Forms of Economic Globalization and Its Impact on the Indonesian Economy

Forms of Indonesian Economic Globalization – In at least the last century, the world has been increasingly hit by globalization. The rapid development of technology is suspected as one of the causes of this borderless world phenomenon .

The flow of globalization is increasingly unstoppable flooding all fields, including the economy. Economic globalization has various forms and various influences. We as citizens of the world are also “required” to understand and be aware of it. What’s that like? Read more in the article below!

A. Definition of Economic Globalization

Literally, globalization can be interpreted as the process of something becoming global. “Things” here can be technology, thinking, information, and people’s lifestyles.

According to Professor Selo Soemardjan—a professor in the field of sociology—, globalization is a process of establishing organizational and communication systems among world people to follow the same systems and various rules.

Globalization has distinctive characteristics, namely, changes in the form of technological development and progress, the emergence of interdependence between countries regarding economic production and markets, common problems of the countries of the world are increasing, and the occurrence of cultural exchanges and interactions between citizens of the world.

The term globalization has actually been used by the world community since the 19th century. It’s just that at that time the word used was globalize, which refers to the emergence of a network of economic and social systems on an international scale.

The term ‘globalization’ itself was first used in 1983 by Theodore Levitt, an economist. Levitt coined the term ‘globalization’ through his writings in the form of an article entitled Globalization of Markets which was published in the Harvard Business Review. Since then Levitt has been recognized by the world as the creator of the term ‘globalization’.

Globalization has now occurred in all areas of life, the economy is one of them, so that the concept of economic globalization emerged. The economic sector is indeed a field that is easily and quickly hit by globalization. This is because the needs of the economy around the world tend to be the same and uniform.

However, the economy is not the only sector affected by globalization. According to the Head of Research at the Global Cities Institute from RMIT University who is also a Lecturer in Global Studies, Manfred Steger, there are four main empirical dimensions of globalization, namely, economics, ecology, culture, and politics.

Later there was one additional dimension and became the fifth dimension of globalization, namely ideology. This fifth dimension crosses over the other four dimensions. Why is that? Because according to Steger, this ideological dimension is full of a set of norms, beliefs, claims, and explanations regarding the phenomenon of globalization itself.

Back to globalization in the economic field. What does economic globalization really mean? The phenomenon of economic assimilation and the emergence of economic dependence between nations—both at the local, regional and even national levels—through the intensive movement of technological products, goods, services and capital, is a definition of economic globalization.

Globalization in the current economic sector arises because of the rapid development of information on all activities that are production, marketing , as well as science and technology.

In simpler language, economic globalization puts the world into one unit, the goal is to build a large trading area that transcends national boundaries.

Economic globalization is also closely related to the phenomenon of free trade which seeks to remove various barriers to the trade process in the international arena. These series of obstacles are usually caused by export and/or import tariffs that are too high, causing prices of goods to no longer compete in a healthy manner.

Other barriers can also take the form of politics in trade adopted by a country. The political goal is none other than to protect the production process in that country. In theory, free trade overcomes these barriers.

Many people may be confused and wondering, has economic globalization occurred in the world, especially in Indonesia? To answer this question, there are several characteristics of economic globalization, namely:

  • Technology is developing so rapidly, even across space and time. The existence of technology products such as satellites, television, mobile phones, and especially the internet, has succeeded in making the communication process in a global scope able to take place very quickly.
  • Global problems that have attracted the attention of the whole world have increased in intensity, for example, multinational crises, regional regulations, and what is currently being paid the most attention to is the environment.
  • The emergence of dependence on economic production and markets in world countries caused by global trade
  • The occurrence of interactions that are cultural and cross-cultural among citizens of the world who ask various new things.
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In Indonesia itself, the constitution that existed from the beginning put more emphasis on the planned economy which was clearly recorded in the Preamble of the 1945 Constitution. Study the national economic system, globalization, constitutional economics and economics in the book Globalization, Constitutional Economics, and the Economics Nobel .

B. Real Forms of Economic Globalization

Although it cannot be sensed directly, economic globalization has tangible forms that can be felt. This is because the phenomenon has a characteristic that makes it easy to identify. For example, there is a cultural relationship due to the emergence of dependence on global markets.

Is a well-known entrepreneur in Indonesia, Dr. Tanri Abeng, SE, MBA, who sparked the idea of ​​five forms of economic globalization. Apart from being an economic actor in his status as a businessman, Tanri Abeng has also served as a policy maker in the VII Development Cabinet and the Development Reform Cabinet, serving as Minister of State for the Empowerment of SOEs. He has also served as President Commissioner of Pertamina.

In this capacity, the following are Tanri Abeng’s ideas about some concrete forms of economic globalization:

1. Globalization of Production

The form of globalization of production is the existence of one or more companies that set up factories in many countries. This is done with the aim of minimizing production costs . The countries chosen are usually countries that have low wage rates. In addition, the import duty rates imposed by the country are also cheap.

Furthermore, the infrastructure in the country is sufficient to carry out production. Finally, the business climate in the destination country is also conducive to the production activities of these companies.

Companies that often globalization of production are usually those engaged in the manufacturing industry. Indonesia has also become one of the destination countries for this globalization of production. In the last few decades, many world-class manufacturing companies have flocked to set up their factories in Indonesia.

2. Globalization of Financing

Globalization of production can be done because of the globalization of financing, namely, loan facilities that can be obtained by international class companies in all countries in the world.

Apart from loans, global companies can also get facilities to carry out investments. This globalization of financing then allows international companies to produce and invest in many countries.

3. Labor Globalization

This phenomenon of globalization has recently become the subject of discussion in this country, both in cyberspace and in ground copy. The entry of foreign workers into a country is a sign of the globalization of this workforce.

In this case, global companies are very likely to use human resources from many countries in the world. The workforce used is also in accordance with the level. But unfortunately, this also opens up opportunities for these companies to use HR services that have international experience. Meanwhile, the majority of workers from developing countries or countries where they are produced will only be used to become laborers with menial jobs.

4. Globalization of Information Networks

The borderless world phenomenon is evident in the globalization of this information network. People everywhere can now quickly, easily and inexpensively access information from all over the world.

Advances in technology are allegedly the main cause of the emergence of this phenomenon, especially communication and information technology. In the end, it is this technological advance that is used by global companies to market their products throughout the world.

The entry of well-known international brands in the fashion and culinary fields eventually became global tastes. This is what is currently being felt in Indonesia. Not only in urban areas, people in rural areas feel more proud to use or consume international brands than locally produced ones.

5 Globalization of Trade

This phenomenon is the ultimate form of economic globalization. The globalization of trade is manifested by the presence of uniform tariffs.

In fact, it is not uncommon for countries in the world to reduce export and import tariffs and remove various non-tariff barriers. This is done so that global trade becomes faster, fairer, but at the same time has tighter competition.

With the rapid pace of global trade, issues regarding IPR, law violations in e-commerce , electronic contracts, consumer protection in cyberspace, and various other issues are increasing. Learn all about it in the book The Influence of the Era of Globalization on Business Law in Indonesia .

C. Influence and Impact of Economic Globalization in a Country

After examining the understanding of the forms of economic globalization above, of course this phenomenon creates significant influence and impact on a country. Like two sides of a coin, economic globalization has positive, beneficial impacts, but at the same time, negative and detrimental impacts are inevitable.

1. The Positive Impact of Economic Globalization

The existence of a global company that spreads its wings throughout the world is of course a breath of fresh air for the economy, especially for developing countries. Indonesia is no exception. This is a blessing in itself that must be grateful for, but at the same time it must be watched out for.

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Here are some of the positive impacts of economic globalization in more detail:

  1. Economic globalization is able to stimulate economic growth in destination countries—the majority of which are developing countries, our country also feels it
  2. Economic globalization makes mechanisms and investment opportunities more open in the international arena
  3.  Economic globalization encourages the world economy to continue to grow. Not only partial and sectoral, the world economy is growing as a whole. This is due to the fact that there are industries whose locations have changed so as to encourage efficiency
  4. Increased income in developing countries as a result of free trade on an international scale is also a positive impact of economic globalization. The increase in income was ultimately able to reduce poverty in the world
  5. Still related to the point above, the increased income of developing countries due to global trade can in turn increase per capita income on a global scale.
  6. Economic globalization makes goods and services commodities in one country increase in variety. This is due to the many offers of various goods and services by many countries, so that the variations become more numerous in the global market. This increased variation also results in the fulfillment of the needs of the population in one country
  7. Finally, economic globalization makes a country able to compete in global markets more efficiently.

2. Negative Impacts of Economic Globalization

As mentioned above, besides having a positive impact on economic globalization, at the same time it also has a negative impact. This is because every country must increase vigilance in order to face the negative impacts of this economic globalization.

The following are some of the negative impacts of economic globalization:

  1. Economic globalization causes the process of economic adjustment in a country to be ineffective. This is due to the flexibility that the country must have as a demand when it wants to engage in global trade
  2. Economic globalization also results in an increase in economic conditions that are unstable and sensitive to various events, for example the occurrence of war and the presence of terrorism in a country
  3. Economic globalization triggers environmental damage. This is due to the increase in parties carrying out industrial activities, from production to consumption
  4. Economic globalization causes an imbalance in per capita income between developing and developed countries
  5. Still related to the point above, income inequality does not only occur between countries. This gap can also occur within the scope of a country. This is due to the uneven distribution of regions that are directly affected by globalization. Urban areas usually earn more than rural areas because they have greater access to global trade. This inequality is an unavoidable risk, although on the other hand globalization has a real impact on the economy as a whole
  6.   Globalization of the economy results in a decrease in the level of security at work. This is the impact of the wider scope of the market, so that security when transacting or carrying out work becomes difficult to ensure.

D. The Effect of Economic Globalization on the Indonesian Economy

As a world citizen, Indonesia cannot escape the influence of economic globalization. In Indonesia, there are at least four sectors that are directly affected by economic globalization. The four sectors are labour, investment, exports and imports. As mentioned above, the perceived impact can be both positive and negative.

In addition to the four sectors above, the phenomenon of globalization is also capable of making changes to the behavior of economic actors towards the production process. The use of factors of production more efficiently and intensively is the impact of these changes.

The positive effects of economic globalization that can be felt in this country are the increasing frequency of investment and trade, as well as the increasingly competitive industry at the national level. Once again, like two sides of a coin, negative influences must also be borne. The national industry, which is increasingly full of competition, has resulted in the destruction of comfort among the people.

In addition, economic globalization has caused many traditional economic sectors to be abandoned by society. They flocked to migrate to a more modern economic sector. As a result, many traditional markets are now quieter. Therefore, in protecting these traditional markets, the book Managing Cultural Heritage, Caring for Civilization by the Editorial Team is here to answer this.

Thus, economic globalization is indeed a necessity, a phenomenon that cannot be avoided. This is a consequence as a citizen of the world. However, we need to remember that Indonesia also has noble cultural roots that should not be abandoned.

Being global is indeed important and even a requirement, but local wisdom should also be upheld. Think global, act local. Once again, being global is important to show our existence as citizens of the world, but don’t let your identity as a nation of Indonesia erode because of it.

E. Book Recommendations on Economic Globalization

1. The Influence of the Era of Globalization on Business Law in Indonesia

2. Indonesian Economic Politics

3. Monetary Economy: Case Study of Indonesia