We have to distinguish between short-term and long-term impacts of globalization.
The short-term effects of globalization are often very disruptive. Production tends to shift to wherever it’s cheapest. That mans that people in more developed economies will lose jobs to people in less developed economies. The benefit for the developed economy is that the people there will be able to buy the foreign-manufactured products more cheaply than domestically produced ones.
Unfortunately, these gains and costs aren’t evenly distributed. The fact that Americans can buy a shirt for 10% less at Walmart doesn’t console the Americans who lost their jobs making shirts. At the same time people are losing their jobs, business owners often increase their profits by offshoring. The combination worsens income inequality, which is linked to a host of societal ills.
These problems are exacerbated the faster that globalization occurs, for the simple reason that it takes time for people to find new jobs and for new industries to emerge. If a major new trade deal leads to a flurry of jobs leaving a country, some of the people who wind up unemployed may never find career-quality employment again, instead having to work temporary or part-time jobs because it’s all they can find.
Long-term, the effects of globalization should be generally positive. Globalization makes economies more efficient, by eliminating the barriers that keep work in places where it doesn’t make sense. After a wrenching period of adjustment, either industries should become more efficient (as we ultimately saw in the American automobile industry) or will die out in certain countries, freeing up workers to do other things.
The biggest downside remains the worsening of income inequality that I mentioned earlier. Even in the long run, globalization tends to benefit business owners over employees. For it to really benefit the population at large, governments need to make policies that ensure that economic growth translates into benefits for the population at large. In general, this means taxing business profits (either directly or through taxing the shareholders and executives who share in those profits) and using that revenue to strengthen safety nets like welfare and disability, social programs like education, etc.
The United States has done a poor job of translating globalization-related economic growth into benefits for citizens. China has done a somewhat better job, but still not a good one, with many citizens literally cheated out of their homes while a class of well-connected businesspeople become staggeringly rich. I wish I could point to a country that has been an exemplar of handling globalization well, but none comes to mind.
Globalisation is brainchild of Industrialisation and is, in a way, superset of urbanisation. So, this question is similar to asking why urbanisation is important. Urbanisation separates consumers and producers based on the industry–industry which fits in the City and people can be allowed to go to ‘homes’ to return each day are Urban; rest all are rural. As the population grows, all need to be provided jobs and all need to have enough purchasing power to sustain the stay in the city. The purchasing power and being able to stay in the city has largely marked the quality of life and the industry one is involved with. Now urbanisation allows for accomodating several in small spaces are it is structured and numbered with everything being available in packaged form. The Urban people produce nothing that they can consume as the industry for food production requires more space than is commonly available in the Cities and also the kind of raw material which is easily available in the countryside. So, this way, only power urban people have is their purchasing and that is their assets.
Urbanisation is meant to expand all over the habitable earth to accomodate the population which is incessantly increasing. Globalisation is the cross-border step of urbanisation which allows for smoother business by “supposed” mutual profit to local currencies and for the mega corporations to avail their services to far away foreign lands. You can already see the Teens in US and UK and in Japan acting almost alike. Globalisation is not something which can even be avoided as the world population expands and businesses get bigger than what would fit within one country’s land and economy.
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The major function is Free flow of goods and services between countries due to the reduction in trade barriers. The four advantages are,
- Creation of an environment for flow of capital and investment among countries.
- Free flow of technology from one country to another.
- Free movement of labor among countries.
While the important are, Increase in employment opportunities: As globalization increases, more and more companies are setting up businesses in other countries. This in turn increases the employment opportunities that people atone place have. People can get better jobs without having to move to other countries in search of better jobs. Today, many multinational companies such as Microsoft, Google and Toyota, facebook etc. have their offices in India and many Indians work for these companies in India. Without globalization, Indian people would not have had the opportunity to work for such companies in India.
· Education: With the increase in globalization, it has become easier for people to move across borders to different parts of the world to acquire better education. This has resulted in an integration of cultures. People from underdeveloped and developing countries often move to developed countries to get better education. More and more Indian students are traveling to countries like the UK or the USA to pursue higher education. This has also opened their cultures towards the Indian culture to some extent.
· Increase in free trade: An increase in free trade has opened doors for investors in developed countries to invest their money in developing countries. Big companies from developed countries have the freedom to operate in developing countries. In the 2000s, Japanese and European companies such as Kawasaki and Siemens started producing high-speed trains in China. This helped Chinese firms in gaining knowledge about the production process and now Chinese companies such as China South Locomotive & Rolling Stock Corp. are producing high-speed trains on their own.
· Faster flow of Information: Information flows from one part of the world to the other immediately, resulting in the world being tied together. Vital information can be shared between individuals and corporations at a very fast rate. It has also facilitated in increasing the ease of transporting people and goods.
· Increase in quality of goods and services: As a result of globalization, people have access to the best quality of goods and services throughout the world. Companies have to strive to provide better quality goods and services to the consumer and the consumer has the liberty of choosing whichever product he thinks is best suited for his needs. This allows a person in America to wear clothes made in India and Mexico while watching a football match taking place in England on a TV made in China.
· Decrease in prices of goods and services: As the competition in the market has increased due to rapid globalization, producers have to price their products competitively in order to remain in the market. This has become a boon for the consumer as he can get better quality products at cheaper prices. An example is that of the car Ambassador in India. It was the only car available in India along with the Fiat before the liberalization of the Indian Economy. These cars were inefficient and expensive. Once the Indian economy was opened, other car companies started selling their cars in India at cheaper prices. This was a major benefit for the Indian consumer.
· Reduction in cultural barriers: As people move from one country to another, barriers between various cultures tend to decrease.This has resulted in tolerance and openness towards other cultures. This has also facilitated communication between different cultures and hence, nations. It has also led to a reduction in wars as we are today living in one of the most peaceful periods in the history of mankind.
Globalisation is a process of integrating the economy of the country with other economy of the world world through trade, capital flow, and Technology. it means opening of the economy to the other Economics of the world.
Globalisation has several advantage on economic technological and other fronts.
- Globalisation has lead to increase in free flow of goods between countries. As a result World Trade has increased in recent years.
- Globalisation has increased International flow of capital. Investment opportunities for the developed countries have increased MNCs from the developed countries have start undertaking investment in the developing countries. This has led to the emergence of worldwide financial market.
- The interdependence between different National state has increased. Globalisation has increased interdependence between different countries of the world. This is reflected in the interdependence with regard to trading in goods and service and in the movement of capital.
- Globalisation has brought in new opportunities for the developing countries. They have now greater access to the advanced technologies. The technology transfer from the developed countries has led to increased productivity and higher living standard in the developing countries.
- There has emerged worldwide product market. This has increased the range of goods available to Producers and Consumers.
- The communication between people of different countries has increased as a result of revolution in the Global mass media. These has made the world appear smaller. Information flow between different countries has increased.
- Globalisation has increased economic prosperity in the developing world.
- Globalisation has brought people of different cultures together. It has reduced the cultural barriers. Increase in the cross cultural contacts has made the dream of global village more realistic.
Globalisation in the term of removal of barriers of free trade and closer integration of national economy can be treated as a positive factors. it has potential to reach everyone in the world provided that the problems areed in a dispassionate way and decisions are taken by putting a side ideological interest. It must be noted that most of the positive effects of the 90s of the last century have turned negative at present. For example, foreign currency reserves on the decline, exchange rate of Rupees has sharply come down, exports have been gradually going down, balance of payment position has gone to decline, investors confidence in Indian economy has been seriously shaken.
The benefits of globalisation for the developing countries has been less than the price paid for it. In the context of India it can be said that transition from her welfare economy to the market economy has not brought about desired benefits. The condition of for the poor countries is miserable. Globalisation has not been working there. It is also not working for the stability of the global economy. Then, should globalisation be abandoned? it is hardly possible to provide an easy answer. It is generally believed that the problem is not with globalisation, but how it has been managed by the major institution playing the key role in globalisation. The functioning of the three institution such as the International Monetary Fund, the World bank and the World Trade Organisation failed to deliver the desired result day. They formulate prescription with a to serve the interest of the advanced countries rather than those of the developing world.
Globalisation itself is neither good not bad. Those who have embraced globalisation under their own terms and their own pace were enormously benefited. China was benefited by following an alternative path. But to many countries including Russian globalisation produced disasters.
A scholar of the contemporary period J.Stiglitz has strongly criticise globalisation effect on different countries. he has painted globalisation as globalisation of poverty.
It cannot be denied that the demand for economic reform at the global level is reasonable, but not the way things are going. The international institution which shape and manage globalisation should be reformed and they should change their attitude interest and Outlook to serve the purpose of globalisation. And for that, globalisation has to be reshaped by ensuring Global collective action, participation of the developing countries in the Governance of the Institution of globalisation and above all, transparency in their functioning. This will crown globalisation with a human face.
In discussing globalization what you’re discussing is the globalists, those wealthy-elites involved in using their wealth and power to influence government policy on a global scale. It should be obvious by now that said elites have little interest in the betterment of society, an improved standard of living for humankind. Mostly what globalists are interested in is greed, the consolidation of power into the hands of the super rich who comprise a miniscule fraction of the earth’s human population.
Globalism in its current form is a trojan horse in major need of an overhaul one might say. The elite may be able to seduce the naive, the stupid, into going along with their plans with silly concepts, theories, like cultural diversity, climate change, etc. But the end game should be obvious to any informed person. Concepts like multiculturalism, climate change, etc might seem like cool ideas to the uninitiated.
What about the hidden agenda? It’s silly, or for that matter downright stupid, to think that a group of individuals who have demonstrated such a propensity for greed and corruption could be trusted to look out for the interests of the common person of society. What have the globalists ever done to help the commoners, to solve a single problem related to the environment?
What have globalists ever done to deal with the problem of nuclear waste, the proliferation of of nuclear weapons? Heck, it’s globalists, globalist operatives embedded within the power structure of the US government, that chose to build up Communist China into a nuclear-armed military/economic superpower. How does propping-up a communist country whose government has a history of murdering it’s own citizens, help humanity, the planet?!
FYI Communist China, as of this writing, has 300 nuclear warheads and has indicated a desire to expand it’s cache of nuclear weapons. So, China already has more than enough nuclear warheads to turn the planet earth into a radioactive wasteland, and that’s not enough?!!!
The globalists are trying to implement a posthuman apocalyptic world in which only the super rich will be allowed to thrive. By some accounts they want to merge with artificial intelligence, to become half-human cyborgs. This may seem unthinkable. Heck, if one were to describe modern society to a person living in the 1800’s they would likely shake their head in disbelief.
Husband surprised his wife after he made €18,300 in one day.
Wife was in tears when she saw how much his husband made in the past 4 months.
In my opinion —
The essence of globalism is Economic Globalism, which means, the victory of capitalism worldwide.
Nothing in capitalism has ever been beneficial to everyone all the time.
Capitalism is based on competition — on new patented inventions that will take market share away from established companies by new Cost-cutting measures and new Labor-saving devices.
These devices win in the Market because most people love saving money. Prices do go lower with all these new inventions. THE CONSUMER BENEFITS.
HOWEVER — the downside is always the same — with every new company with their newest gizmo, another whole factory closes and all those workers are laid off.
The chronic factor of Massive Unemployment has cursed Capitalism since the mid-1700’s Industrial Revolution. There’s no way around it, because Competition is its bread and butter. The working class always suffered under its paradigm.
Now — in the US (and other nations) the US President FDR instituted a New Deal in which there was Social Security pensions and Unemployment Insurance for the working class.
This was a major relief for millions of people. But it didn’t solve the main problem of Technology. With every new improvement in Industrial Production and Distribution, the evolution of Technology kept growing and growing — and even the most dedicated workers who were willing to work 60 hours a week, failed to keep up with the Technology. One needed a college degree to keep up.
Would the government also provide national Retraining programs for the working class? No way. Too expensive. The idea was to cut costs, not increase them.
All that to get to the conclusion —
Globalism has the same problems that Capitalism has — namely — that New Technology continues to displace the older technology, and that means that millions of workers worldwide will either have to afford their own Retraining, or get thrown onto the enormous Unemployment Heap.
Governments must somehow learn to educate their citizens to cope with this — but as of today, no nation knows how to do this.
There, briefly, is my opinion.
Globalization has impacted nearly every aspect of modern life. While some U.S. citizens may not be able to locate Beijing, China on a map, they certainly purchase an overwhelming number of goods that were manufactured there.
According to a 2010 Federal Reserve Bank of San Francisco report, approximately 35.6% of all clothing and shoes sold in the United States were actually manufactured in China, compared to just 3.4% made domestically. Below is a look beyond the everyday implications of globalization and towards the economic implications that impact international investors.
Globalization Benefits World Economies
Most economists agree that globalization provides a net benefit to individual economies around the world, by making markets more efficient, increasing competition, limiting military conflicts, and spreading wealth more equally around the world.
However, the general public tends to assume that the costs associated with globalization outweigh the benefits, especially in the short-term, which has caused problems we’ll explore in the next section on protectionism.
The Milken Institute’s Globalization of the World Economy report highlights many of the benefits associated with globalization while outlining some of the associated risks that governments and investors should consider.
But, in aggregate, there is a consensus among economists that globalization provides a net benefit to nations around the world and therefore should be embraced on the whole by governments and individuals. Some of the benefits of globalization include:
- Foreign Direct Investment. Foreign direct investment (“FDI”) tends to increase at a much greater rate than the growth in world trade, helping boost technology transfer, industrial restructuring, and the growth of global companies.
- Technological Innovation. Increased competition from globalization helps stimulate new technology development, particularly with the growth in FDI, which helps improve economic output by making processes more efficient.
- Economies of Scale. Globalization enables large companies to realize economies of scale that reduce costs and prices, which in turn supports further economic growth, although this can hurt many small businesses attempting to compete domestically.
Some of the risks of globalization include:
- Interdependence. Globalization leads to the interdependence between nations, which could cause regional or global instabilities if local economic fluctuations end up impacting a large number of countries relying on them.
- National Sovereignty. Some see the rise of nation-states, multinational or global firms and other international organizations as a threat to sovereignty. Ultimately, this could cause some leaders to become nationalistic or xenophobic.
- Equity Distribution. The benefits of globalization can be unfairly skewed towards rich nations or individuals, creating greater inequalities and leading to potential conflicts both nationally and internationally as a result.
That would depend on who is trying to globalize. It will reap different benefits depending on the group. For example, the US globalizing in an attempt to spread their influence across the world is important in order to secure US interests worldwide. While Chinese globalization might be about trying to expand markets for Chinese goods to other countries. Brazilian globalization could be about trying to spur investment in the nation. Afghanistan globalizing could be about trying to garner more international aid for the War on Terror. It all depends.
Globalization is scary for a lot of people, and with good reason. It often leads to conflicts of one kind or another. Those who are in support of globalization must believe that mankind can overcome our differences and be friends. And there is also something to that.
Globalization is essentially where the people of the world start to come together more and more. Cynics say this leads to more conflict. That does have no small sum of historical basis to it. Optimists say that it will lead to a closer mankind. There is evidence on both sides. Ultimately, it is something for historians to decide on two hundred years from now whether it was the right decision or not.
But globalization does provide a few important things for the people involved. The IMF describes it as having 4 hallmarks and positives: Trade, Investment, Immigration, and Spread of Knowledge.
Trade: Producers of goods from all over are able to sell their goods all over the world and the consumers can buy goods from around the world as well. All of it promotes a more interconnected global economy and enables people to have a wider variety of goods at their disposal. Think of the relationship between NAFTA and Guacamole as an example. Because of NAFTA it was possible for avocados can be moved up from Mexico to America and turned into guacamole and put on American tacos. Because of NAFTA Americans started eating much more guacamole (How the Avocado Became the Fruit of Global Trade).
Investment: When investment is open across nations, it means that there is usually mutual growth and prosperity. If countries don’t have much developed infrastructure but a lot of potential, then a more prosperous country will likely invest in that less developed country. When the developing country starts to improve after using the investments, their country gets better and the country that invested gets money themselves. It is a perfect cycle where the constant is that everyone starts making money (Finance and Development).
Immigration: When people are free to chose what country they want to live in it can really improve things, for both countries and for the immigrants especially. Setting aside the moral argument either way, lets focus on economic. Again, this is mostly academic but many people argue that it can certainly increase productivity. It does so for both countries where other countries can make better use of the skilled laborers and the sending country can focus on implementing policies that help develop the unskilled labor instead (No Man Left Behind).
Knowledge: Only fools think that everyone can have all the knowledge in the world. You can have a small amount of general knowledge or you be specialized and know a lot about one particular topic area. Without the spread of information, then you have more people who have to learn a small amount about everything instead of specializing. It makes a really big difference when you have a hundred specialists putting the puzzle together when working in unison. Take medicine as an example. If we have more globalization then various labs across the world can specialize in different forms of medicine. So a lab in Belgium can develop the next generation of cancer medicine while a lab in Mexico can develop innovative neo-natal care practices, a Chinese lab can research super-antibiotics, while a US lab can focus on developing safer surgical protocols for surgery. Thus, each country can focus its resources in a more effective manner. And more than that, it can have to do with cultural knowledge as well, enabling people to get along better.
Again, since the world has never been truly globalized the arguments are entirely academic, but we will have to watch and see what happens as the world slowly starts to come together more and more.
Yes, it allows specialization and comparative advantage to work: you do only what you’re good at, export it in big quantities and import the rest, roughly.
The products used to be so simple that basically any country could make any of them (say, a horsewagon, a military rifle, a kerosene lamp). Not anymore.
In 1970s Intel has designed first truly widespread CPU, 8080. The transistor count was smth like 6,000. I’ve read somewhere that working out the design cost Intel several hundred thousand dollars.
Fast forward to today:
Nowadays modern CPUs have transistor counts in billions. What used to be a simple process turned into something that requires Intel to spend something on the order of $10bln to set up a single fabrication facility. And those are just capital costs.
Mergers and acquisitions happen not because Evel Businessmen want it that way, they happen because making products and services ever more sophisticated and capable and serving ever more demanding public is increasingly costly.
That in turn requires global markets, so that the huge costs involved can be recouped by serving hundreds of millions of people and exploiting economies of scale: Economies Of Scale Definition | Investopedia.
Where productivity is stagnant and economies of scale cannot be realized, it leads to serious economic and/or social trouble, just two examples:
- All countries experience rising costs of healthcare (caused by so called stagnant productivity in services), regardless of the system they chose (be it US mess or European style single-payer); that puts increasing strain on their economies
- Airlines (no economies of scale to speak of): systematically in bankrupcies, unprofitable
Depends on which economic class you belong to. For the capitalist class its turning out to be a very good deal with protectionism on the backfoot and the free movement of labour relatively controllable in this day and age capital investment is really finding the world is its oyster. On the other hand the global labour force is relentlessly chasing the capital to wherever it happens to turn up. It has to in order to survive – despite the restrictions on economic migrants, low wages, poor living and working conditions and the possibility of losing your life on the journey.
Nevertheless, the history of capitalism clearly illustrates that globalisation is not a done deal and the game of swings and roundabouts is old hat with the world market in a constant state of flux. One minute its all on board for a dose of protectionism the next minute it’s abandon ship o’ye are all doomed. Crazy systems obviously will motivate even crazier people to commit themselves to even more crazier schemes if they think it will turn a profit.
Just take a look at what is happening in Thailand.
“The tsunami was nothing compared to the impact of tourism. It is a much larger, long-term problem. . . . I was born in 1972 and when I was eight or nine it was still largely virgin rainforest here on the island. By the late 1980s, though, it was mostly developed. We have now lost so much of the biodiversity and primary forest and the soil is destabilising in many places. The construction of hotels upstream is creating a lot of sediment in the water and this causes damage to the coral reefs when it washes out to sea. It also affects the mangroves on the east coast. A lot of our waste water –about 40 per cent – is still being pumped out to sea on the west coast where all the resort areas are.
Land is now so expensive here due to tourism; the cost of living is even higher than Bangkok – it has meant that many local people have been forced to sell off their ancestral home and have now lost their only real asset. There is even competition for schools here for the first time. And there is a lot of overfishing here; this is for export rather than for the tourists per se, but lobsters are now being brought in from Burma to meet the tourists’ appetite for these vulnerable creatures. The corals are also damaged by tourism. Snorkellers actually cause more damage than divers because they touch the coral more often….” (Leo Hickman, The Final Call – In Search of the True Cost of our Holidays, 2007)
In a sane society such upheavals would not just beed as crazy but also as just plain stupid. Yep globalisation and its opposite number protectionism just sucks!
It is said that we are living in a time where change is the only constant. This applies to globalization too. Although globalization has many dimensions and affects all of us in many ways, economic dimensions are most important. So let me answer this question by explaining the Virtuous cycle of globalization.
The economic virtuous cycle of globalization
Globalization allows the free flow of capital, labor, and entrepreneurs. So shifting of production unit by one MNC into another country brings these 3 things with it. It creates new economic opportunities in the host country. For example the growth of the IT sector in India. It leads to the skilling of the workforce to meet the demands created by these MNC. If gov of the host country is adoptable, then they can frame their economic policies to ensure every section of society can reap benefits from this new development. If this economic growth becomes the inclusion of all kinds of people it’s can give huge dividends to everyone.
Increases in newly added salaried classes lead to an increase in standards of living of the people. People start to demand new services and goods, which further leads to economic growth. In the process, it creates wealth in the host country. At the same time, it can lift millions out of poverty. It adds economy host country into global supply. chain. This further leads to spillover effects on other sectors of the economy like infrastructure, logistics, and travel.
Once people are skilled in any sector for long. They seek to start their ventures. Since they have global exposure now. Leading to the creation of the local entrepreneurial ecosystem. Which brings more money into the host country. So saving in entire economic increases due to growing income. If this saved money is invested well can further open gates for economic development. In the process, there is an increase in digitization of the economy, and shifting focus from manufacturing to the services sector. contributions to the economy. So by now the country which was the host for global MNC creates its own global Blue chip companies.
Starting exporting its surplus capital in search of more profits.
This cycle continues…!!!! This is the economic aspect of globalization. The so-called virtuous cycle of globalization.