The integration of regional economies through trade was generally seen as a unifying factor due to the reduction of international trade barriers. The objective was to increase material wealth of the people improving the economies of the nations through good global relations, competition and specialization.
According to Clark (1998, p.482), globalization refers to the process driven by political, socio-cultural, economical, technological and biological factors with an aim of creating free trade within the nations of the world.
Economist and social scientists speculated a growth in almost all the sectors of economy such as finance, agriculture, information and technology, politics and governance, medical and educational sectors with respect to human rights and biodiversity.
However, these projected benefits of globalization were later watered by critics who argued that it is a movement aimed at, not only lowering people’s standard of living through ethnic conflicts, urban decay and poor health, but also one leading to criminal violence, terrorism, illegal trade, environmental degradation and economic meltdown (Fiss, & Hirsch, 2005, p.30).
However, as the paper tables, though globalization has its strengths that cannot be compromised, it is also worth highlighting how it has significantly affected the financial management of the US in several ways during the recent witnessed recession.
Effects of Globalization
During the recent witnessed recession in the US, globalization came in as a disaster that significantly favored the recession. The disastrous financial and economic problems in the USA and widespread protest against the World Trade Organization (WTO) and consumer boycotts in the developing countries were due the hazards of globalization whose concepts were regarded positive.
While globalization has its own merits, the paper tables the many ways, both positive and negative, that it affected the aforementioned issue of recession in the US.
Globalization has created a different situation in USA according to a poll conducted for Wall Street Journal and NBC news in, 2008. Its impact has been so great on jobs and career in the financial sector such as banking, finance, insurance industries and their intermediaries in addition to securities, commodities and other investments.
Thus mutual distrust amongst major financial institutions in the global market for inter-bank loans created credit crisis in the US, which made it difficult for the banks to receive loans (Pascal, & Bob, 1993, p. 25).
Financial service sectors were consolidated and restructured in an attempt to improve and increase their productivity and the capacity to compete on regional and global markets thus increases employment in the other sectors. This extensive merging of firms displaces several workers with some remaining jobless.
Therefore, the act of seeking economies of scale by financial service sector adversely influences the ambition and wish of Americans who were eying the sector.
For instance, prior to recession employment in the insurance branch was estimated to rise by about seven percent between 2006 and 2016, but this was constrained only by corporate downsizing, and automation. This means that any job opportunity in the sector would mainly be to replace departing or retiring workers (Armstrong, 2000, p.466).
Since financial sector has been the epicenter of the financial and economic crisis in the USA, its job opportunities have been strongly affected to an extent that the banks minimize the layoffs from independent mortgage brokers and other independent contractors who provide subcontracting services to such financial institution.
Hence restricting the number and type of mortgage on sale through brokers by offering top rates only to customers who approach them directly, this tends to marginalize mortgage brokers by stopping them from offering loans as a means of denying them jobs (Thompson, 1999, p.141).
Even though the banks showed that this was a reflecting move towards conservative business practices, it was only a mere move to eject more workers from the banking sector while the real cause was globalization.
“The economic fate of workers initially depended on the fate of national economies” (Fiss, & Hirsch, 2005, p.44). However, with globalization, they are compelled to “compete directly in the global job market where wages do not depend on the failure or the success of the individual economies” (Wade, 2001, p. 325).
Given that industries have to improve their products by skillfully applying technology in order compete effectively, jobs, wages and income distribution reduces In addition, job insecurity increased as people were under pressure of losing their jobs to competition.
Consequently, this resulted to lower standards of living. Employed persons in the financial sector were therefore disturbed with the threats of business being outsourced.
Globalization has created economic liberalization where workers can emigrate and take jobs in industrial countries and/or work in outsourced industries in their home countries (Bhagwati, 2004, p.34). Most of the US nationals have therefore lost jobs due to cheaper labor provided by these emigrants, some whom are political refugees.
However, this has mainly hurt “unskilled labor lowering the quality of life due to growing gap between the income of the rich and the poor” (Reinsdorf, & Matthew, 2009, p.25). Notwithstanding substantial proportions of labor, forces of many nations are in fact working in the USA despite difficulties.
Moreover, globalization has led to human mobility opening the airways to the transcontinental movement of infectious diseases in the US. For example due to immigration about five hundred thousand the US national had suffered from the chagas disease. In addition, since good health is vital to any type of job, people were compelled to drop the jobs (Daly, 1999, p.36).
The mobility of highly skilled professionals is so high that the US financial opportunities attract the attention of professionals from almost all the nations in the word. For instance, a Kenyan doctor can act as a secretary to American doctor other than treating Kenyan patients simply because of high salary.
This leads to brain drain, which has a negative effect of denying the US nationals those opportunities hence fewer individuals may want to undertake courses related to finance as a career (Fiss, & Hirsch, 2005, p.50).
Although the US state of joblessness is considered a factor of financial crisis, some causes and consequences have resulted from business practices.
Business process outsourcing enabled cheaper services jobs but displaces some service sector jobs because globalization has allowed the US corporation to spread service jobs from high cost locations to less developed economies to benefit from cheap manpower hours. Consequently, less jobs in high cost locations while, creating great economic activities in the poor countries (Clark, 1998, p.492).
Moreover, the surplus in cheap labor together with an increased number of companies has weakened labor union in the USA. The unions have become ineffective due to reduced membership and power to question the corporations.
These corporations can easily replace workers or even stop offering unionized jobs. For instance, accountants, editors and even programmers have lost jobs due to outsourcing to cheap locations (Reinsdorf, & Matthew, 2009, p.28).
Globalization has affected the USA strongly due the strong sense of individualism and insufficient social spending by the government. It led to the collapse of subprime mortgage market in the USA resulting into a greater global financial crisis and recession.
It is noted that failed regulation of Wall Street’s Investments bank and government deregulation were the contributors to the subprime mortgage crisis, which made the USA citizens to lose jobs. This effect was due to financial interdependency.
In addition, the government has reduced the expenditure on the finance sectors while increasing the spending on military installations. Notwithstanding, the US government spent about seven hundred dollars to permanently install Kandahar Air Field in Afghanistan, in 2009 (Fiss, & Hirsch, 2005, p. 28).
Although some sectors of US economy have benefited out of globalization, it has mainly benefited few in the finance sector due to profit maximization. However, there are no significant pros of globalization to the financial sector in relation to jobs and careers in the same.
Lack of proper management of the globalization process in the US was the main “cause of the Great Recession in the US and subsequently in many other nations” (Francis, 2001, p.89). Many Americans wondered the suitability and inevitability of globalization while others considers the relative decline in the US power as being due to its high trade imbalance because of globalization.
It is therefore worth believing that it has destroyed the national industry and jobs, as claimed by reformists and revolutionists who argued that income inequality of the nations is due economic globalization (Pascal, & Bob, 1993, p.30).
References
Armstrong, D. (2000). Globalization and the Social State. Review of International Studies, 24(4), pp. 461–478.
Bhagwati, J. (2004). In Defense of Globalization. Oxford, New York: Oxford University Press.
Clark, I. (1998). Beyond the Great Divide: Globalization and the Theory of International Relations. Review of International Studies, 24(4), pp. 479–498.
Daly, H. (1999). Globalization versus Internationalization-Some Implications. Journal for Ecological Economics, 3(1), pp. 31–37.
Fiss, P., & Hirsch, P. (2005). The Discourse of Globalization: Framing and Sense making of an Emerging Concept. American Sociological Review, 70(1), pp. 29–52.
Francis, B. (2001). Globalization, the reformist Left and the Anti-Globalization Movement, Democracy and Nature. The International Journal of Inclusive Democracy, 7(2), pp.86-121.
Pascal, Z., & Bob, O. (1993). Workplace Revolution Boosts Productivity at cost of Job Security. Wall Street Journal, 10 (3), pp. 23-34.
Reinsdorf, M., & Matthew, J. (2009). International Trade in Services and Intangibles in the Era of Globalization. Chicago: The University of Chicago Press.
Thompson, G. (1999). Introduction: Situating Globalization, International Social Science Journal, 51(2), pp. 139–152.
Wade, R. (2001). The Rising Inequality of World Income Distribution. Finance & Development Journal, 38(4), pp.325-332.