Globalization refers to the process of integration and interaction among people, companies, economies, and governments of different countries. It is a process driven by investments, information technology, and international trade. The process effects on economic growth and development, human well being, prosperity, economic development, environment, culture and behavior (Faundez and Celine 2010, pp 53).
Globalization cannot be considered as a new concept in many economies. The process has been in existence for thousands of years, as from during slave trade, where people exchanged goods and services. This spread into corporations where companies could buy and sell cross lands. Many of the characteristics of modern globalization can be considered as close to those that prevailed before the First World War in 1914 (Martell 2010, pp 9).
The elevated trends of globalization, in the past few decades, have impelled increases in investments, cross-border trading, technological changes, and international migration. Many observers believe that the world is entering into a qualitatively new phase in global economic development. For instance, since 1950, international volumes of trade have increased by 20%. Surveys indicate that by 2010, foreign investments have nearly tripled to an approximate of $1200 billion dollars.
The wave of globalization draws its debate from Thomas Friedman who distinguishes the current growth from previous trends as faster, further, deeper and cheaper. The process remains to be the center of current debates on its pros and cons. Recent debates have concluded that globalization creates interconnectivity, independency, and complexity in growth, which is more tremendous than what happened before the First World War. The ultimate results of globalization can be said to be positive though its effects on environment, political grounds, and inequality pulls all its positivity down. The effect of globalization can, therefore, be said to be somewhere between being advantageous and disadvantageous. However, its effects can be considered as more advantageous to an economy than its limitations.
Globalization is highly characterized by improvements in infrastructure, technology, telecommunication, and ever increasing trends in efficiency and capacity development. It leads to movement of capital and labor, which increases opportunities, increased production of variety of goods and services, and rise in investments. It leads to knowledge diffusion, invention and innovations, and generation of development ideas (Martell 2010, pp 8). A significant example is on the introduction of automotive farming machines in Asia. It leads to growth of NGO’s and Multinational Corporations, which provide global connectivity.
Globalization leads to opening of economies on local and international perspective. It leads to an adoption of free market system where variety of goods and services are traded. This leads to increase in production potentials, and growth of investment ideas. Increased investments imply growth and development, job creation, reduction of poverty, and increased individual welfare. Local corporations also take this advantage by; setting up foreign factories, establish new production, and new foreign consumers (Prasad 2003, pp 2002). This has led to creation of international financial and industrial business structures.
Technological input is also a beneficial characteristic especially to developing economies. Foreign investors bring across new technological developments, which boost production (Faundez and Celine 2010, pp 36). The introduction of information technology bring across human economic factors such as new consumption trends, tools for identification of business opportunities, faster and informed economic trend analysis, and effective transfer of assets. This boosts production, marketing, distribution, and consumption awareness.
Globalization is, however, considered as controversial; its proponents argue that the process allows individuals and poor economies to grow economically by raising their living standards. Its opponents argue that the introduction of unfettered international trade benefits developed economies more than it does to developing economies. The foreign investors benefit at the expense of local entrepreneurs, local resources, local cultures, and common citizens. Most of these foreign investors pose a massive threat on local environment (Faundez and Celine 2010, pp 67). Waste disposals are released on land, water and atmosphere leading to pollution that is a hazard to human health.
The investors impose their own rules on how to manage the available resources like land and labor. Foreign investors use imported resources even if the resources are locally available. This implies that the locally available resources are either put into unproductive use or are misused. These resources could, however, be used by local investors to promote local businesses and save or add value on their use (Martell 2010, pp 8).
The investors dictate on wages and salaries, and exploit the owners of these resources to their benefit. Local governments only receive a percentage of the income earned from these investments while the rest is exported to their countries of origin. At its core, the process is an easing of borders, which makes them less significant as economies become dependent on each other to survive. It is characterized by increased inequalities between economies, and this makes them vulnerable. The process interferes with political systems of a country, weakens some economic structures, and dictates consumption trends.
In addition, globalization is associated with creation of social divides. While outsourcing may create employment for one country, it does this at the cost of the people from the country that outsources them. The controversy lies on the share of profits earned in relation to costs. Furthermore, it is only a section of the society that has the ability to afford to outsource. This implies that the jobs created are only favorable to a section of few individuals in society. This leads to lack of uniform development, and societal imbalances. The insinuation that globalization relates to increased poverty levels may be true if job creation is considered. A significant example can be derived from India and China. These two countries have an open market where n overwhelming majority of poor citizens, living in rural areas, benefit. The benefit accrues to the extended economies of scale where foreign investors create opportunities, which provide sustainable profits for these people (Prasad 2003, pp 2005). The limitation lies on the skewed growth in urban centers and lagging growth in rural areas. This is in relation to technology, infrastructure, modernized communication, and housing.
When foreign goods and services flood in a local market, local consumers tend to shift their consumption at the cost of locally produced commodities (Martell 2010, pp 12). This is more common in developing and underdeveloped nations than in developed economies. This leads to massive losses accruing to local producers. Take an instance of a local manufacturer who does not have enough resources to export the products; in this case the manufacturer will only depend on local consumers. If foreign investors import substitutable products, and at cheap prices, the local consumers will shift to the imported products. The interpretation is that globalization, and free markets do not favor local producers.
With so much being emphasized on imported products, people tend to forget their locally produced goods (Martell 2010, pp 16). They disregard their consumption culture, traits, behavior, and ethnicity. Take an instance of foreign fashion being introduced to developing economies. Such a case has led to disregard of cultural dressing codes to fashionable designs that contribute to cultural disregard. The effect is brain drain, which mostly affects the youth, and this leads to lack of cultural foundation.
An analysis of the effects that globalization has on an economy may depict more advantages than limitations. The advantage lies on a whole economy perspective while the limitations lie on considering its effects on local citizens. The process impacts on positive growth and development, in developing nations, while on the other hand it increases the levels of poverty and lacks uniformity in resource distribution.
Whether globalization is positive or negative cannot be answered in white or black. Its effect always draws a grey transition between its positive and negative side. The impact it has on an economy depends on the ability of a government to enhance the balance between the advantages and disadvantages (Martell 2010, pp 13). The government in any economy should be responsible for protecting its citizens and resources by drawing up policies that foreign investors should adhere. How many nations have the capability to do this still remains the issue in making globalization favorable to developing economies.
Reference.
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Faundez, Julio, and Celine Tan. International Economic Law, Globalization and Developing Countries. Cheltenham, UK: Edward Elgar, 2010. Print. Bottom of Form
Martell, Luke. The Sociology of Globalization. Cambridge: Polity, 2010. Print.
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Prasad, Eswar. Effects of Financial Globalization on Developing Countries: Some Empirical Evidence. Washington, D.C: International Monetary Fund, 2003. Print.
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