Globalization: Is it Good or Bad? Pros & Cons
By: Antonia Ava
Communities are formed by the interaction of groups with each other. These communities turn into countries. All the countries are not sufficient in all the resources. They need to exchange things from each other. The exchange of things, ideas, culture, and money has made the world a global village. Globalization has brought the world together. The best part of globalization is that it promotes and increases interaction between different populations, no matter how they are far away from each other.
Globalization has some good aspects and some bad. Advocates of globalization say that globalization results in a positive growth rate reduces market instability, and lowers opportunity costs. On the other hand, opponents are of the view that globalization results in a reduction in local job growth, unproductivity of wages, and cost of mismanagement to countries.
How to go for Globalization
When countries think above their self-interest, then they think about global economic wealth and technological and scientific progress. But not everyone is benefiting from the economic, technological, and scientific changes. Wealth is distributed unfairly and economic growth occurs as a result of environmental costs. How can countries think above their self-interest and how can they make fair societies and a healthy global world? History reveals that closing borders or protectionism is not the right way because many countries that did it have failed.
The globalization policies should extend the policies of openness and integration while improving its side effects. How to go for globalization is a very complex question. It involves redesigning economic systems. Globalization is greatly related to economic systems and markets that make the impact on and are impacted by social and cultural factors, and those factors are very hard to control.
So globalization requires global cooperation and consensus, and on the other hand, it requires country-specific solutions.
Contradictory Reviews about Globalization
The former president of the US, President Donald Trump, was very vocal about his stance about globalization. In the case of free trade, his point of view is regarding protectionists such as the North American Free Trade Agreement.
It is related to a few multinational trade agreements and higher taxes on imports. He has also levied tariffs on foreign goods to restrict their import and use. Some economists praise the universal benefits of globalization whereas some are against the globalization forces that take away domestic jobs. These contradictory reviews have developed a burst of opinions and policies that range from protectionism to trade barriers.
As per the economic point of view, globalization is an increase in the global trade of goods, services, capital, and technology. This growth trade is critical between developed countries like the United States and emerging markets like China. Global trade is the result of many factors. Destruction of Europeans during and after World War II evokes them to start again. Lower transportation rates have reduced the costs of trade. Technologies have mitigated the barriers. Moreover, liberal economic policies have assisted lower political barriers to trade. Cost reduction has increased global trade.
The main advantage of globalization is a comparative advantage. Comparative advantage is the ability of one country to produce goods and services at a lower opportunity cost as compared to other countries. This concept suggests that two countries proficient in producing two commodities at different costs can take advantage of each other by exporting the goods where the comparative advantage exists.
For example, a developing country has a comparative advantage in producing cement, and the United States is manufacturing bricks. The US is able to produce cement more efficiently than the developing country. The US would be able to focus on bricks because of its comparative advantage.
This is the reason globalization is a powerful driver of global consumption among countries of different resources. Evidence taken from different sources suggests that a positive growth impact takes place in countries that are rich in globalization. It gives opportunities to mitigate the instability of output and consumption, although all the products and services are exported and imported easily.
Globalization is known for taking away jobs from domestic workers and companies. Let’s assume the US brick industry will go down if imports from a developing country's prices go down lest the consumption increases. Small and medium brick companies could find it hard to compete, and they would shut down. It would result in the unemployment of workers. The larger US brick companies would experience a long-term decline.
A second disadvantage is the high cost of comparative advantage to the country's prosperity if it is not managed well. Another disadvantage of globalization is the rise of wages that can affect corporate profitability. For instance, if a rich country has a comparative advantage in developing software, then it will enhance the price of software engineers all over the world, and it becomes very difficult for foreign companies to compete in the global market.
Technological advancements like blockchain, banking, and mobile communication are upgrading globalization. However, the rapid pace of globalization in the 21st century could be slowed or even reversed by protectionism and anti-globalization sentiments. Apart from nationalism and the growing economic policies, globalization is under the threat from cyberattacks, decaying infrastructure, human rights abuse, and climate change. All these require a solid strategy from both governments and corporations which will impact the future of globalization.
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