Business, Legal & Accounting Glossary
Globalization polarization (known as globalisation polarisation in British English) is the phenomenon of production being moved from what was once a lower-cost production centre or country, back to the home country, which was the original producer, while globalization, as it is traditionally known, continues.
The first half of this theory has been referred to as de-globalization and reverse globalization, but this only addresses some of the concept: The other half is that globalization is still continuing.
This reverse-globalization is largely due to transportation costs due to prohibitively-high costs of energy (oil). In other words, globalization polarization occurs when it becomes more cost-effective to discontinue outsourcing production.
Let’s take an extreme example: If oil costs $1,000 per barrel, almost all shipping of goods is prohibitively expensive. It is too expensive to import even computers because the cost of the shipping is far higher than the cost of the product. As a result, local producers have to manufacture the computer themselves, or will eventually find a way to do so. Any labour or materials savings realized from an external producer are eliminated due to astronomical shipping costs.
As knowledge-based globalization continues, countries that outsource (the US, the UK, Europe) invest in these foreign firms based in places like India, Philippines, and China. Outsourcing continues, the companies are profitable, and more investment fuels more business. In other words, many of these business process outsourcing firms, call centres, and off-shore facilities are in fact making money for the countries that are outsourcing.
Consumers who are concerned about the environmental damage caused by shipping goods long distances are increasingly making an effort to buy goods produced locally. While locally-produced products may be more expensive than those produced on a larger scale by a cheaper labour force, they remove the need to transport the goods long distances.
Another reason they buy locally-produced items is to support their own communities economically, but this is separate from environmental concerns, though it adds motivation to buy locally.
While technology undoubtedly encourages and facilitates globalization, it also can work against it. If it is becoming too expensive to travel to other countries for meetings, conferences, or business dealings in general, people look to technology, or technomics to fulfil their needs. While technology will by no means end globalization, it will allow people to have meetings via video conferencing, or online. As a result, the physical travel and associated international exchanges of currency and commerce that come with it (hotels, food, shopping, transportation) are reduced.
As threats of terrorism increase countries lose trust in each other and stop the trade. Countries like the US become more nationalistic and protectionist. Embargoes may develop, and international trade is hindered.
The chart below demonstrates the potential effects of this polarization. It is not entirely reverse globalization because some sectors will continue to experience globalization.
|Type of industry||Example||Effect|
|Heavy manufacturing||Steel manufacturing||Decrease of globalization; return to the host country|
|Knowledge-based||Business process outsourcing||An increase in globalization|
In extreme cases, globalization polarization would result in less-competitive economies. Price changes (savings) would not spread across borders and local producers could then charge more for their goods.
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This glossary post was last updated: 29th March, 2020 | 25 Views.