Question

write and expaine some of the cost and benefits of globalization?

Answer 1

Benefits from Globalisation

1) Increased economies of scale: Production is increasingly specialised and develops deeper relationships among markets across borders enable and encourage producers and consumers to reap the gains of economies of scale

2) Greater competition: Due to globalisation the firms face greater competition from foreign firms which reduces monopoly gains and incentivize businesses to seek cost-reducing improvements and innovations in what they sell, this results to an improvement in dynamic efficiency

3) Free movement of labour: Trade improves division of labour as businesses and nations specialise in areas of comparative advantage

4) Free trade: Globalisation results to benefits in efficiency should bring about an improvement in growth of economy and higher per capita incomes.

5) Reduces poverty: Globalisation has helped many nations to achieve higher rates of economic growth and decrease the number living in extreme poverty.

6) Productive and allocative efficiency: Globalisation allows nations to have comparative advantage, resulting to productive and allocative efficiency

7) Lower prices for consumers: Global competitiveness has brought about lower prices for consumers

8) Wider choice of goods: Global competitiveness allows wider choice for product to consumers

Costs:

1) Free trade can harm developing economies: Developing nations generally struggle to compete with developed nations thus it is argued free trade provide gains to developed countries more

2) Environmental costs: Global competitiveness contributed to increase in the pollution and global warming. Threats of land degradation, deforestation, irreversible damage to ecosystems, loss of bio-diversity and the danger of a permanent shortage of water are affecting millions of the majority vulnerable people

3) Labour drain: It is harder to hold onto their best-skilled labor, who are attracted by higher wages elsewhere

4) Tax competition and tax avoidance: Multinational companies often pay very little tax in the nations where they do most of their business by funnel their profits through the subsidiaries offices in different countries

5) Less cultural diversity: Due to globalisation there is arguably less cultural diversity

6) Inequality: Globalisation has strong link to increasing inequalities in income and wealth.

7) Unemployment: Globalisation has lead to higher levels of structural unemployment.