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globalization in economics has led to the growth of multinational enterprises and an assimilation of merchandise
Globalization In Economics And Its Consequences
The growth of global networking in the sectors of communication, transport, and trade has led to an amalgamation of production and consumption processes in the international market. Consequently, the modern world has become more integrated both culturally and economically. Bhagwati (2004) defines economic globalization as “the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology” (p. 5). In simple terms, globalization can be equated to making the entire world function as one country. The quest for economic growth through globalization has had both positive and negative consequences on different national economies.
Many economic benefits have been realized through globalization. Reduction of barriers in several countries, economically and politically, has been beneficial to global organizations in acquiring discounted labor and unprocessed materials not available in their home countries. A good example is China, which reduced its tariff rate by almost 13 percent after joining the World Trade Organization (Milanovic, 2002). Globalization has led to a rise in the production ability of many global firms and provided them with a global customer base. The growth in industrialization has resulted in creation of employment opportunities, growth of Gross Domestic Product (GDP), and an overall improvement of living standards worldwide (Garret, 2000, p. 941).
In the fiscal sector, globalization has integrated financial markets, leading to improved provision of financial services. For instance, external financial borrowing has significantly improved because of globalization. Countries such as Japan and Malaysia have had rapid development due to external financial borrowing (Vogel, 1991, p. 37). Technological advancements in satellites, the internet, and fiber-optic communication have significantly reduced costs of communication and improved trading across borders and other business activities. For example, it is now possible to outsource labor, buy products, and organize shipment through the internet.
In as much as globalization has led to economic growth in most countries, the process has also had negative consequences in some national economies, especially in the third world. Longworth (2007) describes a quality of life indicator called the Human Development Indicator (HDI), which measures changes brought about by globalization. According to the HDI, the world’s richest countries have experienced increased development as a result of globalization, while the poor nations have had a slow growth rate. This has made globalization a process through which rich and powerful economies continuously plunder poor and weak nations. The benefits of globalization are realized by countries that can compete effectively in the international market. Poor nations lack this ability and power and have to negotiate with the rich nations on unequal terms. Furthermore, the forces of globalization do not take into account social injustices such as Asian and South American sweat shops, where underpaid citizens of poor nations face labor-related injustices in producing goods for the first world market. Globalization often benefits the producers of manufactured goods while the primary producers continue to operate under many international trade barriers.
In conclusion, globalization in economics has led to the growth of multinational enterprises and an assimilation of merchandise, labor incomes, and revenue rates in both industrialized and developing nations (Garret, 2000). However, the pursuit of economic growth and improved living standards adversely affects the economic stability of poor nations, which lack the ability to compete effectively in the international market.
References
Bhagwati, Jagdish. (2004). In Defense of globalization. Oxford, New York: Oxford UniversityPress.
Garret, G. (2000). The causes of globalization. Comparative Political Studies, 33, 941-991.
Longworth, C. (2007). Caught in the middle: America’s the age of globalism. New York:Bloomsbury.
Milanovic, Branko. (2002). True world income distribution, 1998 and 1993: First circulationbased on household surveys alone. Economic Journal, 112(476), 51-92.
Vogel, F. (1991). The Four Little Dragons: The Spread of Industrialization in East Asia.Cambridge, Massachusetts: Harvard University Press.
Globalization in Economics and its Consequences
Globalization in Economics and its Consequences
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Abstract
This paper seeks to give an analysis on globalization. Globalization plays an essential role in every economy, and its impact needs to be known. Employment has been created as a result of liberalization of trade in many economies. Unfortunately, the Gross Domestic Product of some countries has been affected negatively, in terms of per capita. It also plays a positive role in that, it reduces inequality and poverty. Policies, which focus on human development, growth and the societal standards, need to be implemented (Galbraith& Kum, 2002).
Consequences of Economic Globalization
To achieve economic development in the future, globalization of an economic nature has to occur. This is because the results are fulfilling as well as rewarding, due to its positive forces. In turn, the economy benefits through growing, living standards are improved, as well as resources being allocated fairly. Also, it seeks to ensure that enhancements of greater productivity take place. Those against economic globalization believe that it has led to income distribution reducing and poverty has increased to great levels (Galbraith& Kum, 2002). There is a need to ensure that economies are integrated .This can occur if investments are liberalized, through the existing economy, which is global. In order to promote growth of the economy, trade regimes have to exist.
Through change in an economy, development occurs. This is because development occurs at high stages from where it initially began, at the lower stage. This process is continuous and dynamic. It ensures that countries undergo social and economic transformation. Many societies seek to ensure that their values, social and economic, objectives are met through development. All activities done in societies are based upon the development concept. Development seeks to eradicate unemployment, inequality and poverty (Greenway& Morgan & Wright, 2002) .Basic needs provisions and reduction of poverty is the result of development. The ideal, which exists concerning globalization, is that everything in an economy needs to be fair .There is a need for technology and capital to freely flow, efficient working of markets and knowledge being easily accessible to people. Also, every person should have the right to make sure that the information they have benefits them
Reduced costs of transportations and use of technology have brought about economic globalization. Many governments are seeing the importance of an economy being integrated, as they will benefit in the long run. There are many dimensions of globalization of an economy. This is because restrictions on trade are brought about, and it involves aspects such as quotas, also, tariffs. When this takes places, labour is able to move freely and capital markets become liberalized (Greenway& Morgan & Wright, 2002). Imports are normally controlled through controls, which are quantitative as well as curtailed. Foreign Direct Investment restrictions are eliminated and tariff rates reduced. As a result of globalization, poverty is reduced and productivity as well as growth is promoted. The best example of a where globalization has had a positive impact is in East Asia. Research has found out that the latter, was able to increase the income per capita, which benefited many of the citizens, living in the various countries (Barro, 2000).
Conclusion
In conclusion, globalization has a lot of benefits for an economy. This means that countries should take advantage to ensure that problems such as unemployment, inequality and employment, do not exist. Polices, which enhance globalization, should be implemented, so that everyone benefits. Other factors, which influence globalization in an economy, are political stability, market structure, policies on domestic macroeconomic, among others.
References
Barro, R. (2000). Inequality and Growth in a Panel of Countries. Journal of Economic Growth 5, 1, 87-120.
Galbraith, J. & Kum, H. (2002). Inequality and Economic Growth. UTIP Working Paper No. 21. Austin: University of Texas.
Greenway, D. & Morgan, W. & Wright, P. (2002), “Trade Liberalization and Growth in
Developing Countries”, Journal of Development Economics, 67, 229-244.
Globalization has had diverse implications on the economic wellbeing of the society.
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Globalization
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Globalization has had diverse implications on the economic wellbeing of the society. The relative technological advancements and free flow of information have impacted on world populations differently. The purpose of this paper is to evaluate how globalization or economic integration has increased inequality within and across nations. Inequality in this regard is closely related to the levels of income of different facets of the population. Further, the paper highlights the measures that have been undertaken by the states, industries and different economic sectors to respond to the implications of globalization. To enhance a harmonic consideration, it also underscores the rationale for the identified measures.
Introduction
Increased technological advancements have had diverse implications on the global economy. In particular, these have led to increased flow of information that is used across the globe. In addition, this has culminated in easy movement of goods or products across the globe. From an economic point of view, globalization has led to an increase in the gaps between the rich and the poor. This can be attributed to the fact that unlike the poor, the rich have ready access to technology that they employ in production. In general, globalization creates greater inequalities within and across nations.
As aforementioned, globalization has led to increased flow of information and technology. This information is useful for daily survival and its spread is necessitated by technology. In order to benefit immensely from the respective information, an individual needs to have skills and knowledge regarding use of relative technology. In his review, Birdsall indicates that higher education plays an important role in instilling the relevant skills and knowledge in individual (78). Statistical evidence on the other hand ascertains that compared to the rich, the poor lack sufficient resources to pursue higher education. This can be used to explain way they seldom access vital knowledge and skills to benefit from free flowing information and knowledge. In this consideration, globalization trends continue to empower the rich more than the poor at all level. Wealth in this regard is defined in terms of income levels in that the rich have higher incomes than the poor.
Also, it is worth noting that higher education is essential for attainment of a higher economic status. Lack of higher education therefore prevents the poor from improving their economic wellbeing. In this regard, higher education instills in an individuals skills, knowledge and competencies that enable the same to perform optimally in the job market. According to the trends in the job markets, individuals with higher skills have higher wage compensation than their counterparts. In most economic sectors, individuals with higher education tend to get more financial rewards than their counterparts. This is attributed to their ability to perform better and more efficiently. Thus compared to skilled individuals, non skilled individuals have a lower income. In this consideration, persistent differences in income levels contribute significantly to economic inequality.
Emergent researches show that wealthy individuals are more likely to assume leadership positions than poor individuals. Likewise, wealthy nations have a higher probability of assuming global leadership poor nations. Wealth in this regard is an exemplification of power and influence. Most of the wealthy individuals use their power and individuals to pursue their good and improve their well being. In particular, they use their influence to gain access to vital resources across the globe. This further widens the gap between the rich and poor factions of the society.
Use of technology in the economic sphere has had adverse impacts on the poor who have fewer skills. In this respect, job automation has culminated in widespread unemployment. Unemployment implies that the poor lack a definite source of income and their quality of life is affected detrimentally. On the other hand, job automation increases the income of the wealthy because who supposedly own the industry. It increases the quality as well as quantity of production and makes it possible for them to explore new and more rewarding modes of production. From an economic viewpoint, this increases the gap between the rich and the poor.
According to Kapstein, globalization also leads to increased economic competition. All nations across the globe compete for the natural resource base in order to better their wellbeing (17). This is further perpetuated by technological advancements that enhance the exploitation of resources. Arguably, the rich or those with higher incomes have an upper hand with regards to resource exploitation. They have more resources at their disposal and are likely to compete favorably. In addition, they have the influence to access the resources for their benefit and in most cases, they actively engage in formulation of policies used to govern resource utilization. Inherent disparities and intense competition increase the gaps between the rich and poor because while the rich achieve more, the poor continue to strain and achieve comparatively less.
At this point, it can not be disputed that globalization has led to increased economic inequality. While the rich continue to acquire more wealth and increase their income levels, the poor continue to suffer in poverty. This has had far reaching implications on the quality of life of the poor. In response, they are undertaking various measures to counter the scenario and enhance their quality of life. Arguably, respective measures are also geared towards leveraging income levels and ensuring that al individuals have a chance to access vital resource for quality living.
From a global point of view, Lindert and Williamson indicate that mass migration has been instrumental in equalizing income distribution between different countries (18). Movement of individuals from poor to rich countries has allowed them to benefit form the wealth and higher incomes of the wealthy countries. Likewise, movement of the wealthy individuals to poor countries has provided them with a chance to exploit the resources therein and improve the income levels individuals in poor countries at the same time. Besides helping to bridge the gaps between the rich and the poor, mass migration has helped in distributing wealth across the globe. As such, all individuals have had a chance to share in the global wealth in acceptable degrees.
Industries and other economic sectors have also responded to the implications of economic integration through formulation of policies and regulations that encourage equitable distribution of resources. Since inequality is already apparent in the society, it has been deemed necessary to establish laws and regulations to govern resource exploitation and distribution. These allow all individuals from different social and economic backgrounds to share in the natural resource base. Regulating exploitation also ensures sustainability as respective resources are given a chance to regenerate and benefit future populations. The established standards, rules and regulations also ease competition that provides room for equal exploitation of resources.
Countries of the global world have also taken measures to develop financial institutions such as the World Bank to help in addressing the implications of globalization (Micklethwait and Wooldridge 25). Basically, these provide financial aid to needy countries in a bid to enhance their economic production. The established regulations are instrumental in enhancing accountability especially considering the poor nations have weak regulations and policies. Notably, the economic policies that are enforced by these financial agencies allow the poor nations to benefit from the rich nations through cooperation. For instance, a policy such as General Agreement on Tariffs and Trade (GATT) that is enforced by the World Bank dissolves trade barriers and allows the poor countries to benefit from a supportive trade environment.
Conclusion
In conclusion, globalization has greatly increased the economic gap between the rich and the poor in different ways. The relative technological advancements that are useful in resource exploitation are only available to the rich and wealthy who have relevant skills and knowledge. Technological advancements disadvantage the poor in the society because it culminates in unemployment and denies them a chance to actively participate in meaningful employment. In addition, market trends related to according the skilled higher compensation further increases disparities between the rich and the poor. The entire scenario is further perpetuated by the recognition that comparatively, the rich are more likely to further their higher education and perfect their skills than their poor counterparts. The industries, countries and a host of economic sectors have responded to these in different ways. This is in a bid to enhance their economic performance, improve their quality of life ad enhance equality. Besides establishing policies and financial institutions to assist the disadvantaged, mass migration has been instrumental in addressing this menace.
Works Cited
Birdsall, Nancy. Life is Unfair: Inequality in the world. Foreign Policy, 111.1 (1998): 76-94. Print.
Kapstein, Ethan. World Economy. Foreign Affairs, 73.3 (1996): 16-37. Print.
Lindert, Peter and Jeffery Williamson. Does Globalization make the World More Unequal? Cambridge, MA: National Bureau of Economic Research, 2001. Print.
Micklethwait, John and Adrian Wooldridge. Think Again: The globalization Backlash. Foreign Policy, 126.1 (2001): 16-26. Print.