Globalization in Economics and its Consequences

Globalization refers to the process through which different regional economies, societies and cultures all over the world combine and operate as though they were a single unit (Mutia 13). Economic Globalization is a term which describes the process of integration of individual, national economies into the world economy by allowing free movement of both goods and services, and the factors of production (labor, capital, and technical knowhow) across borders. Through globalization, financial and investment markets effectively transact globally because there is better communication platform and there is no unnecessary regulation (Haggblade 2).  This paper explores the positive and negative consequences of economic globalization.

The immediate, positive result of globalization is the creation of opportunity for both firms and consumers to access a variety of products from foreign economies. In other words, through globalization, industrial production is trans-nationalized. The effect of this is to ensure a common world market in which there is competitive trade (Mutia 13).  The negative consequence associated with this is the possibility of a failure spill-over effect resulting from the structural linkages of the markets. Again, firms are most likely to invest in places where they will minimize their production costs and minimize worker benefits (Haggblade 3).

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Similarly, with globalization, there is access to external financial services worldwide, and the freedom to choose for all classes of borrowers. However, this if not adequately controlled, it is likely to cause massive fluctuations in the global financial market as has been observed in the period 2007- to date. Globalization also plays a pivotal role in the global health sector. The general effect has been to increase privatization, which aims to address specific issues uniquely. Individual economies benefit from the global, technological developments in the health sector. However, there is a potential danger that national needs may conflict with the global market needs, especially given that developing countries have recently embarked on structural adjustment programs that are usually country specific (Smith 20).

Globalization is also associated with gains, both social and economic, which follow the relationships in the political space as a result of world government. A country that emerges politically superior such as the U.S for example, is a direct beneficiary of globalization. Similarly, those counties with good political relations are likely to grow fast due to benefits of globalization as in the case of China and the U.S. However, it must be noted that this has also contributed to inequality among countries, because it has been observed that developed countries have amassed huge gains at the expense of developing countries. Indeed, some scholars have argued that some countries have had to compromise on their sovereignty for survival in the globalized economy (Haggblade 7).

Globalization serves to enhance specialization due to the laws of comparative advantage. This, apart from encouraging competition, improves productivity in the world market, creates employment and improves the general welfare of the world community (Smith 27).

Globalization affects the ecological balance of the world economy. On the one hand, chances of collective effort in addressing world environmental challenges are high and better due to merging of technology and ideas. On the other hand, there is increased global risk following industrial pollution of the air and water. Finally, globalization significantly affects the world’s views and perceptions and this has a direct effect on the people’s standards of living based on how they view any aspect of change in the surrounding world.

Works Cited

Haggblade, Silas. “Transforming the Rural Nonfarm Economy: Opportunities and Threats in the Developing World”. London:  Johns Hopkins University Press, 2007.

Mutia, George. “Globalization in Economics”, Kampala: Oxford University Press, 2001

Smith, Charles. “International Trade and Globalization’, 3rd edition. Stocksfield: Anforme, 2004.

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