Economic globalization is the term used to define the interdependence between various economies to increase the trade of goods and services in a manner which positively affects both the economies. It is the growth and integration of various markets and is a permanent trend in the financial systems. Economic globalization steers the rapid flow of information in every market frontier. It also involves the open transfer of goods and the globalization in production, money, technology, corporations, institutions and skilled workforce.
The notion of economic globalization by incorporating many nations within the World Trade Organization can be argued as the realization of the theory of comparative cost advantage put forth by classical economists. The idea behind globalization was to provide competitive strength and growth to underdeveloped and developing countries. A clear picture regarding the effect of economic globalization is yet to be seen. Although it has brought employment and growth to many countries, a shift in power is also noticeable which affects the culture and politics in each country.
- Multinational corporations have offices all over the world
- Outsourcing is used by developed countries to provide developing or underdeveloped countries employment and get better products in return
- Many automobiles and gadgets are designed in one country, assembled in another and then sold worldwide
- The European Union comprises of various countries located in Europe
- Employment: The process of globalization brings job opportunities in a country. Even the host country reaps the benefits of globalization if the MNCs present there shift their operations to any other country. A good example of this is that Coca-Cola invested $300 million in Malaysia which gave rise to 800 jobs in the factories and another 8000 jobs connected to the local suppliers.
- Technology: Developing countries may not have the latest technology at their disposal for research and development. MNCs can provide them the necessary technology for completing their work helping them in becoming competitive in the global market. Technology transference is a subsidiary in globalization, and those users who cannot access the technology can hire it from operators providing the subsidiary.
- Social: The social impact of globalization is the better lifestyle which the common people can afford after having employment in a reputed organization. The necessities and hygiene can be maintained by the workers once employed, and this raises the standard of living of the country.
- Supply chain: A supply chain is a system of organizations and resources involved in moving a product from the manufacturer to the customer. Thanks to globalization, the supply chain also becomes global so the corporations can manage the manufacturing and selling of their products. Globalization is the reason why an iPhone can be designed in the US, assembled in China and then sold in India.
- Health risk: The outsourced employment in developing nations is offered to individuals having low income as this would garner profit. But the atmosphere in which they have to work is not always hygienic. Workers are found to be working for a very low amount of unsanitary and unregulated conditions.
- Mistreatment: Globalization can give rise to gender discrimination and poor labor conditions. Labor unions are not always present in the companies in developing countries and this result in a degradation of the workforce. The rights of the workers are unprotected, and they cannot rebel against their employer.
- Capital flight: Poor financial conditions like increased taxes, labor costs, arrears to government and capital controls result in the rapid flow of money from the developing country. The currency declines and the economy take a big hit. Capital flight is bad for developed countries also as many people in business have shifted to locations having low taxes. The issue of tax havens has risen due to globalization.
- Economic inequality: The economic power at the global level has been restructured because of globalization. Because of this powerful nations are more influential in developing nations.
Globalization is a step in the right direction for because different nations help themselves to balance their economies. But considering the disadvantages of globalization, it is evident that strict measures are yet to be taken so that both the workers and the employer benefit.