The integration of international markets has increased our exposure to foreign cultures and ideas. But the potential benefits of increased cultural exposure are often ignored by economists when they study the effects of globalization. They should not be.
The problem is that, unlike the benefits of increased trade, the benefits of increased cultural exchange are difficult to quantify. Unlike trade interactions, cultural interactions do not create tangible assets to which we can assign a monetary value. This is why we can calculate a country's Gross Domestic Product (GDP) but not the dollar value of having learned about a new culture. Because it is not possible to put a dollar value on cultural interactions, we cannot create utility functions and indifference curves to evaluate potential gains. All that we can say is whether we like or dislike having an increased awareness of cultural diversity.
An increased awareness of cultural diversity never harms an individual. The value of this awareness might vary amongst individuals, but it is never negative. The knowledge of the existence of a foreign culture which you find repulsive does not harm you. It might bother you, but it will not negatively affect your life if you do not want it to.
Most often, the first time two cultures meet, one side is negatively affected. This is often the case when members of different cultures do not attempt to understand each other as they interact. This often leads to conflict and resentment. This resentment in turn reduces the likelihood that individuals will try to understand new cultural perspectives.
Thus, the initial introduction to a culture is often the critical factor in determining whether possible gains from cultural exchanges will take place. As a result, the growing integration of international markets will make multinational companies increasingly responsible for the way individuals view other cultures. This is because a multinational corporation will be the assumed representative of its country of origin or even of all foreigners by the individuals with whom it interacts.
Consequently, whether globalization increases our appreciation for cultural diversity or increases conflicts between cultures largely depends on how international companies choose to conduct themselves. Gains from trade will be greater if companies make a good initial impression and conduct themselves in a manner which respects the people and the cultures that they encounter. This is because creating a positive impression in that first cultural interaction will foster a desire to learn more about foreign concepts and ideas. It is these intangibles that arise from trade that, while they cannot be measured, should not be ignored when talking about globalization.
The fact that certain multinational corporations have taken advantage of weak corporate governance structures in developing countries in order to gain significant market share is unjustifiable. Not only does it create resentment which might eventually be counter-productive to the firm's business interests, but it also reduces the intangibles that trade brings to people, particularly an appreciation of foreign cultures and ideas.
