Question

Globalisation is a complex and controversial issue. Take a look at some of the main benefits and costs associated with the greater globalisation of the world economy ; review the benefits and outline a viable and workable solution to the unintended consequences of globalization.

Answer 1

Costs of Globalization-

1. Inequality- Globalization increase inequality and increases the gap between the countries involved in Globalization and the countries which are not.

2. Inflation- Sometimes, the demand of some products increases too much, that in the shortfall of quantities of these products, this result in inflation.

3. BOP- when imports exceeds exports, it leads to BOP crises which further results in destabilization in the economy.

Benefits of Globalization-

1. Economies of scale- due to Globalization, demand has increased. This leads to economies of scale as the producer has to produce more quantities.

2. Increases GDP- Globalization increases GDP of the country. It opens the international trade and if the country succeeds in exporting more, it drives the GDP forward.

3. Benefits customers- due to the diversity of products and low prices due to more competition, Globalization has benefitted the customers.

Challenges of Globalization to institutions-

1. Political institutions are now required to be more careful in order to operate in an economy. This is because, due to globalization, foreign markets can access the political institutions and their activities.

2. It hinders the politics. Political parties are also affected by the globalization.