Pros and Cons of Globalization
Globalization is a system of interaction between countries throughout the world aimed at developing the global economy. Globalization refers to the worldwide interconnectedness of economies and societies. Advances in communication, transportation, and infrastructure enable technological, economic, political, and cultural exchanges, resulting in globalization. Since the 1980s, when computer technology initially made it easier and faster to do international business, the phrase has been used in this meaning. The key aspects of this integration are international trade and cross-border investment flows. As a result, globalization is an amalgamation of interaction and integration among distinct groups of people, organizations, and governments from other countries.
Globalization is based on the comparative advantage hypothesis, which holds that countries that are good at producing a particular good are better off selling it to less efficient countries. In turn, the latter country can export the items it produces cost-effectively to the former, which may be lacking in the same. The basic concept is that not all countries are capable of manufacturing all types of goods, hence trading with one another is beneficial. Furthermore, due to wage disparities and the diverse ways that different countries are endowed with different resources, countries stand to benefit from trading with one another.
Advantages of Globalization
1. Globalization brings the world’s advanced economies closer:
Globalization allows the world’s most powerful economies and governments to collaborate to achieve great things. This process frequently strives to make the world a better place, whether we are creating space stations that circle our globe, sending missions to the moon, or inventing affordable solutions to combat famine. The cost of these vast initiatives is frequently too high for a single country to bear alone. Humanity can use its diversity to solve any challenge if it works together in a cooperative spirit.
2. It helps to keep the world’s politics in check:
Even if populism and elitism are on the rise around the world in 2021, globalization processes still foster more cooperation than isolation. When economies are isolated from one another, they do not grow as efficiently as when they collaborate. That is to say, there will always be some amount of import-export opportunities since there is no other way to sustain the standard of living.
3. People gain increased power as a result of globalization:
Governments strove to centralize power into a small group of individuals or a single individual before we had tools like the Internet to enable access to e-commerce platforms because it was the best method to bargain on a nation-to-nation basis. That worked perfectly if there were structures in place to safeguard the broader public, but it also harmed many groups, particularly those of Jewish ancestry. There is less of a need to solidify dominating powers if we move toward a larger attitude of cooperation and open communication. We may employ checks and balances systems to ensure that power remains in the hands of the people, reducing the problems that arise when one person has absolute control.
4. Globalization opens up more opportunities for free trade:
When we concentrate on the national borders that exist in our world, we limit unrestricted access to goods and services. Even when they exist between allies, duties, and tariffs limit the number of import opportunities available. Even if the high fees are solely applied to luxury goods, it encourages buyers to evade the rules that prevent them from getting what they want at a reasonable price. Currently, there are more than 1,500 different trade barriers in existence that have an impact on global trade. Globalization helps us to focus our energies on what we require rather than enforcing standards that we have devised for ourselves.
5. Currency manipulation is less of an issue as a result of globalization:
One of the objectives for the Eurozone’s creation was to limit the power of currency manipulation in the import-export market to assist the European Union’s progress and build a cooperative market. Rather than fighting for the lowest pricing, and sometimes even depreciating the economy to achieve a better contract, working together produces mutually beneficial results because all governments may benefit from economies of scale.
6. Globalization facilitates the spread of information and technology:
In a worldwide society, art and culture aren’t the only things that spread more easily, Information and technology are in the same boat. Consider the emergence of mobile banking in Kenya or the practice of microlending as examples. Civil society organizations can draw inspiration from other countries, and successful ideas can spread more quickly.
7. Earnings fluctuate:
Wages for many workers in the originating nations have declined as more corporations take advantage of international outsourcing options. Companies in poor countries can offer their services at a considerably lower cost than those in countries with higher living standards. Thus, it created an impact on workers of the larger countries. When operating in less developed countries, businesses can take advantage of the opportunities provided by globalization by paying cheaper salaries and having reduced overheads. Other savings can be gained in countries with lower taxes, less red tape, and lower business costs.
Disadvantages of Globalization
1. Globalization Has the Potential to Promote Cultural Homogeneity:
As people’s preferences converge and products can’t compete with cheaper multinational ones, globalization may lead to increasing cultural homogeneity. Near future, we may lose valuable cultural customs. Some critics of globalization believe due to this goods are becoming homogeneous and people will use the same kind of things from cars to food habits. Homogenization is something that is imposed on people by market forces and it treats people as a product. Due to this, the global tendency could not eliminate cultural diversity, and thus, it creates a popular monoculture.
2. Multinational Corporations Gain Power as a Result of Globalization:
Globalization has also been criticized for empowering transnational businesses at the expense of governments and populations. This erodes state sovereignty and people’s ability to hold their leaders accountable for the state of their countries. Multinational firms may also use trade agreements to press for advantageous clauses.
3. Unbalanced Development:
Globalization can result in unequal growth across and within countries. Economically and morally, these consequences must be properly managed. Globalization frequently has the consequence of boosting immigration within countries. In terms of macroeconomics, immigration boosts gross domestic product (GDP), which can be beneficial to the recipient country. However, if immigrants’ income is lower than the average income of people already in the country, immigration may cut GDP per capita in the near term. Furthermore, immigration, like competition, can benefit the country as a whole while imposing costs on people who may want their government to limit immigration to shield them from those costs.
4. Globalization has failed to protect workers, the environment, or human rights:
Globalization has the potential to spread principles and practices like environmentalism and labor rights all over the world. In practice, though, the expansion has been slow and uneven. Instead of exporting labor regulations that a firm may be required to follow in the United States, it may choose to follow weaker standards in another country where labor is not protected. Some say that globalization has resulted in a “race to the bottom,” in which businesses actively seek out countries with the weakest labor and environmental safeguards, as well as the lowest pay. While globalization has enhanced the flow of products, services, and capital, there are still many tax havens, implying that governments are not capturing and redistributing much of the wealth gained by globalization.
5. Low-cost labor marketplaces are exploited:
Globalization enables firms to expand employment and economic prospects in underdeveloped countries, where labor costs are frequently lower. However, these countries’ total economic growth may be modest or stagnant.
6. Cause of employment loss:
Globalization creates more employment, but it redistributes them by shifting production from high-cost countries to low-cost countries. When a result of globalization, high-cost countries often lose jobs as production moves outside.
7. Concerns about the environment:
Globalization has been related to several environmental issues, many of which are serious, such as:
- Economic specialization and infrastructure development have resulted in deforestation and ecological loss.
- Higher movement of commodities results in increased greenhouse gas emissions and other forms of pollution.
- Invasion of new environments by potentially invasive species
- While existing or prospective rules and regulations manage such issues, businesses have prioritized environmental concerns and sustainability.
Financial markets, such as capital markets, money and credit markets, and insurance markets, as well as commodity markets, such as oil, coffee, tin, and gold markets, and product markets, are examples of markets where globalization is particularly prevalent. Globalization is a term that refers to the process of integrating national and regional economies, civilizations, and cultures via a worldwide network of trade, communication, immigration, and transportation. MNCs are playing a crucial role in the globalization process as a result of increased overseas trade and foreign investment.
India has reaped significant benefits from the (Liberalization, Privatization, and Globalization) LPG framework, with its GDP increasing by 9.7% in 2007-2008. India’s market capitalization is in fourth place. Despite globalization, agricultural production has remained stagnant. Agriculture accounts for 17% of total GDP. The United States has been the largest country for less than a century, with huge movements from the U.S. Since then, India and China have become two Asian nations. According to economic specialists and global research, India and China would be the driving forces in the twenty-first century. India, which is currently the world’s fourth greatest acquirer of power, will overtake Japan and become the world’s third-largest economy in ten years. Finally, the globalization transition affects our daily lives. Globalization has both beneficial and negative consequences on India’s development.