Globalization in the Economy and its Consequences (Essay Sample)

Globalization in Economics and its Consequences
The growth of global networking in the sectors of communication, transport, and trade has led to an amalgamation of production and consumption processes in the international market. Consequently, the modern world has become more integrated both culturally and economically. Bhagwati (2004) defines economic globalization as “the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology” (p. 5). In simple terms, globalization can be equated to making the entire world function as one country. The quest for economic growth through globalization has had both positive and negative consequences on different national economies.
Many economic benefits have been realized through globalization. Reduction of barriers in several countries, economically and politically, has been beneficial to global organizations in acquiring discounted labor and unprocessed materials not available in their home countries. A good example is China, which reduced its tariff rate by almost 13 percent after joining the World Trade Organization (Milanovic, 2002). Globalization has led to a rise in the production ability of many global firms and provided them with a global customer base. The growth in industrialization has resulted in creation of employment opportunities, growth of Gross Domestic Product (GDP), and an overall improvement of living standards worldwide (Garret,2000).
In the fiscal sector, globalization has integrated financial markets, leading to improved provision of financial services. For instance, external financial borrowing has significantly improved because of globalization. Countries such as Japan and Malaysia have had rapid development due to external financial borrowing (Vogel,1991). Technological advancements in satellites, the internet, and fiber-optic communication have significantly reduced costs of communication and improved trading across borders and other business activities. For example, it is now possible to outsource labor, buy products, and organize shipment through the internet.
In as much as globalization has led to economic growth in most countries, the process has also had negative consequences in some national economies, especially in the third world. Longworth (2007) describes a quality of life indicator called the Human Development Indicator (HDI), which measures changes brought about by globalization. According to the HDI, the world’s richest countries have experienced increased development as a result of globalization, while the poor nations have had a slow growth rate. This has made globalization a process through which rich and powerful economies continuously plunder poor and weak nations. The benefits of globalization are realized by countries that can compete effectively in the international market. Poor nations lack this ability and power and have to negotiate with the rich nations on unequal terms. Furthermore, the forces of globalization do not take into account social injustices such as Asian and South American sweat shops, where underpaid citizens of poor nations face labor-related injustices in producing goods for the first world market. Glob...