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Globalization's Biggest Threat -- Slow World Economic Growth

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Globalization's Biggest Threat -- Slow World Economic Growth

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In the beginning of globalization economic growth was a benefit to every country all around the world. However, recent studies shows in the past couple of years Southern European countries have been slowing down with economic growth because of the huge debt which is crippling Europe's southern countries. Considering the huge debt in the Southern European countries, the north and the south are now at a strong dislike with one another. If this becomes too serious this could arise political officials and start something huge. This will not only effect Europe as whole but this will threaten the Euro and integration.

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As the World's Economic Forum begins in Davos, globalization is facing a big problem-slow world economic growth, which is fueling anti-global sentiment in key parts of the world.

That's bad news for the world's large corporations, which have been benefiting from open markets and free trade. Wall Street should take note.

For years, globalization -- the increasing integration and interdependence of local and national markets -- and economic growth have supported and reinforced each other in a virtuous cycle. Globalization helped economic growth by lowering the cost of doing business around the world for local producers, on the one hand -- and by expanding business opportunities for the world's large multinational corporations like Apple, Cisco Systems, Intel, Samsung Electronics, Applied Materials, and Sony Corporation-to mention but a few.

Economic growth, in turn,set the world economy into a virtuous cycle of income and employment gains, which pacified opponents of globalization, and helped the expansion of free trade agreements which supported and reinforced globalization.

High growth, for instance, provided support for the expansion of EU and the creation of NAFTA and APEC. This reinforced globalization in key regional markets around the world -- especially since the collapse of the Berlin Wall, which marked the end of the old ideological wars (nationalism and communism) and the ease of nationalist tensions.

But i n recent years, slow economic growth fueled by mounting sovereign debt has been threatening globalization. And this has revived the old ideologies of nationalism and communism, pitting sovereign borrowers against sovereign lenders, and anti-global forces against pro-global forces.

The current situation in the EU region is a case in point. Mounting sovereign debt in Southern Europe has pitted Southern countries against Northern countries, reviving old animosities that go back to the two World Wars.

That in turn is fueling the rise of extreme political regimes, which threaten European economic integration and survival of the Euro, undermining overall European economic growth and worsening the debt situation for the Southern countries.

That's certainly bad news for the economic future of Europe. And for the global economy.

The Asian region is another case in point. A two-decade long stagnation of the Japanese economy, which has taken its toll on the lives of Japanese people, provides fuel to the nationalist mill. Nationalism usually rises during periods of economic stagnation, as trade between countries is considered an economic threat rather than an economic opportunity.

Compounding the problem, Japan's precipitous devaluation of its currencies has exerted competitive pressures on both China and Korea, threatening an all-out currency and trade war in the region - not to mention reviving of territorial disputes between Japan and China over a few rocky islands. Anti-Japanese demonstrations in China reinforced this sentiment among the Japanese while resulting in a big Chinese backlash towards Japanese companies with a big presence in that country.

And that is also bad news for the economic future of the Asian region and the global economy.

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Globalization's Biggest Threat -- Slow World Economic Growth

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As the World's Economic Forum begins in Davos, globalization is facing a big problem-slow world economic growth, which is fueling anti-global sentiment in key parts of the world. That's bad news for the world's large corporations, which have been benefiting from open markets and free trade. Wall Street should take note.

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When companies start to grow from globalization and free trade they start to expand their company and workers to other countries. Countries use this method because the cost of labor is lower when expanding into other countries, typically in the third world. Though people think that children “do not have have a voice” and easier to convince. Many people say globalization increased child slavery and child labor because of expanding their companies to third world countries and not having the same laws. Officials use bribery as a way to get the children to work for them. It is cheaper and more efficient for businesses.

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In order to cut down costs, many firms in developed nations have outsourced their manufacturing and white-collar jobs to Third-World countries like India and China, where the cost of labor is low. The most prominent among these have been jobs in the customer service field as many developing nations have a large English-speaking population - ready to work at one-fifth of what someone in developed world may call 'low-pay'. This has caused a lot of resentment among the people of developed countries, and companies have been accused of taking their jobs away. Another problem is that many Americans are not satisfied with the level of customer service that they are subjected to, and this has caused a lot of animosity among people and has added to the dissent that people already have against outsourcing.

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The Negative Effects of Globalization Not Many of Us are Aware Of

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In order to cut down costs, many firms in developed nations have outsourced their manufacturing and white-collar jobs to Third-World countries like India and China, where the cost of labor is low.

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Impact Of Globalization: The Good, The Bad, The Inevitable

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Impact Of Globalization: The Good, The Bad, The Inevitable

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Many people think of competition as good thing that gives consumers the option of what they want, where they want it from, and how they want their product to look like. In reality, the bigger companies, like Apple, Exxon,and Google, have a bigger advantage. Consumers are loyal to these companies, even if a smaller company produces something bigger and better. For example, people all over the world from England to Japan know about Apple products and don’t have much knowledge about smaller technology companies. Many small business that were around before globalization were destroyed by big name brands because of this.

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Globalization is not a new concept in the world. It may be farther along and advancing at a faster rate than ever before, but globalization has been around for hundreds and, arguably, thousands of years. The Silk Road spanned one-sixth the diameter of the planet - literally connecting the West and the East - and began during the Han Dynasty (roughly 200 B.C.).

Integrating a global economy is nothing new, but the modern implications in global business are bigger and stranger than ever before. Below we examine what it means to play a part in a global market, but you can bring yourself up to speed with this course on the geography of globalization and how it simultaneously shapes our cultures and economic relationships.

What, Exactly, Is Globalization?

There are two ways of looking at globalization. One is as an accidental or inevitable affect of economic growth; industry, technology, communication, etc. As the economy grows, it is only natural for a global market to become established in previously local areas. For this to happen, free trade and the free movement of capital are essential. Globalization is not just expansion; it is, as Merriam-Webster nots, "an increasingly integrated global economy." For integration to occur, economic freedom is necessary. Expand your knowledge of our global economy with this five-star course on finding success in global business.

The second way of looking at globalization is as a deliberate process, and this is almost certainly more accurate. Yes, there is a degree of inevitability involved, but this is due in large part to the agreements made between nations, between corporations, etc. Business wants globalization and it has almost single-handedly caused it to happen. The Silk Road was not a humanitarian effort. It was about a vision of business. And these visions become grander and more easily conceived as technology and politics progress so fast that globalization does, after all, seem inevitable.

Globalization: A Purpose

There is not one purpose of globalization; there are many, many more than I can list. But from this point forward I want to abandon this general talk of globalization and focus solely on the economy; or, more specifically, globalization and business.

So why do businesses actively work to make globalization happen? An initial answer is easy: cheaper production costs and more consumers to sell to. Globalization has a hand even in the smallest businesses (at least, in first-world countries). And where do these businesses go for cheaper production costs? China is the cliche example, but other popular options include India, Brazil, Russia, Mexico, Bolivia, Indonesia and a number of Eastern European countries.

The first company I worked for when I lived in New York employed about 15 people, yet all of our production was out-sourced to China. Even a small business can benefit from the incredible production savings to be found overseas, and this (along with the obvious fact that there are more people to sell to) is why businesses actively and aggressively promote globalization.

If you need help expanding your own business, this course on international expansion will help you formulate an action plan to expand business through international sales and partnerships.

In the end, globalization is all about competition. Lower production costs? That's a competitive advantage. More consumers? Another competitive advantage. Untapped markets, different services, investment opportunities . . . all competitive advantages. As soon as the first company went global, everyone else had to follow suit to keep up. Globalization is about growth, sure, but it is also about establishing the ultimate competitive position: diverse resources, diverse interests, diverse markets, diverse acquisitions; in a word, a portfolio so diverse it can only be attacked piece-meal, i.e. the proverbial "unsinkable ship."

If you're anxious to learn how to create your own competitive advantage, check out this post featuring 7 competitive positioning tips and strategies.

The Benefits Of Globalization

For some people, globalization is synonymous with world destruction. In the end - who knows - maybe this will be true. But in reality there are many good things that have resulted from globalization. In this section, I will still focus on the economy, but I would also like to touch on some social advantages, as well. For more information regarding the positive impact of globalization, check out this blog post on the benefits of globalization in the modern era.

Many Americans do not appreciate how efficient our markets are (efficiency here meaning supply and demand). These efficient markets allow economies to grow, and in a global world, when one economy grows, it spurs growth in all the other economies that are connected to it. In this way, reverberations of success are felt across the world, even when they are most profound in one area. Needless to say, this is a very good thing.

This is partially a result of what I just mentioned, but wealth equality around the world goes much deeper than that. Perhaps a better phrase than wealth equality is "standard of living." Globalization does several things nobody can deny: it creates jobs, it improves infrastructure and it allows more people to live at a higher global level every day (access to medicine, clean water, food production, housing, etc.).

Globalization results in partnerships between countries and organizations. This makes relations much more stable between both. Agreements are agreed to, and as long as these are upheld, a kind of world-cooperation is sustained. Having these friends with (economic) benefits provides both stability and security for countries that wish to remain peaceful and prosperous.

This course taught by Dr. Bentkowska (PhD Economic Sciences) focuses on the research of legendary economist Paul Krugman and how international trade creates and affects a new geographic economy.

Globalization allows important processes to happen more efficiently and important ideas to become reality. There is a certain irony involved in this, however. For example, globalization is going to allow the world to work together to (hopefully) solve our apocalyptic environmental predicament; but of course, this predicament is a result of globalization.

Still, it allows the human race to push forward, which at this point we must recognize as a necessity of our species. Progress is written in our DNA, and globalization has allowed us to accomplish truly incredible things (the International Space Station being one of the most far-reaching).

The Disadvantages Of Globalization

Because globalization is 100% inevitable, we must tell ourselves that the benefits outweigh the disadvantages. But do they? It depends where you're coming from, but let us first take a look at what these disadvantages are before we form an opinion. Get a different opinion from this post by Nick Gibson on the pros and cons of globalization.

Unfortunately, while competition is generally thought to be a good thing, it does not come without a sour side. If I were to say, "Some companies won't survive because of globalization," then you might say, "Then they don't deserve to survive; that's the beauty of it; the companies worth sticking around usually do."

I won't deny the truth in that, but what about the borderline monopoly that the largest companies in the world have created for themselves? Apple, Exxon, Google, etc. Whereas they were once innovators, they are now so big that politics and strategy are more important than innovation. The result of this is that smaller companies with innovative ideas have an incredibly difficult competing. And how can they? If they're lucky, they'll be bought out and walk away with a pay check; if not, they'll just be crushed, often purposefully, by a competitor that is literally a billion times bigger than them.

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I was raised in what was once the Apple Capital of the World: Winchester, VA. Over the last two or three decades, this title has (inevitably) been stripped from us; first it was by Pennsylvania, but then Pennsylvania had it stolen by China.

So now China is the Apple Capital of the World. They produce the cheapest apples, which account for roughly half the world's supply of apples. A lot of people up and down the East Coast lost their jobs, but here's the kicker: China isn't allowed to export apples to the U.S. This might change soon, but for the time being, China is able to put a lot of people on the East Coast out of business without even selling apples in the same country.

The lesson of the story is that another country can do what you do better and put you out of business without even looking you in the eye. That's globalization. But to be fair, the damage we've done to China and the benefits we took advantage of (cheap labor) are vastly more significant. Sorry, did I say "to be fair"?

I hardly need to spell this out, but I will add a thought or two. Globalization has created a global-sized need for energy and industry, and this need has been abused and ignored to the extent that the future of life as we know it has been brought into question. You may or may not believe in global warming, but you cannot deny the existence of the conversation. Does the fact that this conversation is happening not say something in itself?

Have we bulldozed our planet into trouble? Obviously, yes. The argument against this fact is that we could not possibly have caused so much destruction to our enormous planet. The facts say otherwise: we've logged over half of the world's tropical forests. And as far as how difficult it would be to change the composition of the atmosphere? The atmosphere ends a mere 60 miles above the surface of the Earth. It's just not that voluminous. It's not limitless. It's actually small, and when we work together globally, even the negative side effects of all the amazing things we accomplish are, in a word, globalized.

Good, Bad, Inevitable

Unfortunately, or maybe fortunately, globalization is simply and utterly good, bad and inevitable. Hopefully the good will out-weigh the bad, but the continued existence of both is inevitable. Because of this, we are better off accepting the truth and, like we do best, moving forward. But make no mistake: environmentalism is gaining speed. Whether you want to join the cause or just be on the front lines of a new opportunity, this course on energy, economics and the environment can help you make your choice.

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Impact Of Globalization: The Good, The Bad, The Inevitable

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Globalization is not a new concept in the world. It may be farther along and advancing at a faster rate than ever before, but globalization has been around for hundreds and, arguably, thousands of years. The Silk Road spanned one-sixth the diameter of the planet - literally connecting the West and the East - and began during the Han Dynasty (roughly 200 B.C.).

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Twelve Reasons Why Globalization is a Huge Problem

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Twelve Reasons Why Globalization is a Huge Problem

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Even though globalization may seem positive, there's a downside to every plan. Globalization uses up valuable earth resources very quickly, which is very bad for the earth. In 2001 China became a part of the World Trade Organization and their exports skyrocketed. Factories had to work faster and harder, using more burning resources such as coal, gas, and oil. When those products go into the earth's atmosphere it can be dangerous over time. The amount of resources they used increased about two tons from 1982 to 2010. Using these resources as much as China does not only increases but coal, gas, and oil is horrible for the earth.

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Globalization seems to be looked on as an unmitigated "good" by economists. Unfortunately, economists seem to be guided by their badly flawed models; they miss real-world problems. In particular, they miss the point that the world is finite. We don't have infinite resources, or unlimited ability to handle excess pollution. So we are setting up a "solution" that is at best temporary.

Economists also tend to look at results too narrowly-from the point of view of a business that can expand, or a worker who has plenty of money, even though these users are not typical. In real life, the business are facing increased competition, and the worker may be laid off because of greater competition.

The following is a list of reasons why globalization is not living up to what was promised, and is, in fact, a very major problem.

1. Globalization uses up finite resources more quickly. As an example, China joined the world trade organization in December 2001. In 2002, its coal use began rising rapidly (Figure 1, below).

In fact, there is also a huge increase in world coal consumption (Figure 2, below). India's consumption is increasing as well, but from a smaller base.

2. Globalization increases world carbon dioxide emissions. If the world burns its coal more quickly, and does not cut back on other fossil fuel use, carbon dioxide emissions increase. Figure 3 shows how carbon dioxide emissions have increased, relative to what might have been expected, based on the trend line for the years prior to when the Kyoto protocol was adopted in 1997.

3. Globalization makes it virtually impossible for regulators in one country to foresee the worldwide implications of their actions. Actions which would seem to reduce emissions for an individual country may indirectly encourage world trade, ramp up manufacturing in coal-producing areas, and increase emissions over all. See my post Climate Change: Why Standard Fixes Don't Work.
4. Globalization acts to increase world oil prices.
The world has undergone two sets of oil price spikes. The first one, in the 1973 to 1983 period, occurred after US oil supply began to decline in 1970 (Figure 4, above and Figure 5 below).

After 1983, it was possible to bring oil prices back to the $30 to $40 barrel range (in 2012$), compared to the $20 barrel price (in 2012$) available prior to 1970. This was done partly by ramping up oil production in the North Sea, Alaska and Mexico (sources which were already known), and partly by reducing consumption. The reduction in consumption was accomplished by cutting back oil use for electricity, and by encouraging the use of more fuel-efficient cars.

Now, since 2005, we have high oil prices back, but we have a much worse problem. The reason the problem is worse now is partly because oil supply is not growing very much, due to limits we are reaching, and partly because demand is exploding due to globalization.

If we look at world oil supply, it is virtually flat. The United States and Canada together provide the slight increase in world oil supply that has occurred since 2005. Otherwise, supply has been flat since 2005 (Figure 6, below). What looks like a huge increase in US oil production in 2012 in Figure 5 looks much less impressive, when viewed in the context of world oil production in Figure 6.

Part of our problem now is that with globalization, world oil demand is rising very rapidly. Chinese buyers purchased more cars in 2012 than did European buyers. Rapidly rising world demand, together with oil supply which is barely rising, pushes world prices upward. This time, there also is no possibility of a dip in world oil demand of the type that occurred in the early 1980s. Even if the West drops its oil consumption greatly, the East has sufficient pent-up demand that it will make use of any oil that is made available to the market.

Adding to our problem is the fact that we have already extracted most of the inexpensive to extract oil because the "easy" (and cheap) to extract oil was extracted first. Because of this, oil prices cannot decrease very much, without world supply dropping off. Instead, because of diminishing returns, needed price keeps ratcheting upward. The new "tight" oil that is acting to increase US supply is an example of expensive to produce oil-it can't bring needed price relief.

5. Globalization transfers consumption of limited oil supply from developed countries to developing countries. If world oil supply isn't growing by very much, and demand is growing rapidly in developing countries, oil to meet this rising demand must come from somewhere. The way this transfer takes place is through the mechanism of high oil prices. High oil prices are particularly a problem for major oil importing countries, such as the United States, many European countries, and Japan. Because oil is used in growing food and for commuting, a rise in oil price tends to lead to a cutback in discretionary spending, recession, and lower oil use in these countries. See my academic article, "Oil Supply Limits and the Continuing Financial Crisis," available here or here.

Developing countries are better able to use higher-priced oil than developed countries. In some cases (particularly in oil-producing countries) subsidies play a role. In addition, the shift of manufacturing to less developed countries increases the number of workers who can afford a motorcycle or car. Job loss plays a role in the loss of oil consumption from developed countries-see my post, Why is US Oil Consumption Lower? Better Gasoline Mileage? The real issue isn't better mileage; one major issue is loss of jobs.

6. Globalization transfers jobs from developed countries to less developed countries. Globalization levels the playing field, in a way that makes it hard for developed countries to compete. A country with a lower cost structure (lower wages and benefits for workers, more inexpensive coal in its energy mix, and more lenient rules on pollution) is able to out-compete a typical OECD country. In the United States, the percentage of US citizens with jobs started dropping about the time China joined the World Trade Organization in 2001.

7. Globalization transfers investment spending from developed countries to less developed countries. If an investor has a chance to choose between a country with a competitive advantage and a country with a competitive disadvantage, which will the investor choose? A shift in investment shouldn't be too surprising.

In the US, domestic investment was fairly steady as a percentage of National Income until the mid-1980s (Figure 9). In recent years, it has dropped off and is now close to consumption of assets (similar to depreciation, but includes other removals from service, such as removals because manufacturing has moved overseas). The assets in question include all types of capital assets, including government-owned assets (schools, roads), business owned assets (factories, stores), and individual homes. A similar pattern applies to business investment viewed separately.

Part of the shift in the balance between investment and consumption of assets is rising consumption of assets. This would include early retirement of factories, among other things.

Even very low interest rates in recent years have not brought US investment back to earlier levels.
8. With the dollar as the world's reserve currency, globalization leads to huge US balance of trade deficits and other imbalances.
With increased globalization and the rising price of oil since 2002, the US trade deficit has soared (Figure 10). Adding together amounts from Figure 10, the cumulative US deficit for the period 1980 through 2011 is $8.6 trillion. By the end of 2012, the cumulative deficit since 1980 is probably a little over 9 trillion.

A major reason for the large US trade deficit is the fact that the US dollar is the world's " reserve currency." While the mechanism is too complicated to explain here, the result is that the US can run deficits year after year, and the rest of the world will take their surpluses, and use it to buy US debt. With this arrangement, the rest of the world funds the United States' continued overspending. It is fairly clear the system was not put together with the thought that it would work in a fully globalized world-it simply leads to too great an advantage for the United States relative to other countries. Erik Townsend recently wrote an article called Why Peak Oil Threatens the International Monetary System, in which he talks about the possibility of high oil prices bringing an end to the current arrangement.

At this point, high oil prices together with globalization have led to huge US deficit spending since 2008. This has occurred partly because a smaller portion of the population is working (and thus paying taxes), and partly because US spending for unemployment benefits and stimulus has risen. The result is a mismatch between government income and spending (Figure 11, below).

Thanks to the mismatch described in the last paragraph, the federal deficit in recent years has been far greater than the balance of payment deficit. As a result, some other source of funding for the additional US debt has been needed, in addition to what is provided by the reserve currency arrangement. The Federal Reserve has been using Quantitative Easing to buy up federal debt since late 2008. This has provided a buyer for additional debt and also keeps US interest rates low (hoping to attract some investment back to the US, and keeping US debt payments affordable). The current situation is unsustainable, however. Continued overspending and printing money to pay debt is not a long-term solution to huge imbalances among countries and lack of cheap oil-situations that do not "go away" by themselves.

9. Globalization tends to move taxation away from corporations, and onto individual citizens. Corporations have the ability to move to locations where the tax rate is lowest. Individual citizens have much less ability to make such a change. Also, with today's lack of jobs, each community competes with other communities with respect to how many tax breaks it can give to prospective employers. When we look at the breakdown of US tax receipts (federal, state, and local combined) this is what we find:

The only portion that is entirely from corporations is corporate income taxes, shown in red. This has clearly shrunk by more than half. Part of the green layer (excise, sales, and property tax) is also from corporations, since truckers also pay excise tax on fuel they purchase, and businesses usually pay property taxes. It is clear, though, that the portion of revenue coming from personal income taxes and Social Security and Medicare funding (blue) has been rising.

I showed that high oil prices seem to lead to depressed US wages in my post, The Connection of Depressed Wages to High Oil Prices and Limits to Growth. If wages are low at the same time that wage-earners are being asked to shoulder an increasing share of rising government costs, this creates a mismatch that wage-earners are not really able to handle.
10. Globalization sets up a currency "race to the bottom," with each country trying to get an export advantage by dropping the value of its currency.
Because of the competitive nature of the world economy, each country needs to sell its goods and services at as low a price as possible. This can be done in various ways-pay its workers lower wages; allow more pollution; use cheaper more polluting fuels; or debase the currency by Quantitative Easing (also known as "printing money,") in the hope that this will produce inflation and lower the value of the currency relative to other currencies.

There is no way this race to the bottom can end well. Prices of imports become very high in a debased currency-this becomes a problem. In addition, the supply of money is increasingly out of balance with real goods and services. This produces asset bubbles, such as artificially high stock market prices, and artificially high bond prices (because the interest rates on bonds are so low). These assets bubbles lead to investment crashes. Also, if the printing ever stops (and perhaps even if it doesn't), interest rates will rise, greatly raising cost to governments, corporations, and individual citizens.

11. Globalization encourages dependence on other countries for essential goods and services. With globalization, goods can often be obtained cheaply from elsewhere. A country may come to believe that there is no point in producing its own food or clothing. It becomes easy to depend on imports and specialize in something like financial services or high-priced medical care-services that are not as oil-dependent.

As long as the system stays together, this arrangement works, more or less. However, if the built-in instabilities in the system become too great, and the system stops working, there is suddenly a very large problem. Even if the dependence is not on food, but is instead on computers and replacement parts for machinery, there can still be a big problem if imports are interrupted.
12. Globalization ties countries together, so that if one country collapses, the collapse is likely to ripple through the system, pulling many other countries with it.
History includes many examples of civilizations that started from a small base, gradually grew to over-utilize their resource base, and then collapsed. We are now dealing with a world situation which is not too different. The big difference this time is that a large number of countries is involved, and these countries are increasingly interdependent. In my post 2013: Beginning of Long-Term Recession, I showed that there are significant parallels between financial dislocations now happening in the United States and the types of changes which happened in other societies, prior to collapse. My analysis was based on the model of collapse developed in the book Secular Cycles by Peter Turchin and Sergey Nefedov.

It is not just the United States that is in perilous financial condition. Many European countries and Japan are in similarly poor condition. The failure of one country has the potential to pull many others down, and with it much of the system. The only countries that remain safe are the ones that have not grown to depend on globalization, of which there are probably not many today-perhaps landlocked countries of Africa.

In the past, when one area collapsed, there was less interdependence, so it was possible to let cropland "rest" and deforested areas regrow. With regeneration, and perhaps new technology, it was possible for a new civilization to grow in the same area later. If we are dealing with a world-wide collapse, it will be much more difficult to follow this model.

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Twelve Reasons Why Globalization is a Huge Problem

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Globalization seems to be looked on as an unmitigated "good" by economists. Unfortunately, economists seem to be guided by their badly flawed models; they miss real-world problems. In particular, they miss the point that the world is finite. We don't have infinite resources, or unlimited ability to handle excess pollution.

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With so many choices in this market, free trade the quality of goods increase. To still be considered in the top choices for the consumers producers stock in the best goods to make their product the best choice out their. If the consumer buys their high-quality product, they can filter out the bad and good producers. The consumer would recommend this product to other consumers and so on. If the producer is from another country like Australia, no one would ever know about this product if no one spread the word about it. This is only possible with free trade and globalization.

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Two Sides of the Same Coin

Globalization is both, good and bad. If channeled in the right way, it can open up several new avenues. If channeled in the wrong way, it can destroy economies.

Globalization is the integration of economies, societies and cultures of varied worlds through the process of technology, politics and trade. In simple words, the world ceases to exist as a divided entity by way of territories, borders and land, and seems more like a common land without barriers. In that way, it is possible to sit at one end of the world and know exactly what is going on at the other. It gives new definition to the term small world.

The fact is that all of us are affected by globalization in one way or the other. How is that? Look around you and more importantly, at you, carefully - chances are that some (or most) of the things that are associated with you are not local in nature. They are essentially foreign. For example, the clothes that you wear or the food that you eat or the popular burger joint that has opened up in your area, or the fact that you can mouth the words of the latest pop song that is all the rage in Britain, are instances of how globalization has become a part of your life. You can easily buy things that are not produced in your own country or can watch a movie that is foreign, just as easily as you would go to the market and shop for groceries (chances are, those will have a fair share of the 'foreign' filtering in as well). The examples are countless and are enough proof of the fact that globalization exists. However, to fully understand the concept of globalization and whether it is good or bad for a country, we must know its pros and cons.

1. Provides Wider Choices
Globalization is responsible for the wide range of choices in most products that are available in the market today. If you think back to a time, say 15 years ago, you might recollect that 'foreign' goods were a rarity. If they were at all available, they were extremely expensive. Today, however, that scene has completely changed. We see several varieties of goods that range from groceries to beauty products to other consumer goods in all sections of the market. With so many choices at our disposal, we have a wider range to choose from.

2. Improves Quality
The secondary advantage of a wider range of products is that because there is so much choice in the market, the competition increases. To be in the running, manufacturers and distributors of goods have to stock only the best quality products to survive in the market. This in turn ensures that the consumers get only the best quality products to choose from and the inferior products are automatically filtered.

3. Improves Communication and Transportation
Advancements in the fields of communication and transportation have made it possible for people to communicate with others across the globe in a matter of seconds. Moreover, people can travel from one end of the world to the other in just a few hours. This has made it possible for people to take advantage of varied opportunities in the fields of education and business, among others. People can also migrate to other countries for a better future or to escape danger. All of which has been made possible due to globalization.

4. Boosts Economy
Globalization makes it possible to not only export and import goods, but it also allows for outsourcing services and jobs. It has been seen that jobs in the information technology sector are especially outsourced. Many American companies set up branches in the Indian subcontinent because the labor is relatively cheaper there as compared to their country. This results in a direct increase in their net profits. And as for India, they get a sudden burst of jobs which is helpful for their economy.

5. Provides Freedom of Choice
Globalization provides a platform for an exchange of information, ideas, goods and services. There is never a dearth of choices and options. And it is thus a highly 'freeing' phase wherein one never has to settle for something mediocre, because there is always the option of finding something more superior. If it is not available in one's own country, and if one has the necessary resources, one can always look outside and more importantly, procure it.

6. Spreads Knowledge
Earlier, it would not have been possible to have an in-depth knowledge about other countries and their cultures. But due to important tools of globalization, like the Internet, it becomes possible to know everything that is happening around the world. It is possible to know about the different cultures of the world, varied food habits, the kind of education systems that exist, world news and other current events. The world shares entertainment, books, recipes and much more.

7. Promotes Progressive Thinking
Globalization is not merely limited to exchanging food, recipes, and the like, but runs deeper in the way of bringing about a change in the attitude and thoughts of people. It makes people tolerant of varied world views and practices and thereby promotes progressive thinking. This, more than anything else, helps to bring about social reforms in society. For example, leaning how a particular country improved the quality of education or the steps that were taken to increase security for women, or the different policies of world governments and educational systems that were passed will set an example to other countries and bring about reforms.

1. Promotes Traits of Commercialism
If you look at the teens of today, of any country that is, you'll find that most of them will be in the same type of apparel, listening to the same kind of music, eating the same kind of food and frequenting the same joints. It seems like there is nothing unique and local anymore. People have developed an attitude of consumerism and everyone seems to have the same kind of things. This results in the same type of lifestyles and it pushes the 'local' ideas, products and practices somewhere in the background.

2. Destroys Ethnic Cultures
With so much emphasis on being global, people are forgetting what is local. They are disregarding their culture, ethnicity, and local traits in preference for foreign practices. It is feared that it won't be long before countries lose out on their culture and heritage.

3. Affects Local Markets
When foreign goods flood the market and people begin to buy them, it is done at the cost of local goods. This is especially true of developing countries. For example, small time businessmen who do not have the resources to export their goods and only depend on the locals to buy them, go through varied degrees of losses because their goods are not sold. There are high chances that if you ask a small time businessman whether globalization is good or bad for developing countries, he'll probably answer in the negative.

4. Promotes Danger of Spreading Disease
With people traveling and migrating from one place to the other, they introduce, or are introduced to varied forms of viruses. Thus there is a great risk that there could be a spread of diseases. The immunity that people develop against the diseases in their own country could be put at risk when introduced to the virus of other diseases and vice versa.

5. Creates Social Divides
While outsourcing may create jobs for one country, it does so at the cost of the jobs that are taken away from the people of the country that outsources them. One then has to question at what cost are profits being earned. So also for the fact that only a certain section of society which is able to afford to outsource are doing so and putting the lesser privileged sections of that society at a disadvantage. As a result, the divide between the different sections of society increases more and more.

6. Leads to Wastage of Resources
In order to import and export products, a country makes use of its resources even if the product is manufactured locally. Instead, if that same money is utilized in improving the product one could promote business for one's own country and save on precious resources.

7. Promotes Health Risks
When food items are transported from one country to the other, there needs to be proper precautions taken to preserve them. Usage of pesticides and preservatives therefore becomes necessary. These chemicals are harmful for health. So while there is a wide range of food products that are made available, it is done so at the cost of health.

Whether globalization is good or bad cannot be answered in black or white. There are several grays in between. It depends on each country and its government to be able to strike a balance between the good and bad, such that it allows their nation to enjoy the advantages of this phenomenon, while also drawing up policies so that the ill-effects of globalization do not affect them. How many nations are able to do so? Now that is the real question.

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Is Globalization Good or Bad? A Comparative Analysis

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Two Sides of the Same Coin Globalization is both, good and bad. If channeled in the right way, it can open up several new avenues. If channeled in the wrong way, it can destroy economies. Globalization is the integration of economies, societies and cultures of varied worlds through the process of technology, politics and trade.

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Throughout the years of globalization we have got more comfortable with interacting with other cultures and this has made us appreciate cultures and ours as well. This new understanding of new cultures gets us to be more helpful than ever before and become more caring. Others say globalization burns down old bridges from war and past events that make it hard to work with other countries because of this. Grudges are now resolved with free trade and globalization. Communicating with other countries not only benefits ourselves but every country around the world. Communication is key to every aspect of a working plan such as free trade.

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11 Major Pros and Cons of Globalization | NLCATP.org

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One of the many cons of globalization is the loss of culture throughout the world. Many anti-globalization thinkers say that every country would eventually start being the same and running the same way. This would cause countries to lose their cultural identity. People say that barriers are necessary in order to keep tradition and keep the country's values the same as they were before free trade and globalization. Highly cultured places would start getting influenced heavily by western influences and a huge amount of the population would go into mass migration to work in other countries to work and use globalization to support free trade.

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This video describes how globalization affects growth. The workers and makers at the GEDProject took 42 countries and divided them into three categories: social, economic, and political interconnection. With the 42 countries divided in their categories, they looked at all of their economic growth from 1990 to 2011. What they saw was that each country peaked throughout those years from globalization. Well-developed nations benefited more than others and per capita gain spiked with the country's most benefited by globalization. Interconnectedness increased workers incomes on average about 100 Euros. Overall with this “experiment” they saw that each country benefited from globalization throughout 21 years.

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Pros and Cons of Globalization: Controversy and Discussion

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Pros and Cons of Globalization: Controversy and Discussion

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This article mainly touched on free trade. Consumers can get a larger selection of products from not only their country but other countries as well. Another great thing about globalization is free movement of labor. Workers can present their best abilities to other countries markets and enrich other country's economies. This a huge benefit because people with special skills can help other countries and boost their economy as well as getting their name out in the world. This would never be possible without globalization. Globalization makes countries expand their horizons to people outside of their countries to boost their economy and competitive field.

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Globalization is one of the 21 st century's most important political topics. You might have heard the term globalization used before, whether in an economics lecture or in a political debate.

As the world grows more connected through the Internet and greater international trade, globalization is becoming more important - and more controversial - than at any other point in history.

In this blog post, we look at the benefits, the downsides, and the interesting realities of globalization. Whether you're an economics expert or someone with an interest in the future of the world, you'll gain a well-rounded understanding of the pros and cons of globalization.

If you'd like to gain a deeper understanding of economics and globalization, enroll in our course, Economics Without Boundaries with David McWilliams.

What is globalization?

What exactly is globalization? Simply put, globalization is the process of changing to an integrated world from an isolated one. Globalization can be summed up as a long-term change towards greater international cooperation in economics, politics, idea, cultural values, and the exchange of knowledge.

Globalization has largely been made possible by advances in technology, particularly the Internet. As the world grows more connected, people in all nations achieve a far greater level of interdependence in activities such as trade, communications, travel, and political policy.

It's easy to assume that globalization is an entirely modern phenomenon driven by inventions like the telegraph or the Internet. In many ways, globalization has been taking place for centuries.

From the Silk Road, which spanned from Europe all the way to East Asia, to the invention of steamships and railroads, humans have engaged in cultural exchange and international trade for centuries.

In the 20 th century, this international exchange and trade was made far easier by the invention of airlines and road vehicles. What was once a slow process became a far simpler one. In the late 20 th century, the invention of digital communications tools like the Internet made modern globalization a reality.

While globalization covers a wide range of topics, ranging from cultural values and information to economics and international trade, most modern discussion of the pros and cons of globalization is focused on economics and culture.

What are the core features of globalization?

From an economic perspective, globalization has truly changed the world. The core features of globalization are increased free trade between nations, easier movement of capital between borders, and a massive increase in foreign investment.

This has resulted in growth for both small businesses and multinational companies, which can now access new markets across the world. It's also resulted in increased transport and communication between countries and continents.

What are the key benefits of globalization?

There are many pros and cons of globalization, ranging from economic benefits to a freer, more equal labor market. Let's start by looking at the most discussed benefit of globalization: free trade.

Free trade reduces the barriers that once stood between nations trading freely with one another. When companies in different nations don't face any barriers to trade in the form of import or export restrictions, they can engage in free trade.

An example of a free trade agreement is the North American Free Trade Agreement (NAFTA), which allows Mexico, Canada, and the United States to exchange products and services without significant import and export restrictions.

Free trade has numerous benefits for economies and consumers. Consumer enjoy a greater choice of goods and services, since foreign companies can easily offer their products for sale. They also benefit from lower overall prices for goods, as a greater variety of goods for sale increases competition and drives prices down.

Manufacturers in countries with free trade agreements also benefit from free trade in the from of a larger export market. Rather than being able to export to just a few countries, exporters can now sell their goods to wholesalers and consumers in a large variety of counties.

Free trade also allows nations and economies to specialize, producing higher quality goods at better prices. If a country, for example, has large oil reserves but little land that's suitable for farming, it can focus on oil production while importing fresh food from abroad.

Another key benefit of globalization is the free movement of labor. In a globalized world, workers can more easily move from one country to another to market their skills to employers and contribute to the economy.

In many cases, free movement of labor allows economies to fix 'gaps' that exist in their labor markets. For example, the United Kingdom has hired nurses from India to fill positions in its public hospitals that were previously empty due to local labor shortages.

Companies can also hire workers in foreign countries to work for them using online tools and telecommunications. Learn more about the theory and decisions behind this in our Business Process Outsourcing course.

The benefits of free movement of labor also work in the other direction. If a country has too few jobs and too many workers, people can easily move to markets in which the job market is better. An excellent example of free movement between countries can be seen in the European Union, particularly the Schengen Area.

What are the downsides of globalization?

While many features of globalization have been beneficial, others have resulted in problems for certain economies and countries. Each of the benefits of globalization, from free trade to the free movement of labor, can also be a downside for specific countries and economies.

One of the biggest downsides of globalization is the harm it can cause to economies at an early stage of development. Free trade forces all countries to compete using an even playing field, which critics claim puts smaller, less developed countries behind their more developed counterparts.

Some economists believe that free trade is only possible if industries in developing countries are allowed to grow under a certain level of economic protection. This is known as the Paradox of Free Trade, and it is a core argument among economists.

Another downside of globalization is the phenomenon known as ' labor drain.' Since globalization allows workers to easily move from one country to another, countries with limited job opportunities often find it difficult to encourage skilled workers to stay in their countries.

You can learn more about how labor drain relates to the current economic climate in our course, Capitalism in Crisis: The Global Economic Crisis Explained.

This is particularly problematic in countries with extensive publicly-funded higher education systems. After receiving training in their home countries, many people emigrate and spend their professional career in a more lucrative economy at the expense of their home country.

Globalization can also have a significant negative impact on taxation. Since many companies are able to trade with one country while being based in another, large corporations often exploit tax havens such as Luxembourg, Switzerland, and Hong Kong to avoid paying taxes in the countries where they generate their profits.

This can often hurt consumers in the form of higher taxes on consumer products and property. Since countries often have little control over where big companies register to avoid tax, they are often forced to raise other taxes in order to make up for lost revenues due to corporate tax avoidance.

Many economists and environmentalists have criticized globalization due to its environmental impact. Learn about the environmental effects of globalization in Energy Economics and the Environment.

Finally, globalization has had a cultural impact on many countries that have been subject to large-scale immigration. Many critics of globalization feel that the free movement of labor has resulted in the weakening of specific cultures in favor of greater economic and cultural hegemony.

Understanding economics as a whole

Globalization is an interesting issue that's drawn many people to the study of trade and economics. Like many other economic processes, globalization has both major advantages and disadvantages for the world as a whole.

At the core of the globalization argument is the concept of the invisible hand of the market, as conceived by Adam Smith. As nations become more connected, markets will self-regulate to maximize their benefits and minimize their downsides.

Learn more about the basic principles of economics in our course, Micro & Macro Economics.

An example of this can be seen in the United States. Because of globalization, most consumers can purchase products ranging from cars to televisions at lower prices than at any point in history. This is because these products are no longer produced in the United States, but in other countries with lower labor costs.

The benefit of this change is lower prices for consumer goods. However, a downside of this development is a reduction in the number of manufacturing jobs available in the United States, as production is outsourced to countries with greater economies of scale and more affordable labor.

This is one of the many pros and cons of globalization, and it illustrates a key value of economics: any decision which has positive effects can also have negative effects.

Learn more about economics and globalization

Would you like to learn more about how the world's economy functions? Economic developments can have a huge effect on global politics and culture, and learning the theory behind modern economics is a great way to stay informed.

Enroll in our course, The Geography of Globalization, to learn more about how the shift towards a more global economy is changing the world. You may also want to learn about how globalization affects teamwork in international organizations.

Globalization is at the center of modern economics and politics. Stay informed of its positive and negative effects and you'll be a more informed, capable, and politically astute citizen of the world.

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Pros and Cons of Globalization: Controversy and Discussion

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Globalization is one of the 21 st century's most important political topics. You might have heard the term globalization used before, whether in an economics lecture or in a political debate. As the world grows more connected through the Internet and greater international trade, globalization is becoming more important - and more controversial - than at any other point in history.

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These sources argue that globalization has made the world worse.

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These sources argue that globalization has made the world better.