Establishing a global market and inviting all countries to participate seems like a good thing. And it is, for the most part. In fact, the idea sparked in ancient times. Major civilizations wanted to connect for trading or competing, whether with resources, knowledge, or military firepower. This didn’t necessarily last, since investments and deals between monarchs fell through, leading to gruesome events. Today, most international competition or collaboration is done peacefully, aided by law, regulations, and yearly meetings of world leaders. And while globalization has many benefits, it also comes with a few strings attached. That’s what we’re exploring today, the advantages and disadvantages of globalization.
Advantages of Globalization
Here are some of the merits of globalization that stand out:
1. Boost in economic growth
Many people think only struggling countries benefit economically. One of the best pros of globalization is indeed an introduction to new opportunities. Add to that the exchange of goods, knowledge, technology improvements, and monetary support. But it’s far from reserved for one side. Economically dominant countries also reap benefits from an influx of people at the bottom of the totem pole. The non-native workers work for smaller compensation and are motivated to work harder or place their products wider. They also usually pick up lesser-attractive jobs because they’re earning far more than at home. In the process, both sides benefit from reaching improved living standards. They also gain an increase in income and percentage of wealth and a reduction in unemployment and poverty levels.
2. Making goods and services more widespread and accessible at a lower cost
Selling a product or service inside one country can prove to be a massive success. So, what happens when that product or service finds consumers or customers across nearly 200 countries? We have technological advances in production, better knowledge, a cheaper workforce, and incentives from the government to invest. Companies can also choose to either relocate or open new branches in countries with low taxes or no taxes. They can also decide to cut their production cost without or without an increase in quality. The international market also brings a way to tap into a larger talent pool, and gather new ideas based on cultural diversity.
3. Reduces inefficiency in production
Having constantly improved global standards and rules for production and manufacturing boosts the process efficiency. We can see and analyze this in many ways, but the most obvious one is probably allocating and using available resources. In doing so, the overhead cost, first rounds of amassing capital, as well as capital-output ratio, are reduced. Also, witnessing a global state of things often leads companies to reduce cost or improve quality to match that of competition. All of this leads to new inventions, meeting demand faster and better, more affordable products on the market, and better quality of life.
4. Inviting foreign capital
Introducing foreign capital can encourage even more investments, advancements in technology, and improvements in insurance or financial sectors. Furthermore, domestic business need not worry most of the time, only get motivated to improve. By this, we mean that countries enforce international trade tariffs to prevent outside competition from challenging or crushing the native economy. This also helps workers on the bottom, since they have a greater chance and choice in finding or creating work.
5. Building communities between countries
Having one community, split into smaller communities across the globe that live in peace and prosperity, and share resources, knowledge, and funds as citizens of the world is an idealistic vision. This might never become reality since it’s in human genetics to fight for dominance. However, there’s no denying globalization promotes collaboration between countries worldwide by, introducing, and sometimes even melding cultures. This leads to acceptance of diversity while motivating them to live and work together, which is perhaps one of the top benefits of globalization.
Disadvantages of Globalization
The following are some of the prominent demerits of globalization:
1. Power is in the hands of few
This is among the most obvious cons of globalization. World economic power is gradually redistributed to nations that excel economically. Ideally, all countries should at least have optimal resources to avoid poverty. In reality, financially powerful nations exert dominance over poor nations. They can bully them into accepting an agenda, enacting a policy, or doing something against their own interests due to peer pressure.
2. Increases the rift between social classes
The difference between countries and classes with high purchasing power and those at the bottom is growing continuously. This increases the percentage of poverty and suffering of the poor. A good example is the richest people in the world or large corporations such as Google or Facebook. Thanks to globalization, they are free to use tax havens, offshore companies, charity organizations, or open intermediaries in remote countries to avoid paying taxes. On the other hand, the people belonging to the low and middle class are paying their taxes at a hiked-up price and regularly.
3. Imbalance in the import-export ratios
Exporting an exclusive or native product is a great choice in the beginning, at least financially. However, increased demand usually leads to a shortage in the domestic market, as well as increased imports of products from other countries. This leads to deficits in trade and often forces countries to only expedite imports to balance things out. A great example is a VAT (value-added tax) that, despite allegedly pushing for free trade, more than 160 countries have added to manipulate trade costs.
4. Loss of cultural identity
Many see this as a step forward, particularly those in power. However, a large number of people look at this as a big downside of globalization. Abandoning cultural specifics such as customs, lifestyles, and ways of eating, dressing, and acting in favor of a uniform, universal culture isn’t necessarily a great thing.
5. Crushing small businesses and job opportunities
There’s a reason start-ups require so much money and the backing of renowned entities to succeed. Also, it’s hard for small businesses to continue to grow against the already established domestic competition with enough capital, a built infrastructure, and a lower price, let alone internationally. Also, although the number of jobs rises on paper, automatization technologies through bootstrapping, algorithms, and AI are spreading worldwide. It’s a matter of time when this will replace human input as it does a far superior job.
6. Transition period
Globalization is a gradual process. Depending on the state, size, debt, culture, and history of a particular country, it might take a decade or two for sufficient restructuring to transpire. For others, half a century might be a more reasonable goal. While in transition, residents must not only be patient but endure certain financial and cultural cuts and sacrifices.