 Structural Adjustment
Models
There are attempts of addressing social problems instructural adjustment models (SAM) trying togive restructuring ahuman faceby
Giving increased attention to social issues,
Becoming more flexible in conditionalitiesassociated with structural lending and
Searching ways for directly alleviate problems of
the most vulnerable groups; social investmentfunds were set up to channel funding fordevelopment projects for the most vulnerablegroups
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12.9 But SAM has Limited Impacts
Structural adjustment models could so far achieve
only limited impacts because the benefits could
reach a very small proportion of the vulnerable
population and could contribute little in terms of
enhancing sufficient growth to solve the socialproblems since the growth, even if has taken place
in some cases, was not accompanied by
More equitable distribution of the benefits ofgrowth,
Stabilization, and
Increase in efficiency.
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12.10 Evidences: Country Experiences
Evidences of the above are demonstrated in countries like
China and Korea and in East Europe. China and Koreasuffer from rapid rise in unemployment andunderemployment of rural population moving to townsand cities, increase in polarization, spread of crime and
prostitution, including child prostitution, increase in
child labor, withdrawal of girls from schools to dounpaid family work, worsening of environmentaldegradation and the like. People in East Europeancountries are increasingly becoming victims of
polarization, fiscal crisis, problems of job security andlack of welfare services under constraints of public
budgets. Industrially developed countries may be betteroff in this regard but many in these countries also sufferfrom the problem of relative poverty intensified by
restructuring.
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12.11 Rethinking Adjustment
The proposals on rethinking adjustment suggest focusing
on reduction of poverty and inequality and to Promote social development
Set broad international norms and specific targets
Redefine goals of adjustment, and
Establish what are, and what are not the acceptablesocial costs of adjustment.
One special proposal is based on the concept of 20/20,
which calls for earmarking 20% of the national budgetsand 20% of the international aid for priority socialneeds. However, the developed countries forgot theircommitment of giving 1% of their GDP as foreign aidto the poor countries.
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12.12.1 How to Address Social
Issues in Globalization?
Break the current impasse by focusing onconcerns and aspirations of people and the waysto better harness the potential of globalization
itself Change the current path by expanding benefits of
globalization to more people and share thembetter between and within countries
Involve many more voices for ensuring share ofbenefits of globalization, the resources and meansin hand
12 12 2 H t Add S i l
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12.12.2 How to Address Social
Issues in Globalization?
Seek a process of process of globalization with a strongsocial dimension based on universally shared values andrespect for human rights and individual dignity andcreate a situation with fair, inclusive and democraticallygoverned institutions.
Focus on people and respect their rights, cultural identityand autonomy.
Promote decent work, empowerment of localcommunities and gender equity.
Sustain a democratically effective state and manageintegration with global economy keeping an eye ongaining the most of social and economic opportunitiesand strengthening security
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12.12.3 How to Address Social
Issues in Globalization?
Try to attain sustainability through strengtheninginterdependent and mutually reinforcing pillars ofeconomic and social development and environment
protection at the local, national, regional and global
levels. Develop productive and equitable markets through
development of sound institutions to promote opportunityand enterprise.
Play with fair rules to offer equitable opportunity andaccess (to resources) with recognition of diversity indevelopment needs and capacities of differentcountries/nations.
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