There are many advantages of globalization, such as an increase in revenue, a wide choice of products and services for consumers, reduction of the monopoly’s scale, poverty reduction, innovative and cultural development. However, there are still some negative consequences, such as inequality, environmental degradation, and a high rate of unemployment.
Globalization is a process by which national economies have become increasingly integrated and interdependent within the global economy and culture. Globalization is a term used to describe the myriad changes occurring over many decades that have allowed increased trade across the world. As a result, there are both positive and negative impacts of globalization.
There are numerous factors that prove the importance of globalization. First of all, there is a significant increase in revenue for businesses. Companies are able to expand into different markets, allowing them to increase their income. Moreover, globalization encourages producers to benefit from trade based on the division of labor. The cross-border labor migration is increasing; therefore, there are gains from the movement of labor between countries.
One of the pros of economic globalization is that it can also lead to cheaper services and goods for consumers. They get more extensive choice and better prices; therefore, the consumer surplus increases.
The third positive effect of globalization is that it can make domestic markets more contestable. It can reduce the scale of monopoly and supernormal profits.
Moreover, around 10 percent of the world’s population lived on less than $1.90 per day in 2015, compared to 36 percent in 1990. It means that globalization has been contributed to a significant reduction in poverty rates.
Another positive effect of globalization is a dynamic increase in efficiency due to the exchange, dissemination, and transfer of skills, ideas, and technologies all around the world. It is a catalyst and a stimulus for a process of innovation. Some countries can learn from others and so boost economic development.
Finally, globalization strengthens the process of integration between cultures. It has been achieved through the global means of communication, first of all, through the Internet. The process is most evident in the areas of consumption, leisure, and entertainment. The expansion of cultural contacts in the modern world helps bring peoples together.
On the other hand, there are various disadvantages of globalization. First of all, there are trade imbalances in the world economy. Some countries, like the UK, the US, Russia, and China, which are oil-rich, generate significant current account surpluses, while other countries suffer from persistent structural trade deficits. Some advanced countries have gained control over a considerable part of consumption and production, without using any economic or political pressure. At the same time, their internal guidelines and priorities ultimately affect all the most significant areas of internationalization.
The second negative effect of globalization is that transnational corporations are dominant (TNC) nowadays, which leads to the emergence of dominant global businesses. Moreover, the economic activity of big corporations encourages people to consume more that leads to greater exploitation of the environment, increased pollution, and the massive challenge of increased concentration of CO2 and NO2 emissions.
Another disadvantage is that the pay gap for workers with and without qualifications is expanding. While the salaries of educated employees are growing, unskilled ones are forced to be content with modest pay, if there is any work left for them. The unemployment generated by the process has a disadvantageous effect on the reputation of world globalization.
The process of globalization is a highly controversial phenomenon. It has an ambiguous and multidirectional effect on modern world development and the financial security of states.