Introduction
Globalization is the worldwide movement toward integration of economics, financial integration, trade and communication in order to improve the world’s economy. It also involves scientific, economic, political, as well as cultural exchanges which are made possible by improvement of communication, transportation, and infrastructure. Different opinions exist about the costs and benefits of globalization (Bradford et al., 2003). These differences are brought about by disagreements about the effects of globalization, empirical evidence is frequently disputed and economic benefits and costs of globalization are irregular between existing individuals and future and present generations and also between countries. There is no agreement on how interpersonal comparisons of economic benefits and costs should be made. Thus it is impractical to expect a single monetary figure to be estimated so as measure the net total benefit of globalization.
Benefits of Globalization
Free Trade:
Globalization allows countries to exchange goods and resources. Nations can specialize in producing goods at a lower opportunity cost. The specialization of countries in producing goods has several gains on the trade. These gains have reduced commodity prices for consumers, wider choice of products, larger export markets for domestic manufacturers, greater competition and improved economies of scale (Elliott & Lemert, 2006).
Free Movement of Labor
Increased labor movement has advantages to both employees and recipient countries. For if a country high unemployment level there are more opportunities to search for work elsewhere. The process of labor movement also helps reduce geographical inequality such as labor shortages in certain countries. However, the labor movement is quite controversial since some people believe that it can cause excess pressure on housing and social services in certain countries.
Increased Economies of Scale
Since production of goods is greatly specialized, globalization enables products to be produced in different parts of the world. This specialization makes it possible for the goods to be available to consumers at lower prices.
Greater Competition
Domestic monopolies used to be secured by lack of competition. However, with globalization in place firms face competition from other foreign firms.
Increased Investment
Globalization has led to increased investment levels since it has made it easier for other countries to attract investment. Investment by big companies can play a big role in improving the economy of developing countries.
Costs of Globalization
- Free Trade can Destroy Rising Economies
In most cases free trade only benefits the developed countries since the developing countries are still struggling to reach the developed countries. According to Elliott and Lemert (2006) views, industries in developing countries need to be protected from free trade so that they can develop. Developing countries are harmed by tariff protection western countries have on agriculture. The Western countries most of the time ends up violating the free trade norms (Waters, 1995).
- Environmental Costs
Globalization has increased the use of non-renewable resources and led to increased pollution on the environment and global warming.
- Labor Drain
Globalization has led to labor migration due to unemployment in certain countries. Some workers move to other countries in search of greener pastures and high wages. This makes it difficult for countries to maintain their best skilled workers.
- Less Cultural Diversity
Globalization has led to increased economic and cultural hegemony (Sjursen, 2000). It has led to cultural erosion since people interact leading to adopting other peoples cultures.
- Tax Competition and Tax avoidance
Big companies end up paying very little taxes since they set up their offices in other developing countries which have low rates of corporation taxes and funnel their profits through these subsidiaries. Thus they end up paying less taxes in the countries they are doing business which is unfair competition to domestic firms who don’t use tax
References
Bradford, S. C., Lawrence, R. Z., & Institute for International Economics (U.S.). (2003). Has globalization gone far enough?: The costs of fragmented international markets. Washington, DC: Institute for International Economics.
Elliott, A., & Lemert, C. C. (2006). The new individualism: The emotional costs of globalization. London: Routledge.
Sjursen, K. (2000). Globalization. Bronx, N.Y: H.W. Wilson Co.
Waters, M. (1995). Globalization. London: Routledge.
