Question

Globalization is a big concept that can include many different issues. Discuss some of what you view as the benefits and costs of an increasing globalization in our world economy.

Answer 1

Globalization as a concept revolves around considering the world economics as one and then looking after the forces of demand and supply to do their job. Over the years, several countries which had earlier adopted protectionist measures such as India and China have now begun to realize the fact that globalization is the only way they can sustain and develop their economy.

Accordingly, some of the positives and negatives are as explained: -

1) Benefits of Globalization: -

The following are some of the key benefits: -

1) Technology has expanded at a rapid pace due to globalization. This is because with increase in competition companies dually recognize the need for innovation is there if they need to make any profits that exceed competitors.

2) Competition has grown over the years, making the consumer the king of the market. Gone are the days, when you could push a product into the market and it would sell itself. Consumers dig in and do loads of research while making their purchase decision. That is the reason why competition has increased over time.

3) There have been significant improvements in employment in the world and labour movement has also decreased as locally jobs are available.

4) Prices of goods and services has balanced out over a period of time and both consumers and producers have gained from the same.

5) Reserves of governments have increased in value and this gives them protection from any significant inflation or recession which may take place in the society.

2) Demerits of Globalization: -

Some of the key demerits are as follows: -

1) Interconnected economics means that a recession in one country often extends to others as well. This is evident from the recession in the United States which took place in 2008 and extended to the entire world as countries were interconnected economically.

2) The Local small companies lose market share and the markets are then governed by big power houses that over power the markets

3) Income inequality is a serious issue in the globalized world and needs careful consideration. While income of the rich has grown many folds, the poor people still suffer and are not provided for.

4) For small economies which have just begun their development journey, their small-scale industries cannot penetrate foreign markets as they lack technology. This leads to a situation wherein imports are way higher than exports for these countries and they experience serious disbalance of currency.

Please feel free to ask your doubts in the comments section.