CAUSE AND EFFECT OF GLOBALIZATION

Globalization is a positive thing and it benefits a country who, for example, specializes in a
certain product and then exchange that good with other countries. But it does not only have
positive aspects, also the disadvantages have to be noticed I regard to this topic.
Economic integration and free trade conditions have produced an unstoppable movement
towards economic globalization. Most economists applaud the trend, pointing to the
modernization and growing wealth that have resulted. But many countries have been forgotten or
have even been harmed by globalization. So what have been the positive and negative effects of
this globalization trend?

First of all the principal cause and effect of globalization is international trade, which has
expanded substantially. A growing trade has often been followed by higher economic growth,
although not in all cases. For example: Annual growth rates of GDP in East and Southeast Asia
were 6-8 and in Latin America and Sub-Saharan Africa they averaged less than half a percent per
year.

On the other hand there is the unemployment effect. While growing trade has general created
more jobs, the parallel growth in competition has forced many companies to fire their workers in
order to cut costs, boost efficiency and increase profits. Especially some less-developed countries
had to deal with this negative effect. China, which has experienced a strong economic growth
in the last years, has begun to struggle with unemployment, particularly in urban areas. So it
becomes obvious that globalization is also accompanied by negative aspects.

Another point which should be considered when talking about globalization is the income
distribution. Experts suggest that the increased trade between North and South has reduced
income inequality among skilled and semi-skilled workers in the South. On the other hand it has
increased the inequality among such workers in the North. This is because manufactured exports
from the South raise demand and wages for workers with only limited skills and education. But
the effect in the North is the opposite. There the service and technology industries pay top wages
to highly skilled workers but have little use for semi-skilled labor.

There are a lot of other fields where it becomes clear that globalization is followed by a lot of
advantages, but also disadvantages. Overall it can be said that globalization appears to have
deepened inequalities in the international distribution of income.

The next picture shows different areas influenced by globalization:

 POSITIVE AND NEGATIVE IMPACT OF GLOBALIZATION

POSITIVE IMPACTS OF GLOBALIZATION

 Gives Access to a Larger Market

Through globalization countries and companies have access to a bigger consumer base. Instead
of only selling products in their country a business can expand to other regions boosting sales
and in the process making more money.

 Provides Cheaper Goods for Consumers

Because of globalization a lot of companies are moving to areas where their cost of production is
low they, in turn, offer cheaper products because they are not expensive to make hence lower
prices for consumers.

 Globalization Wets Countries do what They do Best

For example, a country can buy cheap steel from another country instead of making its own steel.
They can then focus their efforts on making other things they are good at like computers and
export them to the countries they import cheap steal from.

 Leads to Better Economies

With many multi nation’s heading to Africa to tap the consumer base in this part of the world
more jobs are being created helping people in these countries get better wages and improve their
stands of living. This investments by these multinationals or foreign countries also help
strengthen the economies of these countries with the foreign exchange they bring in. With an
increased number of investors looking for investments opportunities around the globe, country
economies will benefit wherever they invest. Through globalization economies of different
countries are becoming more connected to one another since they depend on each other for trade.

 Promotes World Peace and Unity

Globalization brings governments together so that they can tackle common goals together. For
example, due to globalization world leaders have seen the impact of pollution and have resolved
to tackle climate change together. Also, it is unlikely that a country trading a lot of products and
services with another will attack it or want to go to war with it.

 Innovation

The desire to make a profit has always been a spur to expanded trade, innovation, and the
communication of ideas. The great ideas from leaders spread more easily.

 Better Quality and Variety

Competition from different countries drives firms to improve their products. Consumers have
better quality products and more variety as a result.

NEGATIVE IMPACTS OF GLOBALIZATION

 Causes Environmental Damage

Globalization has led to increased production for businesses in order to meet global demand.
Increased production means more natural resources are used and this can be used up before they
are regenerated leading to a negative impact on the environment. Also in developing countries
rules and regulations on environmental protection are not as strict as in developed countries. This
has seen some multinationals leave their countries to set up in developing countries to take
advantage of this lax regulation in the process they manufacture products that are harmful to the
environment.

 Causes Fluctuation of Prices

Increased competition means that businesses with the best prices win. Due to competition prices
are always fluctuating, for example, a country like the US has to reduce its prices often to
compete with prices for the same product coming from China. China’s production costs are
lower than the US hence they can have ridiculously low prices. For the US companies reducing
prices will have a negative effect on their profits which in turn may led to actions like laying off
workers.

 Job Insecurity

Globalization provides a double-edged sword when it comes to jobs. It creates jobs for people in
developing countries who provide cheaper manufacturing jobs. For example, many companies
are setting up in India and China because wages and manufacturing jobs are cheaper there this
means less opportunities in developed worlds. In short, globalization takes jobs from one country
and provides them to another. This can be negative or positive depending on what part of the
world you are in.
 EFFECTS OF GLOBALIZATION ON DEVELOPING COUNTRIES

The debate continues to rage over whether or not global expansion of corporations and the
opening of economic markets in developing countries is good for the poorest of the world's
nations. Do the poor really benefit from investments made by large corporations in their country,
or do the rich only get richer? If there is benefit, is it simply in job creation or are there other
factors that influence a developing nation's overall well being? Although many factions weigh in
on the subject, several basic ideas should be considered.
 Wages and Inequality
As companies outsource work to poorer countries in pursuit of cheaper labor, many of the poor
in these developing countries are able to find work at wages that are finally able to sustain their
families. However, as in any job market, it seems that those with a higher level of skills are the
ones who receive the most work. Those with less skill may not receive the benefit of higher
paying jobs with a foreign company. As a result, inequity develops among the working class
creating a divide within the local economies. The less skilled still struggle to gain financial
stability while others can rise out of poverty.
Also, the opening of trade and development of companies in places like China, for example, have
led to huge increases in manufacturing and sales. In general, vast numbers of the Chinese people
have been able to rise out of poverty as they have found better paying jobs and work for both
domestic and foreign companies. The country has become a big player in the global market and
many of its people have similarly benefited. With greater personal income, individuals have had
greater access to increased opportunities and further education.
 Education
As additional money flows into a country's economy, the government has more resources to fund
important initiatives such as educational advancement. Similarly, individuals become financially
stable and can afford things that were previously unattainable, such as schooling and vocational
training. However, a potential downside of increased educational opportunities is that some of
those individuals who achieve a professional level may emigrate to other countries in search of
higher salaries and improved lifestyles.
 Health Status and Longevity
Another benefit to developing countries is the improvement of health services and the extension
of life expectancy in the general populace. Increases in income and resources allow for greater
access to food, medical services and health care. Yet, while things are improving for many
developing countries, there are still areas of concern. Access to a greater variety of foods,
especially those foods that are processed, have led to increased rates of obesity in many poor
countries, which, in turn, can lead to health issues such as diabetes, cardiovascular disease and
high cholesterol. Unfortunately, many of these countries are unable to maintain enough highly
trained professionals to meet the health need as professionals often head elsewhere, in search of a
better paying position.
 Spread of Infectious Diseases
Another health concern is the increased risk for the spread of infectious diseases. When countries
remained relatively closed off to trade and interaction with other others, they remained isolated
from health risks as well. As countries opened up, both products and individuals began to travel,
taking diseases with them. Some diseases, that had been virtually eradicated in some parts of the
world, have begun to crop up again. And while researchers work hard to adapt cures to battle the
often-resistant strains of bacteria, poorer countries may not have all the necessary resources to
help its citizens. To combat the problem, developing countries will need to rely on the
humanitarian efforts of others.