Globalization is the increased interdependence of nations due to increased integration of individuals, finance and trade (Ritzer 2011, pp. 2). It is characterized by increased integration and interaction of individuals, governments and companies (Scholte 2005, pp. 2).
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International trade and investment are the key factors that drive globalization. These two elements are the essential components of globalization. Additionally, advances in information technology allow the process of globalization to occur.
Globalization affects the environment, political systems, culture and the economy. This paper seeks to determine whether globalization has resulted into economic growth in various countries.
The process of globalization began after the end of World War 2. However, in the 1980s, technological developments and liberalization of the capital markets and trade accelerated the process of globalization.
Improvements in technology resulted into a reduction in transportation, computation and communication costs. The reduction in these costs enabled firms to undertake different phases of the production processes in different countries.
Liberalization of trade has made many governments not to offer protection to their domestic industries. Therefore, industries in such countries face foreign competition.
Hence, firms must produce high quality goods and services to be able to compete globally (Anwar 2002, pp. 411). This promotes economic growth of different countries.
Globalization increases the market that a country’s producers can access. Notably, countries that participate in globalization benefit from unrestricted trade with other countries (Phelps 2007, pp. 371). Producers in a country are able to market their produce worldwide.
In addition, a country’s economy can benefit from global division of labour. International division of labour makes domestic producers specialize in lines of production. This results into efficiency in the production processes.
The result of efficiency, specialization and international competition is increased variety of products in the domestic market due to domestic and foreign production (Gup 2005, pp. 155).
Additionally, consumers in a country that participates in globalization enjoy goods and services of high quality at lower prices. This is likely to result into economic growth of that country.
Furthermore, countries that trade internationally due to globalization benefit from technological developments that occur in other countries. A country can benefit through acquisition of knowledge used in the manufacture of imported products (Breckenridge & Moghaddam 2012, pp. 600).
The country can then use this knowledge to begin the production of products that it normally imports. Moreover, the country will create more employment opportunities for its citizens due to domestic production of formerly imported products.
Certain governments prefer to protect domestic industries from foreign competition. In many cases, these governments argue that domestic industries require protection until they develop competitive advantages (Thoumrungroje 2004, pp. 2).
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The views of such governments are that foreign competition makes domestic firms collapse since most of them have inefficient production processes and have inadequate capital. Governments of third world countries usually reduce quantities of imported goods and services through the imposition of quotas and tariffs.
However, protection of domestic industries makes domestic firms produce substandard goods and services. The result of inefficient production processes and production of low quality goods is economic stagnation of a country.
In contrast, globalization allows international competition and results into improvement of production processes of domestic firms hence economic growth (Arndt 1998, pp. 480).
Attempts by a country to isolate itself can be detrimental to its economy. International trade enables a country to access more goods and services at lower prices. Therefore, it is appropriate for a country to participate in international trade.
International trade enables a country to profit from international specialization (Arnold 2010, pp. 300). A country has to determine its comparative advantages. This enables it to survive and improve its economy.
However, in case a country does not determine its comparative advantages, its economy is likely to be affected in case there is sudden unfavourable change in terms of trade.
However, international trade, which has resulted due to globalization, has risks. International trade is linked with strong market competition (Gaston 2010, pp. 3). Therefore, firms that are less adaptable and competitive internationally may collapse.
Additionally, certain industries are critical in a country’s security. Therefore, reliance in other countries to supply it with certain products may be inappropriate. This shows that globalization may not lead to economic growth.
However, the benefits of globalization in promotion of economic growth outweigh the negative effects that it has in economic growth of a country.
Empirical evidence has shown that globalization contributes immensely towards economic growth. East Asian countries have tremendously benefited from globalization. China and the Republic of Korea are a few examples of countries that have benefited from globalization (Greenberg 1996, pp. 1).
China is the fifth largest economy that trades internationally (Welfens 1999, pp. 13). It has maintained a yearly growth rate of about 9.3% in the last 20 years. Currently, it is the sixth largest economy in the world (Peixin 2003, pp. 1). Globalization enabled China to achieve these results.
Globalization enabled Korea to improve the effectiveness of market intervention strategies. This enabled Korea to improve the performance of firms such as Hyundai and Samsung (Wen-Heng 2000, pp. 1). Conversely, some countries have not benefited from globalization.
Many third world countries have not managed to mix with the international economy. The share that Sub-Sahara Africa has in international trade has declined persistently. Increased association of third world countries with international trade has contributed to slow economic growth through corruption and corporate exploitation.
Corporate-led globalization has led to poverty and environmental destruction in Ghana hence lower rate of economic growth (Ofosu 2010, pp. 1).
The goal of this paper was to find out whether globalization has led to economic growth. Based on the arguments presented, the benefits of globalization outweigh its costs. Thus, globalization leads to economic growth.
It increases the quantity of products that consumers in a country can access. In addition, it makes firms produce goods and services of high quality since they face international competition. However, not all countries have benefited economically from globalization.
List of References
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Arndt, S.W 1998, “Super-specialization and the gains from trade”, Contemporary Economic Policy, vol. 16, no. 4, pp. 480-485.
Arnold, R. A, 2010, Economics, South-Western Cengage Learning, Australia.
Breckenridge, J & Moghaddam, F 2012, ‘Globalization and a Conservative Dilemma: Economic Openness and Retributive Policies’, Journal of Social Issues, vol. 68, no. 3, pp. 559-570.
Gaston, N. G, 2010, Globalization and economic integration: winners and losers in the Asia-Pacific, Cheltenham, UK.
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