Globalization, Employment and the Workplace

Yaw A. Debrah, Ian G. Smith

• Publisher: Routledge
• Year: 2003
• ISBN:
  9781134527977
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The globalization of business is a relatively new process. Although its influence on work, employment, the labour process and the management process has become increasingly significant, little is known about these developments. In order to redress this imbalance, this book provides evidence of the nature and degree of significance that globalization holds for nation states, cultures, trade unions, employees and business management. Underlying the various contributions is a focus upon the varied and complex nature of internationalism in the business world.

1 Globalization, employment and the workplace

Diverse impacts?

Yaw A. Debrah and Ian G. Smith

Introduction

It is now conventional wisdom that, barring any insurmountable difficulties, the globalization trend which achieved much prominence towards the end of the last century is set to gather pace, to transform the workplace, to change employment relations and, indeed, our way of life. With the recent advances and innovations in technology, we seem to be racing down an unpaved road towards a globalized world. The unpaved nature of the road implies that the journey will not always be smooth and comfortable and there are bound to be some rough rides along the way. These rough rides signify the unforeseen problems, challenges, or opportunities ahead in the management of people but for now these do not seem to deter businesses in their quest for global reach. If these unforeseen problems become insurmountable, they will halt the race towards globalization but as yet this has not happened and there seems to be no shortage of organizations willing to travel down the road to the ‘global village’. Hence, the impression we get from the mass media and from fund managers is: ‘at the dawn of our new millennium the globalization of business is set to continue at breakneck pace with rapid integration of the world economy’ (Peel, 1999).

Globalization, then, has become something of a buzz word and politicians, journalists and academics have jumped on the bandwagon. As Kelly and Olds (1999) succinctly put it, a preoccupation with the ‘global’ has become one of the emblematic – almost obsessive characteristics of our time. This obsession is partly due to the realization that globalization is transforming the world at a rapid pace and it is changing the traditional workplace, employment practices and the way organizations are managed.

As organizations play a crucial role in contemporary society a worthwhile task for scholars is to research the varying ways in which globalization impacts on organizations and employees. However, any meaningful research requires a clear understanding of the concept of globalization. While most commentators seem to accept that the globalization process is underway, there is much controversy surrounding its definition, main components and characteristics. This, then, leads to the question, what is globalization?

The management literature abounds with various definitions of globalization. It is now very much ‘in vogue’ for writers to apply the concept of globalization to any topic under the sun. The numerous publications on globalization in the various academic disciplines and practitioner journals reveal the range of definitions of the concept; see Pieterse (1995), Kelly and Olds (1999).

According to Kogut and Gittelman (1999), globalization is the process of increasing integration between world civilizations. Waters (1995) adds that it is a social process in which the constraints of geography on social and cultural arrangements recede and in which people become increasingly aware that these constraints are receding. In a sense, globalization implies a borderless world (Ohmae, 1995). Giddens (1990: 4) also describes globalization as the intensification of world-wide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa. These few definitions of globalization point to the trend towards the global village (Ohmae, 1990).

Exploration of these definitions reveals that globalization impacts on several areas of social life. These include: (a) the economy; (b) the polity; and (c) the culture (Waters, 1995). This implies that the definition of globalization adopted by a particular author depends on the focus of the study. But it is known that globalization is the product of both exogenous and endogenous forces as governments, firms and groups all interact to effect significant political, economic and social changes (Kogut and Gittelman, 1999).

While it is not possible for us to study the totality of the impact of globalization on society as a whole, we can examine some aspects of the economic impacts of globalization. However, Wiseman (1998) argues that while it is important for us to focus on the economic aspects of globalization, an adequate understanding of the diverse processes of globalization requires a more integrated approach, which illuminates the overall landscape of economic, social, cultural, environmental and political relationships. Hence, it is advisable that while investigating the economic impacts of globalization one does not gloss over its political and social antecedents. In this book we intend to deal principally with economic globalization.

Following Hill (2001), we use the term globalization in an economic sense to refer to the shift towards a more integrated and interdependent world economy. This is in line with the debates in the literature on the increasing interdependence of regional and national economies and the fundamental shift occurring in the global economy. In Hill’s view, we are witnessing the end of an era when national economies were pretty well isolated from each other by barriers to international trade and investment, by time zones, distance, language, by national differences in government regulations, culture, and business systems. In its place we are witnessing the movement towards a more integrated and interdependent global economic system.

Lee (1996) sees the main manifestations of this form of economic globalization primarily in terms of the rapid growth in international trade, foreign direct investment (FDI) and cross-border financial flows in recent years. This process has been associated with a world-wide wave of economic liberalization – including the lowering of tariff and non-tariff barriers to international trade, the encouragement of FDI, and the deregulation of financial markets. Running concurrent with this development are technological developments that have reduced the cost of transportation and communications, hence making it possible for goods and services to be internationally traded in unprecedented scope and volume. These processes have myriad impacts on organizations and the people who work in them. Discussion of these processes is one of the aims of this book.

In spite of the recent popularity of the concept of economic globalization in academic debates, there is a dearth of research on its implications on work, the workplace, employment and trade unions. This book attempts to provide empirical evidence to shed light on some of the views and debate in the literature on the impacts of economic globalization on the workplace and employment. It attempts to contribute to the debate by bringing together research from the UK, the USA, Africa, Latin America, Australia, Continental Europe and East Asia to illuminate our understanding of what is actually happening to organizations, workforces, employee groupings/representatives and individual employees as a result of economic globalization.

In this regard, this chapter provides a broad overview of the concept of economic globalization, the factors that account for the move towards economic globalization, the issues pertaining to the impacts of economic globalization on employees particularly, on employment, incomes and labour relations. This chapter also provides the key themes of the book. In relation to this it reviews the important issues examined in the various chapters. These include:

1. the pressures facing both local and global firms in a globalized era and the various ways in which they are responding to the human resource management (HRM) challenges brought about by globalization;
2. the impact of reverse diffusion on the nature of employment relations in the domestic workplaces of multinational corporations (MNCs);
3. effects of economic liberalization on employment, wages, skills and other labour issues;
4. the implications of globalization for industrial relations, trade union organizing and campaigns;
5. an assessment of the debate on the impact of globalization on labour, work and employment in some specific industrial sectors.

Upon examination of issues presented in this book it is argued that the influence of globalization on work and employment, and on the labour process and the management process is inexorable and at the same time imperfectly understood. International business activity is at the same time complex in nature and pressurizing nation–states and cultures in novel ways, with little known as yet about medium to long-term outcomes. Hence, revealing the reality, the nature, extent and significance of economic globalization remains a learning process involving the expansion of a body of knowledge and understanding on the subject. In this regard, the following chapters represent substantial contributions to this learning process and better understanding from the perspective of the nation–state, and employee and business/ management.

Factors accounting for the move towards economic globalization

Many factors account for the increased economic globalization. Knight (1998) asserts that the driving forces behind economic globalization include (a) technological advancement, particularly advances in communication technology; (b) the pervasive adoption of free market ideology worldwide; (c) the economic expansion and the associated world-wide wave of economic liberalization in developing countries; and (d) the increase in free trade including the lowering of tariff and other barriers to international trade, e.g., the provision of services across borders and the movement of capital.

As noted by Levitt (1983: 92), technological progress has been at the forefront of the push towards a globalized world. In particular, the recent significant developments in communications and information processing, including developments in the mobile telephony, e-mail, the Internet and the World-Wide Web and transportation technologies, it is argued, have advanced the cause of economic globalization. In real terms, developments in microprocessors, satellites, optical fibre and wireless technologies have had the effect of reducing the cost of global communication and with it the cost of co-ordinating, controlling, planning and managing a global organization (Hill, 2001).

Equally, innovations in shipment (containerization) have made it possible for products to be shipped more economically to any part of the world. These cost reductions have intensified competition in the global marketplace. In particular, these advancements provide opportunities for far-flung business interactions to create more global business opportunities (Parker, 1998). Consequently, it is possible for small, previously unknown, local companies to tap into both national and international markets.

Economic globalization has also been accelerated by the decline in barriers to investment and free trade – including the lowering of tariffs and other barriers to international trade. Beginning in the mid-twentieth century, declining tariffs and advances in air and freight transport paved the way for a great expansion in global trade. This gave rise to the greater interdependence of national markets for goods and services, particularly financial services, resulting in the integration of capital and financial markets.

According to Kogut and Gittelman (1999), the global integration of financial markets has been made possible by a confluence of supply and demand factors. The supply side factors include deregulation of currency controls, innovations in financial instruments, and advances in communications and IT that allow transactions to be executed instantaneously across national boundaries. The demand-side factors include the increase in corporate restructuring that created demand for new sources of financing, rapid growth in foreign investment and trade, and the adoption of free market principles in a number of previously regulated economies.

Another force behind the rapid globalization trend has been the increase in foreign direct investment (FDI). In recent years many countries, particularly those in the developing world, have opened their economies to FDI by liberalizing FDI regulations and hence made it easier for foreign companies to enter their markets. Governments in many developing countries have created opportunities through the liberalization of their economies for firms in their countries to attract FDI and this in turn has opened the doors to MNCs to expand their network of operations in developing countries. Budhwar and Debrah (2001) show that since the early 1980s many developing countries have initiated economic liberalization programmes which have as their essential elements privatization and the attraction of FDI. Countries worthy of mention here include China, India, South Africa, Brazil and Russia but equally such regions as Latin America, Sub-Saharan Africa, Eastern Europe and South Asia are also involved.

In Sub-Saharan Africa, the end of apartheid in South Africa has given rise to a fundamental restructuring of the economy and concerted efforts on the part of the government to attract FDI and to persuade those MNCs which pulled out of South Africa as a result of the anti-apartheid campaign to return. Elsewhere in Sub-Saharan Africa the end of the Cold War ushered in a wind of change which is blowing all over the region. One clear manifestation of this is the adoption of structural adjustment programmes.

These economic restructuring programmes initiated by the International Monetary Fund (IMF) and the World Bank focused on:

1. the liberalization of the economies by subjecting them to both local and international competition;
2. liberalization of domestic trade and commerce;
3. reform of fiscal policy;
4. reform of the financial sectors;
5. reform of agriculture; and
6. reduction of budget deficits.

Countries such as Ghana and Uganda have been at the forefront of such reforms but by and large the majority of Sub-Saharan African countries have introduced the reforms partially or in their entirety (Debrah, 2000; Debrah, 2001; Budhwar and Debrah 2001).

In other parts of the world, the changes taking place in Eastern and Central Europe including the former states of the USSR as a result of the collapse of communism as well as the economic liberalization in China (see, Pollert, 2000; Sadher et al., 1999; and Warner, 2001) have all accelerated the pace of economic globalization. Similarly, in Latin America, democratic and free market reforms initiated in countries such as Brazil, Argentina and Chile among others have been powering ahead. In many instances the trade barriers and free market restrictions imposed by previous Latin American governments have been removed.

In yet another part of the world, Budhwar (2001) succinctly discusses the Indian economic liberalization programme which began in 1991. He asserts that the pre-1992 centralized economic planning system brought India to its knees and this galvanized the forces of change. It is reported that by 1991, India had a double digit rate of inflation, decelerated industrial production, fiscal indiscipline, an astronomically high ratio of borrowing to the GNP and abysmally low level of foreign exchange reserves. By any economic indicator or measure, India had effectively been plunged into an economic crisis.

Enter the World Bank and the IMF. These institutions agreed to bail out India but only on condition that it introduced free market reforms. In accordance with this agreement, the Indian government initiated a series of economic liberalization policies which included the devaluation of the currency (the Rupee), and the introduction of new industrial, fiscal and trade policies. The public sector along with trade, exchange policy, the banking sector and foreign investment policies were reformed.

In summary, then, the liberalization of the economies in the developing world coupled with democratization policies, the relatively prudent management of debt and the tackling of inflationary pressures have now turned the table round in both the investment and FDI arenas. In a sense, better management of the investment environment in many developing countries is encouraging foreign investment. Equally, with debt and inflation down in many developing countries, their governments are busy privatizing public enterprises and going all out to attract FDI as their economies gather steam. These developments have increased the attractiveness of some developing countries as destinations for FDI.

One measure of economic globalization is the growth in FDI. In light of the current global surge in FDI, Horton (1998) asserts that we are witnessing the ascendancy of the transnational economy. The predominant view here is that economic globalization was initially facilitated by the growth of MNCs, particularly large Western MNCs, but the trend is changing.

A brief analysis of the history of international trade reveals that prior to the First World War, MNCs were the main players in FDI and many of the powerful MNCs were from the USA. During this era, UK companies were also actively engaged in FDI but their involvement heightened in the period up to the Second World War. Other European companies were also involved and this reduced the dominant role of the USA. The post-war period witnessed the reassertion of the dominance of US companies in the area of FDI. Vaupel and Curhan (1973) have shown that from 1939 to the mid-1970s, US MNCs were responsible for two-thirds of the increase in FDI and the growth in the number of overseas affiliates. However, changes in the world economy and economic order in the early 1970s made the USA a more attractive location for investment. Consequently, by the late 1980s inward investment in the USA had more than double the outflows as this period witnessed a phenomenal increase in Japanese direct (inward) investment to the USA. During this period, Japanese companies began to set up subsidiaries world-wide.

In recent years, with the continuing trend in economic liberalization around the world, there has been a sharp increase in FDI overall. There is some evidence that world-wide outflows of FDI are growing at a faster rate than both exports and gross domestic products (GDP). Thus, it is asserted that FDI has replaced trade as the engine of international economic integration (Kogut and Gittelman, 1999).

One interesting aspect of the growth in FDI is the concomitant growth/rise in non-Western MNCs, particularly East Asian MNCs. As mentioned earlier, the ascendancy of MNCs from Japan has been matched by others from countries such as South Korea, Taiwan, other newly industrializing economies (NIEs) and in some cases developing countries in Latin America, South Asia and South Africa. Hill (2001) refers to these MNCs as the mini-MNCs (medium-sized and small MNCs) and argues that they play important roles in international business as they have global operations and are seriously involved in international trade and investment. This view is reinforced by Yeung (1999) who has shown that MNCs from developing countries, particularly in East Asia and Latin America, have a significant presence in the global market, many have become global players in international business and are becoming significant competitors in the global economy.

Although globalization has intensified FDI flows to developed countries, flows of FDI by MNCs to developing countries have equally been on the increase. In 1998 flows of FDI by MNCs to Latin America and the Caribbean Islands increased by 5 per cent over that of the previous year to reach US$28.7 billion. In particular, the FDI went into new business opportunities created by privatization in Brazil, Venezuela, Columbia, Argentina, Mexico, El Salvador and Guatemala. Equally, more traditional FDI investments in export-oriented industries went to companies in Jamaica, Costa Rica and t...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Tables
• Contributors
• Preface
• List of abbreviations
• 1 Globalization, employment and the workplace
• 2 Globalization, restructuring and occupational labour power
• 3 Global labour? The transfer of the organizing model to the United Kingdom
• 4 The impact of ownership change on industrial relations, jobs and employees’ terms and conditions
• 5 ‘What we do’ or ‘Who we are’?
• 6 Globalization, economic institutions and workplace change
• 7 Globalization and employment in Latin America
• 8 Beyond convergence and divergence – contextualizing the implications of globalization on industrial relations
• 9 Human resource management responses to global strategy in multinational enterprises
• 10 Globalization, employment relations and ‘reverse diffusion’ in multinational companies
• 11 Globalization and Diversity Management
• 12 Globalization, global human resource management, and distance learning
• 13 Responses to globalized production