Effects of Economic Globalization

Tuberculosis, certain influenza strains, and other communicable disease could produce outbreaks at epidemic levels. This concentration of power can lead to reduced competition, influence over political and economic policies, and an unequal distribution of economic benefits. As a result, even local economies can be significantly affected by economic downturns or crises occurring in distant markets. This intense competition can lead to the closure of local businesses, loss of traditional industries, and a decrease in domestic job opportunities.

Trade has distributional consequences

This is known as the development of ‘economies of scale’ and leads to improved productivity. Internationalization of Capital MarketsThe growing ease with which companies (and individuals) can move money overseas has led to international capital markets. In short, this means companies overseas can fund businesses all around the world.

Most nations today offer those in extreme poverty access to safety net programs for basic supplies. Even in the United States, programs like WIC and SNAP offer food and care access to those who cannot afford it on their own for whatever reason. When we reduce or eliminate borders, there would be a likely shift in social programs to benefit those earning less than $2 per day while ignoring the needs of those at home. Households living in poverty in the U.S. or United Kingdom fit into a different definition when compared to global poverty. Some argue that globalization leads to the concentration of corporate power as large multinational corporations expand their reach and influence across multiple countries (Cowling & Tomlinson, 2005). Globalization can lead to downward pressure on wages as businesses seek to reduce costs by outsourcing jobs to countries where labor is cheaper (Mir, Hassan & Qadri, 2014).

Disadvantages of Globalization

In addition, the globalized economy has opened up new job markets by making it more feasible to hire overseas workers. This has created a wide range of career opportunities for both job seekers and employers. Throughout history, commerce and business have been limited by certain geographic constraints. In its earliest days, trade happened between neighboring tribes and city-states. As humans domesticated the horse and other animals, the distances they could travel to trade increased. These distances increased further with the development of seafaring capabilities.

1. Economic globalization has been occurring for centuries, but has grown significantly in recent years thanks to trade liberalization and increasing speed of communication and travel.
2. When borders become less restrictive around the world, people tend to move to locations where their best opportunities exist.
3. While globalization is primarily an economic process of interaction and integration, it is also closely linked to social and cultural dynamics.
4. 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.

Erosion of national sovereignty

If you change the country or region shown you will see that this is true, to varying degrees, across all countries and years. The fact that trade diminishes with distance is also corroborated by data on trade intensity within countries. The visualization here shows, through a series of maps, the geographic distribution of French firms that export to France’s neighboring countries. The colors reflect the percentage of firms that export to each specific country. In particular, workers who lose their jobs can be affected for extended periods of time, so the positive effect via lower prices is not enough to compensate them for the reduction in earnings.

Hence, another disadvantage of economic globalization is that it eases the process of capital flight. Note positive and negative impacts of globalisation that in economics, capital flight occurs money or assets flow out of a country due to localized or internal economic, as well as sociopolitical issues. There has been a rapid economic growth in Asia after embracing market orientation-based economic policies that encourage private property rights, free enterprise and competition. In particular, in East Asian developing countries, GDP per head rose at 5.9% a year from 1975 to 2001 (according to 2003 Human Development Report173 of UNDP). Initially, the General Agreement on Tariffs and Trade (GATT) led to a series of agreements to remove trade restrictions. GATT’s successor was the World Trade Organization (WTO), which provided a framework for negotiating and formalizing trade agreements and a dispute resolution process.

According to the course Global Business, globalization has led to an increase in cross-border investment. At the macroeconomic level, this international investment has been shown to enhance welfare on both sides of the equation. The pros of globalization can be unfairly skewed toward rich nations or individuals, creating greater economic inequalities. For example, in the wake of NAFTA, the average net weekly pay for maquila workers was $55.77 in 1998—less than $2 more than the average cost for basic needs in the maquiladora trade zone.

Globalization leads to a reduction in prices of goods and services by allowing countries to specialize in producing goods where they have a comparative advantage, leading to more efficient production and lower costs (Mir, Hassan & Qadri, 2014). They can diversify their portfolios by investing in different countries, and developing countries can benefit from foreign capital to fund growth and development projects. With broken-down financial barriers, businesses can now source overseas investors for funds. This helps push down the cost of investment and stimulate local business (Erixon, 2018).

What Is Globalization?

Examples include Nike and Apple, which have outsourced manufacturing in Asian countries, as well as other firms, which have outsourced their business processes in countries such as India and the Philippines. When you look at the per capita consumption rates of energy globally, one American consumes as much energy as 31 people in India. If you go to a developing nation, it takes 370 Ethiopians to use the same amount of energy that a single U.S. citizen uses to meet their needs. Borders create restrictions to the free flow of goods and services.

1. The dictatorship market has created more inconveniences for several countries.
2. A good example of this is the appearance of automotive farming machines in Southeast Asia, an area long home to manual agricultural labor.
3. The empirical evidence suggests that the principle of comparative advantage does help explain trade patterns.
4. This means that countries exported goods that were very different from what they imported – England exchanged machines for Australian wool and Indian tea.

Many people, particularly in low income areas, have “suffered serious environmental harm because of globalization.” Climate Change and Environmental ImpactsAn international economy could have significant bad effects on the environment. Goods have much greater distance to move, leading to greater carbon footprints for products. Some may also argue that products are also lower quality, meaning they get trashed sooner – leading to greater amounts of landfill. Lastly, multinational companies can avoid environmental responsibilities by operating in nations with relaxed environmental laws – again leading to ecological damage.