Globalization is the integration of regional economies through trade by reduction of international trade barriers in order to increase material wealth of the people and improve the economies of the nations through good global relations, competition and specialization. The objective of globalization is to enhance the interdependence, business operations and connectivity on an international level with respect to the socioeconomic, cultural, religion, biological, environmental and scientific aspects (Fiss, & Hirsch, 2005, p. 46).
Globalization started in a primeval form especially after the first human settlement in various parts of the world. However, today global economy comprises not only economic aspects or global marketplace but also communication revolution, which is the driving force. For instance, the turning point was the late 1960s and early 1970s, when Nora Quebral set up the first effective communications satellite, which made possible direct communication from one part of the world to another.
According to Clark (1998), ‘‘that changed more or less the whole of late 20th century history’’ (p. 488). In addition, Soviet Union declined because it could only compete in the old industrial economy but not in the new global electronic world. Communication transformation has enhanced interaction among the regions and has brought a paradigm shift of handling issues especially in the 20th century (Alexander, & Korine, 2008, p. 76).
Advancement in technology has made the current globalization be very much intense, steady and rapid. It has become international dynamic with all the continents either affected or engaged. Primarily, there was less trade in the global money markets compared to the current situation, where about trillion dollars turned over daily. While globalization has its own merits and demerits, the paper tables the many benefits and costs of globalization as depicted in the late nineteenth and early twentieth century global economy.
Specification of an Economic model
In comprehending the benefits and costs of globalization, economic modeling gives a coherent and abstract pattern of isolating and arranging complex causes and effects within various interrelated elements in an economy. Although economists have used empirical, visual, mathematical models among others, simulation model provides a more clear relationship between globalization, poverty and inequality, and the factors for high Gross Domestic Product (GDP) (Stulz, 2009, p. 375).
Since simulation modeling exemplifies the best elements of mathematical, empirical and other quantitative models, its manipulations do not require proficiency in mathematics.
Therefore, in my view, computer simulation is most appropriate in determining nation’s economic changes due to globalization as it allows a person to test for short-term and long-term effects, and to alter a whole range of variables at his or her convenience compared to other models, which suffer from lack of precision and reliability (Routledge, & Francis, 2001, p. 120).
What benefits did the globalization affect?
Globalization has helped to shatter the regressive customs responsible for discriminating against people based on sex, race and/or religious beliefs. As such, it has influenced the lives of women in the world positively. ‘‘It is an antidote to the intolerant fundamentalism that oppresses millions of the world’s poorest-majority women’’ (Clark, 1998, p. 492). In the globalized world where competition is paramount, people value the roles of women.
Traditionally, majority of the cultures never recognized the participation of women in development. However, globalization has rapidly improved the social and economic status of women in the developing world to an extent that those countries that exclude women from participating in the major development project fall ever behind (Kose, 2009, p. 7). In addition, a society, which embraces education for women, has the benefit of remarkable social advancement.
As a result, any literate women have a tendency of giving birth to fewer children as well as contributing significantly towards improving her country’ economic outlooks (Fiss, & Hirsch, 2005, p. 37). Financial independence of women enhances their stature in their communities. Comparably, women are economical in their spending than their spouses as they focus on important areas for social development such as, ‘‘the education, health, and nutrition of their families’’ (Jean, & Ferry, 2009, p. 3).
Globalization has resulted into integration of developed and developing nations. Rapid democratic system of information and technology and economics are the major driving force for globalization, which has turned out to be an extremely progressive and liberating strength (Routledge, & Francis, 2001, p. 92).
As such, globalization presents some hope for the poor nations that they would, one day, benefit from the fruits of Western liberal traditions (Kose, 2009, p. 2). Even though some ague that globalization has resulted into exploitation of the poor nations by the rich ones, in my view, that is total confusion between corruption and globalization.
According to research conducted during 1990s on ‘‘national incomes around the world, the income of rich globalized nations increased by two percent each year’’ (Armstrong, 2000, p. 470). Strategically, practicing global trade allows poor countries to continue developing economically and socially by increasing national incomes to fund innovation and development (Mouhammed, 2009, p. 50).
In addition, a country that capitalizes on production at a lower opportunity cost than other countries receive the maximum benefits of the trade resulting into higher Gross Domestic Product (GDP). Comparably, ‘‘poor, more globalized nations had a higher increase in income per year than poor, less globalized nations’’ (Fiss, & Hirsch, 2005, p. 42). Therefore, if all countries have a relative advantage, it means that all of them can gain from the trade.
The introduction of advanced technology in the global market result to a steady boost in the demand for commodities as well as maximum utilization. As per statistics, people exchange ‘‘more than $1.5 trillion in the world’s currency markets daily while around one-fifth of products and services are generated per year are bought and sold’’ (Fiss, & Hirsch, 2005, p. 33). As a result, child labor has dropped with an increase in a country’s income.
Since trade enhances economic growth, globalization results in minimal child labor. For instance, from 1960, about thirty-two percent of the children in low-income countries participated in the labor force. However, forty years later, especially after the ‘‘massive expansion in international trade, child labor in the same countries had declined to nineteen percent’’ (Armstrong, 2000, p. 464). Globalization has also lifted the poor towards wealth-alleviated poverty especially in the developing nations.
According to UNDP, the last fifty years, has shown a faster global poverty reduction than it had been in the past five hundred years. Notwithstanding, the average income in developing nations has been doubled in the last thirty years (Jean, & Ferry, 2009, p. 7).
Therefore, globalization enables the poor nations to benefit from the rich ones because when trade and capital movement link the countries, the poor ones seem to gain most. Moreover, wealth also dictates and/or improves the quality of the environmental quality and its resources.
Globalization has also lowered the inflation of participating nations. Since 1970s, rising international competition has necessitated the industries to improvise progressively more. The expansion and vitality of capital markets has contributed significantly to the prosperity of most nations. Technological development has enabled the industries to improve their productivity in order to survive the global competition (Jean, & Ferry, 2009, p. 10).
Accordingly, the integration of technologies has developed new financial instruments leading to an upsurge in productivity in the financial sectors. Because financial globalization has substantially integrated global economy, it has given international investors several options of investments opportunities while borrowers access a much wider market for savings in order to reduce their cost of capital.
For instance, in the past twenty years, ‘‘the stock of foreign direct investment resources has increased rapidly as a percentage of gross world product’’ (Alexander, & Korine, 2008, p. 74).
Therefore, globalization has encouraged expansion of local capital markets and financial sectors through technological transfer and employment openings. In addition, market competition has also stopped the businesses from unnecessarily increasing prices for their commodities (Kose, 2009, p. 4). Due to integration of the global market, countries have minimized the effect of inflation.
Globalization benefits the nations through multinational corporations and business outsourcings. Globalization minimizes the international trade barriers thereby, giving both the developed and the developing countries equal participation in the free trade in the free markets (Fiss, & Hirsch, 2005, p. 44).
Multinational tend to invest in the developing nation due the availability of cheap labor and in turn bring new ‘‘machinery, better technology, new management skills and production ideas, a larger market and education of workers’’ (Armstrong, 2000, p. 476), consequently, raises output, and wages.
The income can eventually enable families to send their children to school and to provide some health care. For instance, during the last forty years, wages in third world nations rose from ten percent to thirty percent of the American industrial wage (Routledge, & Francis, 2001, p. 117). As growth occurs due to globalization, child labor will definitely diminish over time.
At what costs did the globalization occur?
International Capital Mobility is one costs of globalization. Several participants in the globalized economies so and many economists suggest that globalization causes them to feel that their economy is in an unstable situation (Mouhammed, 2009, p. 44). The nation can suffer a loss in its share of the world’s capital at the hands of the global capital market. Furthermore, there is no global control to intervene for compensation (Fiss, & Hirsch, 2005, p. 39).
Several individuals believe that globalization is very unfair because it gears the world’s capital towards the commercially advantaged economies. Moreover, many of the catch-up countries, for example, China have increased their national investment rate as much as their domestic savings rate (Jean, & Ferry, 2009, p. 5). Therefore, the high investment levels in the emerging economies are not sucking capital out of the frontier economies.
Globalization does force the workers- adults and children-in poor nations into hard labor as a necessary means for endurance. For instance, in some developing countries, sending children to work is a step towards family survival. Comparably, there are no enough schools and medical care in developing nations as in the wealthier countries (Fiss, & Hirsch, 2005, p. 42). Traditionally, adequate education and proper health care was available for only better-off families who could afford them.
Due to hard conditions of living in the developing countries, some of the female children find themselves into prostitution as a means of getting income (Kose, 2009, p. 3). In addition, globalization has resulted into global warming, which has adversely affected the climatic conditions of the world. Consequently, farmers in the developing countries with inferior agricultural methods and tools are in constant fear of a failure of their crops, as that would result into starvation (Mouhammed, 2009, p. 48).
Terrorism act in another cost of globalization. Terrorism activities have been a major problem to world’s stability. The proponents capitalize on free movement across borders and uses internet and mobile phones for recruit and communications among themselves. Nevertheless, they have access to dangerous weapons, which enhances their ability to cause destruction and loss of lives (Alexander, & Korine, 2008, p. 73).
The free movements do not only result into terrorism but also result to the spread of deadly diseases such as HIV/AIDS among others, increase human trafficking, undesirable foreign culture through televisions and the Internet as well as the spread of junk food, which adversely affects the lives and health of the developing nations. As Daly points out, “…people are consuming more junk food from these joints, which have adverse impact on their health” (1999, p. 36).
A disadvantage of global marketing is inconsistency in consumer needs. If global market is not able to address the uniqueness of customers, then consumers are disadvantaged as they might get their preferences (Stulz, 2009, p. 373). For instance, a customer in one country may be different and/or react differently from those in another country in terms of their countries’ specific brand and product (Armstrong, 2000, p. 468).
In addition, there are infrastructural differences and conflicting laws and policies that make global approach difficult to devise (Jean, & Ferry, 2009, p. 13). Otherwise, infrastructure may be obstructing the process in one nation while accelerating the same process in another. In such case, international strategy becomes inconsistent and inadmissible.
Another cost of globalization is inequality. Anti-globalists argue that globalization result into an unequal distribution of goods and capital in the world. Accordingly, few individuals enjoy the wealth from the natural resources while most people in the developing nations are yet to receive the perceived benefits of globalization. Therefore, ‘‘those who have capitalism grow rich as those who do not stay poor’’ (Daly, 1999, p. 35).
Although, in the 18th century, poverty level was the same on both continents with Europe slightly wealthier than the rest, capitalism in Europe made gave them freedom to escape poverty. The developing nations have unequally distributed the benefits from economic growth making poverty remain stubbornly high (Mouhammed, 2009, p. 34). However, in the last ten years, inequality has increased in both the advanced and emerging economies.
Globalization has resulted into loss of million jobs. For instance, it has created a different situation in America. The poll conducted for Wall Street Journal and NBC news indicates that, ‘‘ its impact has been so great on jobs and career in the financial sector, and securities, commodities and other investments’’ (Armstrong, 2000, p. 462).
Globalization has also created economic liberalization where workers can emigrate and take jobs in industrial countries and/or work in outsourced industries in their home countries. More US’ nationals have lost jobs due to cheaper labor provided by these emigrants, some whom are political refugees (Clark, 1998, p. 496). The mobility of highly skilled professionals is so high that US opportunities attract the attention of professionals from almost all the nations in the word.
How did that affect the global economy today?
Globalization has integrated the world’s economies because mobile phones and the Internet have brought human beings closer by making the world become a smaller place. Such products were once confined to only western countries (Daly, 1999, p. 34). However, with globalization, they are nowadays available across the globe.
Today’s developments in traffic communication and transportation make people reach their destination in a somewhat short span of time. In addition, advancement in technology use in media coverage has improved human rights as it draws awareness of the world to human right and freedom abuses (Fiss, & Hirsch, 2005, p. 51). Technologies such as computer and the internet have made it easier for work outsourcing to any part of the world that has an internet connection.
The concept of outsourcing has influenced the economy of both the developing and developed nations. Developed countries have ‘‘outsourced manufacturing and white-collar jobs to developing countries like China and India’’, leaving less opportunities for nationals (Alexander, & Korine, 2008, p. 72).
For instance, most companies outsource manufacturing jobs and software development, editing, customer support, insurance, marketing, and accounting job to China and India respectively where the costs of production are cheaper.
Therefore, companies that outsource the job reap the maximum benefit due to lower costs of production (Mouhammed, 2009, p. 32). As a result, outsourcing improves the economy of the developing nations because their workers learn how to use latest technologies while it hampers the economic growth of the developed nations.
Globalization acts as a gain to the world economy. It has created free trading environment for the mutual benefit of the countries. As such, it has influenced the financial state and the industrial sector of the nations (Tomohara, & Takii, 2011, p. 513). Globalization has given birth to global market, which in turn has widened the accessibility to a variety of both local and foreign commodities based on industrial productions (Fiss, & Hirsch, 2005, p. 35).
Through the formation of a common global market, competition has forced the firms to lower their prices thereby benefiting the consumers. Politically, globalization has helped in the ‘‘formation of a world government to normalize the existing interactions among countries by ensuring that rights emerge out of economic and social globalizations’’ (Clark, 1998, p. 482). Therefore, it has initiated somewhat amicable interactions among the nations.
The Economic Impact on Developed Nations Globalization (EIDNG) forces companies and businesses to acclimatize to diverse strategies based on new principles, which tend to stabilize “the rights and interests of the people and the community” (Daly, 1999, p. 33).
In addition, the fact that globalization allows businesses to compete internationally, means that there is a remarkable ‘‘change for business leaders, labor and management by legally accepting the input of workers and government in developing and implementing company policies’’ (Armstrong, 2000, p. 472).
The involvement of community and the government can help the company to reduce it risks through diversification. Notwithstanding, globalization provides initiatives for reducing macroeconomic instability on output and spending through risk diversification. Moreover, World Bank reports that globalized nations have reduced government outlays, taxes, and levels of corruption.
However, globalization has negatively influenced some economies, which depend on agriculture as the backbone of their economic development. Climate changes caused by global warming and pollution adversely affect agricultural outputs (Tomohara, & Takii, 2011, p. 520). Globalization has increased utilization of non-renewable resources, at the same time ‘‘contributing to the increase in pollution and global warming’’ that raises the global temperature (Stulz, 2009, p. 366).
Conclusion
The current state of the world economy is due to the factors of globalization. While some sectors and/or nations have absolutely benefited out of globalization, it has badly hit some countries (Mouhammed, 2009, p. 38). Globalization has benefited the global economy by bringing reformation at the international, national and sub-national levels, integrating financial markets hence hindering entrepreneur economic and social relations through ‘‘multilateralism and microeconomic phenomena’’ (Daly, 1999, p. 32).
Globalization has also enhanced global trade, short and long-term investments, technological advancement, competition and diversification- leading to reduced prices, greater efficiency and greater economic growth. The negative impacts of globalization are attributed to lack of proper management of the globalization process. It was the main cause of the Great Recession in the US and many other nations.
Many Americans considers the relative decline in US power as being due to its high trade imbalance caused by globalization (Alexander, & Korine, 2008, p. 71). Accordingly, globalization has opened the world boundaries- exposing people to harm of terrorism, human trafficking, drugs and pornography.
In addition, it has marginalized the uneducated and low-skilled employees; caused high salary of capital and has destroyed national industry and jobs as claimed by reformists and revolutionists who argued that income inequality of the nations is due economic globalization (Clark, 1998, p. 490). There is, therefore, little doubt that globalization has both benefits and harms towards people and the world. However, responsible authorities can provide the best solution to reduce the harms of globalization.
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