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When it comes to defining globalization, there is no universally accepted variant. However, it can be described as the economic, political, cultural, and social changes across the globe that started in the second half of the twentieth century. These processes have been hurried up by advancements in the spheres of science and technology which lessened the role of both geopolitical and national boundaries. As a result, the transnational flow of services, goods, and capital significantly increased. Therefore, this essay is discussing the influence of globalization on the economy. In this work, relevant literature will be important as the evidence to back up the arguments. Even though the process of globalization affects various spheres, that is, political, social, cultural and economic, when looked deeply, it is majorly economic. According to International Momentary Fund analysis of 2000, four elements can be used to describe globalization. The four features are a flow of investment and capital, transactions and trade, transmission of knowledge and movement of people. Although the idea of globalization comes with several advantages, some disadvantages come with it as well. For instance, air pollution, cross-border conflicts and global warming (Kaplinsky, 2013). However, it is economic effect of globalization that makes most scholars analyze the concept even further.
Globalization and its Effects on Economy
There are various impacts on the economy that can be attributed to globalization. To start with, global markets, globalization has seen the removal of barriers that have been discouraging a formidable Global Market. In particular, cross-border trade is a significant impediment to formation of stable global markets. However, with globalization, removal of the barrier has been made possible. In addition to that, globalization has made it prudent and possible for the formation of international institutions relating to business. Some of these institutions include but are not limited to the international Monetary Fund, the United Nations Organization and World Bank (Kaplinsky, 2013). The creation of these bodies aims to facilitate trade and set out favorable condition for all players. For instance, with a global market, there is need for justice in transactions and other business activities. Additionally, political factors must be put into consideration and lastly, a strong monetary system that will spearhead all businesses and relations of different countries, groups or companies.
On the other hand, globalization is making it possible for multi-national companies to spread all over the world. The reason for this is that, the world has become a competitive market facilitated by advancement in technology. The trend can be demonstrated by the fact that, the US is slowly decreasing to be the dominant country about multi-national companies. For instance, in 1973, she posted to have 48.5 percent of all multi-national companies in the world, however, by the year 2002, the percentage had drastically fallen to 28 percent thanks to globalization (Papastergiadis, 2013). Thus, globalization is making more countries with multi-national companies to step in and take the advantage that comes with it as far as investing and doing business is concerned throughout the world is concerned.
Moreover, there is the technology effect that globalization comes with it, that is, about telecom. The platform that involves this kind of innovation includes but is not limited to use of telephones and internet. In addition to facilitating transfer of information from one place to another, the technology is making it possible to detect Fraud carried out in either local or international trade. Moreover, it is globalization that is facilitating progression of telecommunication in both developed and developing countries (Palan, Murphy, and Chavagneux, 2013). In addition to that, it is now possible for business people and companies to communicate all over the world in a faster and more efficient way than in the past.
It is important that the impacts of globalization are discussed about the standard of living as this is another indicator used to determine changes in the economy. It is true that globalization is not only expanding trade but also increasing investment all over the world. Taking a look at poverty levels in areas where the expansion is taking place, evidence shows a steady decline in poverty. For instance, in India, there is an increase in Foreign Direct Investment as there is a steady decline in the poverty rate. In addition to that, there are also industrial effects, in that, globalization is influencing the industrial sector all over the world. There is a big relation between industrial growth and economic growth, in that, industrialization is associated with economic growth. In relation to globalization and industrial growth, the former is making it necessary for the creation of goods and services that will feed and serve consumers all over the world (Palan, Murphy, and Chavagneux, 2013). For instance, Coca-Cola produces goods with varying quality depending on preference and tastes of a given region.
On the other hand, globalization has negative effects on the economy and the world at large. To start with, industrialization and advancement in the transport industry, the two depletes ozone layer as a result of carbon emission. It is worrying as the steady rise in global warming threatens the existence of humanity. In addition to that, there is the distribution of equity, and globalization has the potential to create unequal economic growth between the rich and the poor. The inequality has the potential of creating economic conflict domestically and internally. For instance, in South Africa, there is a far cry of locals arguing that foreigners are taking up their jobs, or rather, and as a result, enriching themselves at the expense of domestic citizens (McMichael, 2013, p. 1337). Lastly, globalization can be associated with interdependence that is being experienced in the world today. In particular, developing countries are becoming relied on developed nations for donations to fund projects and their economy. However, increased over-reliance can prove to be detrimental. For instance, Chinese are on record for taking away natural resources from Africa at lower prices than world market price in exchange for donations and funding of local projects.
The discussion above makes it clear that globalization has significant impact on economy, both positive and negative impacts. However, the positive impact outweighs the negative making the phenomenon good for a national and international economy. Specifically, some of the positive impacts of globalization include but are not limited to strengthening the global market, encouraging the formation of international institutions, improving the standard of living and facilitating the use of modern technology. Additionally, there is a steady rise of multinational companies all over the world thanks to globalization. On the negative side, the phenomenon is facilitating over-reliance of developing countries in developed countries and is becoming number one motivator of global warming among other negative impacts. However, comparing the two sides, globalization is good for local and international trade and a balance ought to be struck between negative and positive impacts.
Kaplinsky, R., 2013. Globalization, poverty and inequality: Between a rock and a hard place. John Wiley & Sons.
McMichael, A.J., 2013. Globalization, climate change, and human health. New England Journal of Medicine, 368(14), pp.1335-1343.
Palan, R., Murphy, R. and Chavagneux, C., 2013. Tax havens: How globalization really works. Cornell University Press.
Papastergiadis, N., 2013. The turbulence of migration: globalization, deterritorialization and hybridity. John Wiley & Sons.
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