Globalization refers to the increased integration and global interconnectedness of markets, trade, culture and products. Globalization is enhanced by technological advancements and transnational investments. People around the world are getting more closely connected than before. Goods and services produced are becoming available in all parts of the world irrespective of where they were manufactured. Money and information is also flowing rapidly while international communication and travel are commonplace. This paper discusses the pros and cons of globalization.
Pros of Globalization
There are several benefits that are a direct consequence of globalization. Firstly, companies have a wider market for the goods and services they produce while consumers have a wider variety of goods and services. Globalization implies that companies are able explore new markets in different countries other than their domestic market. This has resulted in the emergence of large multinational corporations that have a wider revenue base hence improved profitability. Multinational companies are also able to achieve lower production costs due to economies of scale.
Secondly, consumers have access to products produced in different countries; therefore, they have a wider variety of goods to choose from. Consequently, consumers are able to buy goods at a cheapest price and of the highest quality. For example a consumer may choose a product made in China over one made in America if both products have the same quality and the product made in China is cheaper.
Thirdly, globalization has resulted in increased economic growth. This can be attributed to two factors; foreign direct investments and increased production. Globalization facilitates foreign direct investments which stimulates domestic capital formation and improved productivity and efficiency. The presence of worldwide markets also stimulates local companies to increase their production to meet the increased demand. Fourthly, globalization has resulted in reduced unemployment and increased employment opportunities. Multinational corporations as well as expanded production of domestic companies have reduced unemployment rates. Similarly, globalization has made it easier to be employed in other countries. People nowadays can work virtually in any part of the world thanks to information technologies.
Fifthly, globalization has facilitated the mingling of persons from diverse cultural backgrounds which has made people aware of other cultures. Cultural intermingling is facilitated by information influx from different diverse countries and international travel. Countries are also able to export their culture through cultural tourism, cultural festivals, theatre, movies and sports. In the process, people adopt different cultural practices. In the same vein, people across the globe have become more tolerant towards other people who live in different parts of the globe as they appear more sociable than before due to cultural diffusion.
Sixthly, globalization has made it easier to solve global ecological and environmental challenges. Solutions to problems such as cross-boundary water, climate change, over-fishing in international water bodies and air pollution can only be obtained through international co-operation. Countries can come together to form standards and regulations that must be met by all countries. Globalization has also resulted in the emergence of worldwide financial markets and improved accessibility to external financing. Globalization has resulted in integration of the financial systems and securities markets. Therefore, firms are able to borrow from foreign financial markets and financial institutions. This implies that firms are able to obtain funds at lower costs and better terms than ever before. Financial openness has also reduced information asymmetry in the financial markets reducing the borrowing to both households and firms. Lastly, globalization provides developing countries an opportunity to develop through capital and foreign technology infusion. By spreading prosperity and economic development, globalization creates an environment in respect for human rights and democracy may flourish.
Cons of Globalization
Despite the numerous pros of globalization, there are a number of detrimental effects that are a consequence of globalization. The most common disadvantage of globalization is that individuals in developed countries are at risk of being rendered jobless. Many companies in those countries are resorting to outsourcing their labour costs to developing nations. This is because the cost of labour in developing nations is significantly lower than that in developed nations. The companies are entirely focusing on their own welfare by minimizing labour costs and maximising profits. However, they are risking increasing unemployment levels in Europe and America where there are developed nations.
Globalization has led to the emergence of powerful corporates. These corporations have a lot of money because they operate in many countries in the world and have influence over global business. The money invested by these corporates matches their powerful nature. There is a threat that these corporates will one day rule the world. They can influence what a country has to do to develop. Usually, these corporates have so much power that they push through their interests by coercing the countries they have invested in to do what would benefit the corporates. Furthermore, if these multinational corporates collude to make decisions on global issues, it may be difficult to stop them regardless of whether the decision is good or bad to the rest of the world.
Developing nations are some of the biggest beneficiaries of globalization. However, this could be a kind of sophisticated colonization for these countries. This is because these countries are given financial help and benefit from foreign investments. However, when foreign corporations invest in a country, they do so on their own terms. These corporates make profits but take all of them to their mother country. It remains that developing nations are being colonized again because they are used to produce goods at low labour costs, and cheap raw materials yet they gain very little.
Globalization can also cause the loss of cultural identity. Globalization is an all-western idea that has spread to other parts of the world. When this ideology becomes part of a traditional society such as an African country, there is change in mentality among people in the country. To embrace globalization, a country has to sacrifice their cultural identity to adopt the new western idea, this risks cultural diversity in the world.
Globalization has contributed to the some negative impacts like social degeneration and communicable diseases. With improved technology, individuals are exposed to radiations from machines and other kinds of chemicals which could lead to diseases of many kinds. Furthermore, it has caused social and moral degeneration because of the continuous interaction of people of many cultures. People work away from their family and friends when they go to work abroad. This increases their chances of misbehaving or breaking the law.
Globalization has bad and good effects on the world economy. However, it is clear that the benefits of globalization by far outweigh the negatives. Globalization helps the world economy become stronger, promotes international integration, enhances productivity around the world and encourages growth in less developed nations. There is also equitable resource distribution when there is globalization. Therefore, globalization is a necessity for the world economy. It must be embraced by all nations because of its positive impacts. Besides, some of the negative impacts can be averted.
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