Technological advancements have brought the world together and have connected economies on a global scale. The connection of various parts of the world on a global scale is known as globalization. Economic Globalization involves various organizations, businesses, and countries working together on a global level. It plays a vital role in the economic development of developing countries and improves the overall standard of living of the people. When people think of the word globalization, they think of it mostly in an economic context. However, globalization impacts and is impacted by various other factors such as culture and politics. We will further take a look at the impact of globalization on national economies.
Benefits of Globalization
Following are some of the most notable benefits of globalization:
Competitive Advantage
With the help of globalization, businesses can get raw materials at a lower cost. They can also source labor in developing countries on low wages, seeking the technical expertise of more developed economies. Overall, it gives them a competitive advantage by reducing costs and increasing productivity as well as efficiency. This would not be possible by operating in just the home country where the business originated from but economic globalization made it possible. However, low wages in developing countries do not mean you should be unfair to them. They pay them according to their standard wages, which are often less than those of developed countries.
Higher Quality of Products
Globalization allows businesses to carry out manufacturing activities in various countries for one product. For instance, in the automotive industry, many parts of a car are manufactured in various countries. Only the ones that are best at it are the ones that are assigned such tasks. You can even manufacture the simplest of products in other countries where production of that product is done the best at less cost. Countries like Spain, Mexico, and Europe are supplying automotive parts to traditional automotive countries. This shows that the market for this goes international market-oriented activities, mostly in low-income countries where the import of the required automotive parts is carried out.
Another example is the importing of perfume material in Paris. You will find some of the best quality natural materials to manufacture high-quality perfumes in Paris.
Job Creation
With globalization comes increased business activities and more international engagement. This not only leads to higher employment opportunities within the home country but also within other developing countries where the business carries out activities. Due to the impact of globalization, many companies in developed countries outsource their talent from developing countries. For instance, IT companies may seek IT experts in India, where they have great experience and capabilities. Another example could be the automotive industry outsourcing labor in Mexico, where labor costs are much lower.
Improved Standard of Living
Globalization leads to the development of an underdeveloped economy and also reduces the cost of production and cost of labor. This means, in general, the cost of many goods and services is reduced, and many people can afford it. This improves the overall standard of living as people can afford all the good stuff, and the local economy benefits from that as well.
Disadvantages of Globalization
Although there are many benefits of globalization to the economy, not everything it brings is positive. There are several negative effects of globalization that we should openly discuss:
Competitive Labour Market
When companies outsource for various jobs in a less expensive labor market, the people in the home country tend to lose their jobs. This means that people in developing countries now have to compete with a less expensive labor market. The workers have to defend themselves against losing their jobs to lower wages in other countries, and it is often difficult to do so.
Developing Countries Prone to be Misused
The labour personnel in developing countries work under lower wages with high production skills. The economies of that country are going under rapid change, and it is sometimes hard for them to adapt quickly. The working conditions and pay grades might be deplorable, such as companies in the US hiring laborers in Bangladesh to manufacture clothes. They employ about 4 million people however, the amount they are paid in a month a US employee earns in a day.
Globalization effects can also lead to increased child labor in developing countries. It is known to lull more child labor into working under low wages and drive them away from getting an education.
How has Globalization Affected the Economy?
You must be wondering how has Globalization affected the economy. The impact of globalization on the country’s economy can be measured by a few fundamental indicators such as Foreign Direct Investment (FDI), capital flows, trade, and GDP per capita. The higher the amount of Foreign Direct Investment and Trade the Higher will be the rate of economic growth in that country. Overall Economists believe that globalization is a prime contributing factor for growing economies.
Businesses thrive in global markets because they can outsource tangible and intangible products. They act as highly intelligible sources and create customer loyalty. All of this is done without the barriers of geographic location as the businesses thrive by using the competence, concepts, and connections of different countries.
Globalization into the Future
Despite the negative impacts of Globalization, it is here to stay. We can only work on reducing those elements for a better future. Globalization has resulted in a smaller, more connected world where people exchange knowledge, expertise, and material goods. It has also resulted in the exchange of cultures and ideas that has led to a better understanding of each other, and people have become more connected.
Conclusion
Economic globalization, or globalization in general, has brought the world together in many aspects and has made many things easier. However, if something seems too good to be true, chances are it is not. With all the many benefits of Globalization comes the negative effects as well. Economies and businesses should focus more on the positive aspects while working to reduce the negative impacts. Due to technological advancements, it is not hard to work on eliminating the negative impacts and strive towards a better future.
