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A common con that globalization is believed to eventually and inevitably create is a loss of a country’s culture. This is because with mass globalization, every country is believed to end up working/running the same way regarding trade, economic stimulation, and structure. Also, with the interaction between countries, cultures are traded as well as goods and services. One reason that culture would be lost is because of the large movement of migration and the overpowering western influence. People believe that to keep a country’s culture there needs to be borders between countries, and when globalization happens these borders are knocked down.

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Globalization is one of the most important topics being discussed economically and politically today. It is the idea of slowly shifting to a fully integrated world where all countries cooperate with each other in politics, cultural values, knowledge, and politics. The reason that this idea has come to be is largely due to the internet. The internet has allowed the entire world to link together, enabling communication and collaboration with people from all over the world. The core values of globalization have truly changed the way that we see the world, travel, and conduct business, but has it all been good? Let's take a close look at the good and bad things that have or will come from globalization of the planet.

The Pros of Globalization

1. Improving The Global Economy
One of the most significant changes that has been brought on by globalization is the access to international sale and business. The market that companies can reach is huge and rapidly expanding everyday. This has helped to breach the opportunity gaps between many countries.

2. Expanding Knowledge Of Foreign Cultures
People from all over the world now have the access to communicate freely with one another. This is helping to break down cultural barriers that have hurt the integration of countries for centuries. Gaining a better understanding of how people around the world live is a key point of globalization.

3. Decisions For The World, Not The Country
Political powers and governments are joining together all over, one great example of this is the European Union. This promotes for political and economical decisions to be made that are good for a global benefit, instead of only focusing on local areas.

4. Free Trade Makes A Happy Economy
Through globalization, the idea that all trade barriers would be lifted is very real. Having no restrictions or crazy taxes to purchase and sell goods all over the world would help to grow the struggling economy. This would also help to improve poverty and unemployment rates all over the world.

5. Movement of Labor
Another thing much discussed is the free movement of labor all over the world. If workers could move from country to country, they would be able to market themselves in areas that need people with their skills. This would even further help the economy and provide much needed workers to certain areas of the world.

The Cons of Globalization

1. Not Good For The Underdogs
If all countries where free to trade with one another, then the entire world would be put at an even playing field. Early developing or under developed countries would not be able to compete with the larger economies of the world and would likely crumble underneath the competition.

2. Makes the Rich, Richer
Globalization is a great thing for owners and managers, but it is detrimental to workers and laborers. The competitive nature of this idea puts people that are already rich, in very successful situations. They often exploit workers, children, and prisoners to keep up with demand.

3. The Labor Drain
Everyone wants to make money and be able to live a successful and comfortable life. With globalization, you are able to move freely from country to country in order to find work. People would flock to areas with higher paying jobs, and leave poorer countries to fend for themselves. They would sufficiently "drain" the country of all of their workers that keep things up and running.

4. A Loss Of Cultures
With globalization, eventually, every country would run and function the same way. The deep rooted cultures of these countries would be lost due to mass migration and western influences. This is a scary thing for many people. Arguers of globalization believe that cultural barriers are necessary in order to have culture.

Important Facts About Globalization

American's spend over 400 billion dollars a year on products that where made in China.

The U.S. is losing half a million jobs a year to nations overseas.

The 3 countries with the richest economies have more money than the economies of all developing countries combined.

Over 2/3 of all international trade is done by the same 500 companies.

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Globalization is one of the most important topics being discussed economically and politically today. It is the idea of slowly shifting to a fully integrated world where all countries cooperate with each other in politics, cultural values, knowledge, and politics. The reason that this idea has come to be is largely due to the internet.

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Another con globalization creates is that some countries are taken advantage of. This is in regards to the fact that sometimes countries are used to fuel larger and richer countries. This can be done by warfare. When larger countries persuade smaller countries to become allies during a time of war, these smaller countries can be used to increase military related power and weaponry. For example; if a larger country with a base for military needs in other smaller, less advantaged countries goes to any type of war, the smaller countries may be attacked when they didn’t need to be attacked at all.

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Although the term globalization has just been widely used within the last twenty years, the trend has been present centuries ago with the discoveries of explorers and the emergence of trade among nations. However, with the evolution of technology, it has gained popularity on a larger scale. Economists explain that globalization is a process that made it possible for nations to interconnect and generate world-wide links and activities with other countries.

This transformation, however, is said to have brought with it, advantages and disadvantages. And while it has brought benefits, critics are saying otherwise. Amid the contentions surrounding globalization, it is best to have a better knowledge of its effects on the aspects of economy, culture and politics:

List of Pros of Globalization

1. It promotes economic growth.
Proponents of globalization see this development as a way for countries from disparate parts of the world to come together and exchange goods and services, thus, opening doors to trade and commerce. Investors, particularly from developed countries, can now operate their businesses in developing countries and in return offer employment to hire employees from foreign countries. In establishing their businesses in other countries, they can take advantage of lower taxes and cheap services and labor. On the other hand, more jobs are generated in the countries they invest in, which mitigate the problem of unemployment. Moreover, with the continuing popularity of business process outsourcing, companies from different business sectors can now hire employees overseas without having to pay by the hour and at a much lower cost.

2. More countries can enjoy the benefits of free trade.
With globalization, there is also the emergence of free trade which allows member nations to purchase and offer their products without regulation from the government. Manufacturers can expand their market base and export their products to more countries. Consequently, increase in sales and profits. With a diversified market, producers can specialize in products they have plenty of resources for. Consumers, on the other hand, can access more goods at lower prices and at the same time have a plethora of choices when it comes to the products they need.

3. Skilled workers can now work overseas and earn more money and earn their countries revenues.
With more jobs available in other parts of the world for skilled workers, there is free movement of labor that allows migrant workers to get higher wages they will not usually earn in their own countries while their governments earn revenues. Host countries also benefit from this since foreign workers can fill the gaps in the local labor market such as health care and domestic services.

4. Countries merge to promote global politics.
Supporters of globalization see this as beneficial to countries which have the same goals in protecting their interests. For decades now, there is the convergence among different nations through international organizations such as the United Nations (UN), European Union (EU) and the Association of Southeast Asian Nations (ASEAN), to name a few. Nations which are members of these organizations work together and give each other support to solve global concerns and promote world peace. Also, smaller and poorer countries are assured help in times of calamities and conflicts with other countries.

5. It gives opportunities to countries to learn and experience other cultures.
Globalization and technology come hand in hand. With the evolution of the internet, language and cultural barriers are crossed. As countries become more open to other cultures, ideas and traditions, people are motivated to embrace biodiversity. And with nations ready to let in foreigners either for work or tourism, people can learn to respect and embrace other cultures more. Cultural globalization bridges the gap among nations and people.

List of Cons of Globalization

1. Globalization can lead to abuse of foreign employers to their workers and tax evasion.
Although this transformation allows businessmen to invest in other countries for lower operating costs, opponents of globalization sees this as a means for abusive foreign employers in order to take advantage of their employees. There are employers who are not offering healthy working environment but are demanding long hours of work. There is also the problem of child labor with many children from poor countries being forced to work in sweat shops. Another drawback raised is the practice of some investors opening companies offshore to avoid paying higher taxes which results to loss of revenue for the government.

2. It can result to labor drain and loss of job opportunities to local employees.
With opportunities to work overseas, skilled workers and professionals like doctors and nurses from developing nations are enticed to leave their own countries to seek for greener pastures. The end result, poor countries lose a large number of professionals who could have been of service to their own countries. Also, workers of the countries that employ foreign workers fear losing their jobs over foreign employees willing to accept lower wages. De-industrialization results since middle class employees are forced to accept a cut from their pay just so they can retain their jobs. At the end of the day, it appears that multinational companies and employers are the ones greatly benefiting from this.

3. Some countries are being used to empower rich countries.
Political globalization may have its pros but it also gives powerful countries to influence smaller countries to be allies and be used to increase their military powers and weaponry. If developed countries with military bases in other territories get into war with other nations, the smaller countries can be caught in between during conflicts and suffer death and destruction.

4. Globalization has adverse effects on the environment and leads to spread of diseases like HIV.
There are also discussions that with industrialization that comes with globalization, more wastes are produced and dumped in smaller countries with no regard for the environment. Toxic wastes are carried to some parts of the world and are harmful to the environment. Also, with more tourists coming from and going to countries where HIV and other communicable diseases are prevalent, health of more people are at risk.

Conclusion

Any development or change has its pros and cons. Globalization is not an exception. Indeed, it has opened doors to different countries and affected nations economically, culturally and politically. It is also something that cannot be stopped. The ideal action to take is to make use of its advantages and minimize its repercussions. Leaders should be on top of the situation and the people of the world could only hope it brings more good than bad.

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Although the term globalization has just been widely used within the last twenty years, the trend has been present centuries ago with the discoveries of explorers and the emergence of trade among nations. However, with the evolution of technology, it has gained popularity on a larger scale.

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Another con of globalization is the strain that can happen within the job market. This can be created through the free movement of trade. As a refresh, the free movement of trade is how easily employees and workers are able to move from country to country, relating to their employer’s needs. However, when workers move freely from country to country, countries that don’t have a lot of job opportunities tend to be negatively impacted. This is because skilled employees don’t stay, and this can create a labor drain which can reverse any innovation that may have happened in the country’s economy.

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While many have heard the term globalization during news reports or televised debates, it can be challenging to suss out all of the attendant pros and cons. As the Internet continues to shrink the world we live in, globalization becomes more and more important. For those who are unaware, globalization is the process of shifting the world we live in from a place of isolation to a place of integration. It signals a greater economic and political cooperation worldwide and an increased sharing of ideas. Thanks to technological advances, globalization has become a greater reality.

List of Pros of Globalization

1. Free Trade
Once upon a time, nations were not able to trade freely with one another, due to all of the barriers that stood in their way. Companies in varied nations across the world are now able to trade with another, thanks to reduction of restrictions on importing and exporting.

2. The Consumer and Economy Benefit
Consumers are able to lower their costs and enjoy a much wider selection of products to choose from. Now that foreign companies can reach those who do not reside in their country, they are able to tap into markets that they were unable to reach before.

3. Competition Between Countries Drives Prices Down
The companies have greater access to more countries, which allows them to sell their goods and services to wholesale retailers all around the world.

4. Gives Other Nations Opportunity
A nation the opportunity to hone in on their strengths, while ignoring their weaknesses. A country that is rich in oil, but possesses a scarcity of suitable farm land is free to focus on exporting their plentiful oil supply. Because they do not have to worry about importation restrictions, they can easily purchase wholesale amounts of fresh foods from other countries.

5. Labor Can Move More Freely
Workers can move from country to country with relative ease and market their skills, goods and services to the highest worldwide bidder. Countries no longer have to suffer with gaps in their labor structures. A nation that is struggling to produce doctors can simply import them from another country. Shortages of labor are no longer an issue on a local level. Thanks to the increased ease of communication and the reliability of the Internet, a person can be trained to work at a job in a foreign country without actually being present.

List of Cons of Globalization

1. Smaller Countries Suffer the Most
While there are a variety of benefits, countries have struggled with certain globalization concepts. Certain nations benefit greatly from the current landscape, as others suffer. Smaller, less developed countries do not typically benefit from the level playing field that globalization provides.

2. Leaving Developing Countries Behind
Economists have argued that developing countries are at increased risk of being left behind. Globalization encourages free trade, which does not provide a developing nation with the protection that they need in order to grow.

3. Strain Among Job Markets
The free movement of labor also has its downsides. When workers can move freely from one nation to the next, countries that have a dearth of job opportunities often struggle. Skilled employees do not often stay in countries without a strong job market, which can cause a labor drain.

4. Inability to Recoup Investment
For countries that rely on public funding for their secondary educational system, this can be disastrous. Residents of the country utilize publicly funded colleges to bolster their skills for the job market, then take their talents to other countries. This leaves their home country with very little recourse to recoup their considerable investment.

5. Companies Seeking Personal Gain
Larger companies have learned how to leverage globalization for their own personal gain. Companies now have the ability to trade with countries that they are not based in. This allows them to exploit certain tax loopholes and hide money in places like Ireland and Hong Kong. When this happens, the countries that they are based in lose out on billions of tax dollars. The consumer is then squeezed by increased taxes on their goods, services and property. A nation typically has zero control over larger corporations registering in other countries to avoid taxation.

6. Negative Impact on Environment
The environment impact of globalization is considered to be negative by most experienced observers. The increased consumption of a wide variety of products leads to increased production which causes an uptick in pollution. Simply put, the environment is under added strain, which can have devastating long term effects on the planet's environmental stability.

7. Loss of Cultural Identity
Greater cultural hegemony is benefit, but countries are beginning to lose their identities due to immigration that is taking place on a progressively larger scale. As globalization becomes the new way of the world, more and more countries are at risk of losing their cultural identity.

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While many have heard the term globalization during news reports or televised debates, it can be challenging to suss out all of the attendant pros and cons. As the Internet continues to shrink the world we live in, globalization becomes more and more important.

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Since globalization includes mass competition, this can create pollution. Pollution can be created because developing countries can catch the interest in foreign investments and businesses. When these investors implement some sort of movement in this country, production and productive technology can be created. These producers can be dangerous for the environment because sometimes what’s efficient is not necessarily good for any type of health. For example; getting rid of toxic waste by dumping it into a lake is obviously harmful to the environment, but for businesses it is an efficient way to get rid of waste because it is cheap of cost and convenient in location.

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Globalization can create some cons as well. These include using up finite sources quickly. Finite sources are resources that are not able to be replenished in naturalism. There are many reasons that mass use of finite sources can be caused. One example of this includes naturally increased production because of an increased demand due to new globalization. Another reason could be because the demand for the finite resource increases as well. There have been many instances of this. A classic example is when China was first introduced to globalization. In a matter of less than ten years, its use of coal doubled.

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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, businesses 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 partly 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 citizen with jobs started dropping about the time China joined the World Trade Organization in 2001.

Figure 8. US Number Employed / Population, where US Number Employed is Total Non_Farm Workers from Current Employment Statistics of the Bureau of Labor Statistics and Population is US Resident Population from the US Census. 2012 is partial year estimate.

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 removal from service). 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.

Related article: Why have GDP Growth and Energy Growth Separated?
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-which is probably not many today-perhaps landlocked countries of Africa.

In the past, when one area collapsed, there was less interdependence. When one area collapsed, 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.

By. Gail Tverberg

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12 Negative Aspects of Globalization | OilPrice.com

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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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1. Use of Finite Resources
2. Mass Pollution
3. Drain of Labor
4. Smaller Countries Suffer
5. A Loss of Culture

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Another pro of globalization includes the free movement of labor. Free movement of labor is when employees and workers are able to move from country to country fairly easily. This is beneficial because it can create substitutes for domestic shortages in labor. For example; if Australia is in need of more farmers, Australia can hire farmers from America to fill in for this domestic shortage of labor. Businesses also can hire people and have them stay in a different country to innovate production, increase awareness, company projects, etc. It can also work in a vice versa. If there is a domestic surplus of labor, people are generally allowed to leave and find work in another country.

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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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Developing countries benefit a lot from mass globalization. Since globalization pushes businesses to innovate their strategies to meet individuals and the society, this encourages them to compete globally. Innovation encourages businesses to employ production in developing countries because this creates risk reduction. This is also beneficial for businesses because it can make them multi international in production. With globalization’s more accepting view of workers, this can implement domestic growth to these developing countries and can create a microeconomic phenomenon. This phenomenon is basically the idea of business competitiveness can stimulate economies, and further help these types of countries.

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The phenomenon of globalization began in a primitive form when humans first settled into different areas of the world; however, it has shown a rather steady and rapid progress in recent times and has become an international dynamic which, due to technological advancements, has increased in speed and scale, so that countries in all five continents have been affected and engaged.

What Is Globalization?

Globalization is defined as a process that, based on international strategies, aims to expand business operations on a worldwide level, and was precipitated by the facilitation of global communications due to technological advancements, and socioeconomic, political and environmental developments.

The goal of globalization is to provide organizations a superior competitive position with lower operating costs, to gain greater numbers of products, services and consumers. This approach to competition is gained via diversification of resources, the creation and development of new investment opportunities by opening up additional markets, and accessing new raw materials and resources. Diversification of resources is a business strategy that increases the variety of business products and services within various organizations. Diversification strengthens institutions by lowering organizational risk factors, spreading interests in different areas, taking advantage of market opportunities, and acquiring companies both horizontal and vertical in nature.

Industrialized or developed nations are specific countries with a high level of economic development and meet certain socioeconomic criteria based on economic theory, such as gross domestic product (GDP), industrialization and human development index (HDI) as defined by the International Monetary Fund (IMF), the United Nations (UN) and the World Trade Organization (WTO). Using these definitions, some industrialized countries are: United Kingdom, Belgium, Denmark, Finland, France, Germany, Japan, Luxembourg, Norway, Sweden, Switzerland and the United States.

SEE: What Is The World Trade Organization?
Components of Globalization
The components of globalization include GDP, industrialization and the Human Development Index (HDI). The GDP is the market value of all finished goods and services produced within a country's borders in a year, and serves as a measure of a country's overall economic output. Industrialization is a process which, driven by technological innovation, effectuates social change and economic development by transforming a country into a modernized industrial, or developed nation. The Human Development Index comprises three components: a country's population's life expectancy, knowledge and education measured by the adult literacy, and income.

The degree to which an organization is globalized and diversified has bearing on the strategies that it uses to pursue greater development and investment opportunities.
The Economic Impact on Developed Nations
Globalization compels businesses to adapt to different strategies based on new ideological trends that try to balance rights and interests of both the individual and the community as a whole. This change enables businesses to compete worldwide and also signifies a dramatic change for business leaders, labor and management by legitimately accepting the participation of workers and government in developing and implementing company policies and strategies. Risk reduction via diversification can be accomplished through company involvement with international financial institutions and partnering with both local and multinational businesses.

SEE: Evaluating Country Risk For International Investing

Globalization brings reorganization at the international, national and sub-national levels. Specifically, it brings the reorganization of production, international trade and the integration of financial markets. This affects capitalist economic and social relations, via multilateralism and microeconomic phenomena, such as business competitiveness, at the global level. The transformation of production systems affects the class structure, the labor process, the application of technology and the structure and organization of capital. Globalization is now seen as marginalizing the less educated and low-skilled workers. Business expansion will no longer automatically imply increased employment. Additionally, it can cause high remuneration of capital, due to its higher mobility compared to labor.

The phenomenon seems to be driven by three major forces: globalization of all product and financial markets, technology and deregulation. Globalization of product and financial markets refers to an increased economic integration in specialization and economies of scale, which will result in greater trade in financial services through both capital flows and cross-border entry activity. The technology factor, specifically telecommunication and information availability, has facilitated remote delivery and provided new access and distribution channels, while revamping industrial structures for financial services by allowing entry of non-bank entities, such as telecoms and utilities.

Deregulation pertains to the liberalization of capital account and financial services in products, markets and geographic locations. It integrates banks by offering a broad array of services, allows entry of new providers, and increases multinational presence in many markets and more cross-border activities.

In a global economy, power is the ability of a company to command both tangible and intangible assets that create customer loyalty, regardless of location. Independent of size or geographic location, a company can meet global standards and tap into global networks, thrive and act as a world class thinker, maker and trader, by using its greatest assets: its concepts, competence and connections.
Beneficial Effects
Some economists have a positive outlook regarding the net effects of globalization on economic growth. These effects have been analyzed over the years by several studies attempting to measure the impact of globalization on various nations' economies using variables such as trade, capital flows and their openness, GDP per capita, foreign direct investment (FDI) and more. These studies examined the effects of several components of globalization on growth using time series cross sectional data on trade, FDI and portfolio investment. Although they provide an analysis of individual components of globalization on economic growth, some of the results are inconclusive or even contradictory. However, overall, the findings of those studies seem to be supportive of the economists' positive position, instead of the one held by the public and non-economist view.

Trade among nations via the use of comparative advantage promotes growth, which is attributed to a strong correlation between the openness to trade flows and the affect on economic growth and economic performance. Additionally there is a strong positive relation between capital flows and their impact on economic growth.

Foreign Direct Investment's impact on economic growth has had a positive growth effect in wealthy countries and an increase in trade and FDI, resulting in higher growth rates. Empirical research examining the effects of several components of globalization on growth, using time series and cross sectional data on trade, FDI and portfolio investment, found that a country tends to have a lower degree of globalization if it generates higher revenues from trade taxes. Further evidence indicates that there is a positive growth-effect in countries that are sufficiently rich, as are most of the developed nations.

The World Bank reports that integration with global capital markets can lead to disastrous effects, without sound domestic financial systems in place. Furthermore, globalized countries have lower increases in government outlays and taxes, and lower levels of corruption in their governments.

One of the potential benefits of globalization is to provide opportunities for reducing macroeconomic volatility on output and consumption via diversification of risk.
Harmful Effects
Non-economists and the wide public expect the costs associated with globalization to outweigh the benefits, especially in the short-run. Less wealthy countries from those among the industrialized nations may not have the same highly-accentuated beneficial effect from globalization as more wealthy countries, measured by GDP per capita etc. Although free trade increases opportunities for international trade, it also increases the risk of failure for smaller companies that cannot compete globally. Additionally, free trade may drive up production and labor costs, including higher wages for more skilled workforce, which again can lead to outsourcing of jobs from countries with higher wages.

Domestic industries in some countries may be endangered due to comparative or absolute advantage of other countries in specific industries. Another possible danger and harmful effect is the overuse and abuse of natural resources to meet new higher demands in the production of goods.

SEE: The Globalization Debate
The Bottom Line
One of the major potential benefits of globalization is to provide opportunities for reducing macroeconomic volatility on output and consumption via diversification of risk. The overall evidence of the globalization effect on macroeconomic volatility of output indicates that although direct effects are ambiguous in theoretical models, financial integration helps in a nation's production base diversification, and leads to an increase in specialization of production. However, the specialization of production, based on the concept of comparative advantage, can also lead to higher volatility in specific industries within an economy and society of a nation. As time passes, successful companies, independent of size, will be the ones that are part of the global economy.

SEE: Does International Investing Really Offer Diversification?

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How Globalization Affects Developed Countries

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The phenomenon of globalization began in a primitive form when humans first settled into different areas of the world; however, it has shown a rather steady and rapid progress in recent times and has become an international dynamic which, due to technological advancements, has increased in speed and scale, so that countries in all five continents have been affected and engaged.

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Globalization created many pros, and of these include lowering inflation. This is because sometimes in a worldwide movement to liberate free trade, tariffs are removed from numerous goods and services. Another reason for lowered inflation is because when businesses want to make their production more efficient, they will lower prices relative to the production of the good/service. Businesses want to make their production as efficient as possible since international trade is a competitive market to be in. Businesses can improve their production with a number of things such as innovated technology, more motivated employees, etc. When done globally, inflation will also lower globally just because of chain of effects.

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Hosted by Nouriel Roubini, EconoMonitor is an important destination for economic news, analysis, and opinion with an impressive list of contributors adding to the conversation daily.

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Another pro of globalization is the fact that the economy is stimulated. What this means is that there is an increased wealth because of country development. This can be proved through countries GDP per capita. In the 1960s, countries that were not globalized only had an average economic growth rate of 1.4% while countries that were globalized had an average economic growth rate of 4.7%. Another statistic is using GDP. In the 1990s, countries that were developing had an annual growth rate of 2.2% while countries that had been globalized for a longer amount of time had an annual growth rate of 5.0%. Just looking at these bare statistics gives people a better understanding on just how effective globalization can be to stimulating an economy.

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One of the beneficial effects of globalization include free trade. Free trade is considered controversial since there are some people that believe it is good for our society and some that argue it is harmful. Free trade is the concept that any consumer can buy whatever they want from whoever they want on mutually agreed terms. This can go on any scale from next door corporations to international trades. Globalization is related to free trade in the fact that now with different innovations, people on opposite ends of the world are now able to trade thanks to modern transportation such as railroads, ships, planes, etc. This has proved beneficial to many countries. This includes more innovated agriculture and better education for millions since socialist planning was taken away.

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Freedom of trade is really a very simple concept. Each individual should be at liberty to buy from and sell to whomever he wishes on mutually agreed-upon terms. Whether the partners to this trade live next door to each other or are separated by thousands of miles should make absolutely no difference to the logic of the idea.

For thousands of years most people lived, worked, and died within a small radius of the place where they were born. Households and small communities went about the business of life with a high degree of local self-sufficiency. Of course, there was always a limited amount of what today we would call "international" trade even among the ancient Greeks and Romans. But, for most people, goods produced in faraway lands were unavailable because of the natural difficulties of transportation, or were too expensive.

This began to change during the last 200 years. Railways and steamships made traveling easier and less expensive in the nineteenth century. Modern engineering shortened the distances between different parts of the world as tunnels were built through mountains, bridges spanned wide and powerful rivers, and canals were dug across strips of land connecting continents.

But most important, the nineteenth century saw the triumph of classical-liberal ideas-ideas that emphasized individual liberty, private enterprise, limited government, and free trade. It was the lowering of political barriers separating peoples and regions that enabled the feats of technology and engineering to bring the world closer together, and allowed men on the five inhabited continents to trade with each other.

Now people could purchase resources and raw materials that before had been far beyond their geographical and financial reach, and invest their capital and labor wherever it seemed most profitable and advantageous. Moreover, the growing number of different finished goods manufactured with those resources could be sold to tens of millions of people everywhere around the planet.

Even with the collectivist forces of the twentieth century, which reimposed political barriers to trade through central planning, regulation, and protectionism, the impulse toward the internationalization of production and trade has continued up until our own time. But the two world wars and the reactionary attempts to coercively establish socialist systems on many parts of the globe created perverse imbalances in the extent and speed of economic development in various countries and continents.

Because the United States was exempt in the twentieth century from the direct physical destruction of war that impacted so many other nations, and because experiments with socialist and interventionist ideas were implemented less pervasively in America than in many other parts of the world, U.S. economic development and growth dwarfed the rest of the planet in the immediate decades after 1945. America, therefore, had an absolute and a comparative advantage in a wide variety of agricultural and manufactured goods. The American people consumed a large proportion of the world's output because they produced a huge amount of it.

But over the last six decades more and more of the rest of the world have been catching up. During the late 1940s and 1950s, European and Japanese reconstruction overcame the destruction of World War II. In the 1970s and 1980s a small but growing number of countries in East Asia moved toward more market-oriented economies. In the 1990s the crushing weight of socialist central planning was lifted from many countries in Eastern Europe, Asia, and South America. As a result, a growing number of these countries began to rapidly industrialize, increase their production and productivity in agriculture, and improve the quality of their "human capital" through more and better education for millions.

Changing Patterns of Trade

This process of economic development and growth around the world has inevitably been changing the patterns of trade and the comparative advantages of many of the nations that have been or are becoming to a greater extent America's trading partners. Labor and manufacturing specializations that the United States has long been dependent on for employment, income, and profits are now shifting to other parts of the globe. Once peoples and markets on continents outside North America began to become relatively freer and less collectivist-though certainly not laissez faire, unfortunately-these changes in the structure of the international division of labor were inevitable.

But besides their inevitability, the changes also are opening healthy and desirable opportunities for hundreds of millions of people to finally raise themselves out of the poverty that has been the lot of mankind for all of human history. We should hail this as one of the greatest moments in the thousands of years of man's time on this earth.

The United States' place in the global division of labor is also changing. Goods and services that were long taken for granted as being "Made in America" are and will increasingly be available to the American people at lower cost and in better quality and greater quantities from suppliers in other parts of the world. This will require U. S. industry and agriculture to shift over time into a number of different lines of investment and employment. Capital will have to be used in different ways, and workers will have to learn new skills in order to supply the exports that will pay for these better, cheaper, and more plentiful imports. The structure of prices and wages, as well as the relative incomes of some American workers, will have to change to reflect the new and more productive global economy.

By bringing about these changes with competitive flexibility and optimism about a better and wealthier world in the 21st century, the American people will not only participate in a potentially more prosperous future, but will also set the pace for the rising standard of living that can belong to us and countless others around the globe.

The path to this bright economic future is a policy of free trade. Governments-including the U.S. government-do not have the wisdom or ability to guide or assist this process. They can only hinder it with controls and restrictions that slow down progress and serve special interests who don't want to face the future.

The best way for mastering the global challenges and opportunities of our new century is to allow each individual to use his own knowledge and ability in the competitive market, free from the controlling hand of government. Freedom will enable us triumphantly to find our way in the new global economy.

Richard M. Ebeling is BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina. He was president of the Foundation for Economic Education (FEE) from 2003 to 2008.

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Globalization and Free Trade | Richard M. Ebeling

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Freedom of trade is really a very simple concept. Each individual should be at liberty to buy from and sell to whomever he wishes on mutually agreed-upon terms. Whether the partners to this trade live next door to each other or are separated by thousands of miles should make absolutely no difference to the logic of the idea.

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1. Free Trade
2. Economic Stimulation
3. Lowered Inflation
4. Developing Countries are Benefited
5. Free Movement of Labor