The latest global financial crisis of 2007-2008 years was merely forecasted or expected. Furthermore, no one could predict that it will actually start from the collapse of the real estate and later financial markets of the United States. By that time, globalization processes have occupied not only trade and service industry, but also labor, financial and banking segments. In the modern world, globalization is inevitable, due to fast spread of the information, constant movements of the human resources, development of the international companies, emergence of new economic and trade unions, etc. Definitely, globalization opens new horizons and helps to cross new borders. However, it also has negative aspects.
As it was mentioned in the article of The Huffington Post, globalization of the labor market, specifically in the form of outsourcing led to lowering the average wage both in the US and EU markets. On the one hand, companies could cut their expenses still hiring well qualified workers from all over the world. But low incomes greatly increased demand for bank loans, which boosted over crediting. Globalization of the financial sector decentralized main funding sources and basically spread them among many developing countries, where the deregulated environment was beyond the investors’ control. Hence, once financial market shook, many companies could not coordinate their financial flows (Creamer, 2009). Globalization of the banking system gives lots of advantages, as it allows to diversify risks and enter new markets, increase profits. However, it makes banking system more vulnerable to any market vibrations. Experience of 2000s showed that once globalization allowed banks to feel more confident, too many risks were underestimated, which led to over crediting and insecure assets (Huwart, & Verdier, 2013, pp. 128-129). Hereby, I would say that globalization definitely contributed to the world economic crisis, but it was a great lesson to show where our weak sides are.
References
Huwart, J-Y., and Verdier, L. (2013), The 2008 Financial Crisis – A Crisis Of Globalisation?, Economic Globalisation: Origins and consequences, OECD Publishing. Available at: http://www.oecd-ilibrary.org/docserver/download/0111111ec009.pdf?expires=1472150899&id=id&accname=guest&checksum=FD11A5C0B2F9E6738BA0113969971BEE
Creamer, R. (2009) How Globalization Set the Stage for the 2008 Economic Collapse. The Huffington Post. Available at: http://www.huffingtonpost.com/robert-creamer/how-globalization-set-the_b_156172.html
Response to Ashley Brown
As per definition by The Suny Levin Institute (2015), globalization is the process that is based on interconnections and relationships in different economic, political and social spheres. It cannot develop without high-tech information technologies, international trading and financial flows. However, globalization is not only built upon these principles, it generates new trade unions, financial and informational networks, unifies social standards, and supports free movements of the human resources. Meanwhile, lack of borders leads to lack of control. Creamer (2009) stated, that globalization of labor and financial markets are those factors that contributed to, if not stimulated economic crisis in 2008. It is a great point, to mention what steps were taken to diminish similar risks in the future.
References
Creamer, R. (February 9, 2009). How Globalization Set the Stage for the 2008 Economic Collapse. Retrieved on 8/25/16 from: http://www.huffingtonpost.com/robert-creamer/how-globalization-set-the_b_156172.html
Suny Levin Institute. (2015). What Is Globalization? | Globalization101. Retrieved from http://www.globalization101.org/what-is-globalization/
Response to Patrick Endicott
Many researches proved that globalization of the financial and labour market deepened the crisis in 2008. Specifically, outsourcing of employees lowered wages, and decentralizing of financial funds decreased chances to regulate them (Creamer, 2009). However, it is truly worth mentioning that education has been globalized as well. PhD specialists were highly demanded in lots of different countries, which made many universities to decentralize their education (Huwart, & Verdier, 2013, p.64). I would also add that globalization of the banking system had many more negative consequences which worsened the financial crisis. Even though, globalization itself was not a major reason caused the crisis, however, it is undoubtful that it contributed to a wider spread of the crisis.
References
Huwart, J-Y., and Verdier, L. (2013), The 2008 Financial Crisis – A Crisis Of Globalisation?, Economic Globalisation: Origins and consequences, OECD Publishing. Available at: http://www.oecd-ilibrary.org/docserver/download/0111111ec009.pdf?expires=1472150899&id=id&accname=guest&checksum=FD11A5C0B2F9E6738BA0113969971BEE
Creamer, R. (2009) How Globalization Set the Stage for the 2008 Economic Collapse. The Huffington Post. Available at: http://www.huffingtonpost.com/robert-creamer/how-globalization-set-the_b_156172.html
