Globalization Contributes to Sustainable Prosperity for All People - Essay Example

Macro and Microeconomics- Globalization According to the video, globalization contributes to sustainable prosperity for all people. This can be done by cutting down on poverty increasing the number companies competing for the sale of the same good or service through opening of trade between different countries and sharing of ideas. This will cause the quality to increase and the prices to drop thus winning the consumers. It will also improve the quality of life for low-income earners by making goods more affordable thus making their money go further. In many countries, the government will limit this by not allowing foreign transnational companies to control the global market place, protecting its companies from going out of the business and putting tariffs on cheaper foreign commodities. Wal-Mart had a net income of 12,731,000,000 on total revenue of $378,799,000,000 in accordance with documents filed by SEC in 2008. By opening trade with other countries, the ability to dictate what is being produced and how, and giving consumers more power, globalization thus helps to flood the market. In a situation where consumers collectively buys only environmentally friendly products, then companies would be forced to a transition to meet our demands thus making a world a cleaner place. Thus, globalization contributes to a sustainable property for all. This helps the people get above the poverty line by increasing competition that in turn helps to bring down the prices of commodities or, services. The competition for goods and services is affected by globalization e.g. the price of goods and services is brought down by increasing their supply. Thus, globalization will help benefit the world. According to the video, De Soto thinks globalization is limited in its current form. Majority have been left out in terms of the legal structures that give rise to it. Globalization must actually include the majority of the people on earth to be truly worth its name. it links elites from the post-soviet world and the developing world to the world economy. The legal revolution that has been taking place especially in the west is because of the market economic system. De Soto argues that if these market institutions are brought down, it could take another few centuries to develop. Hernando De Soto is one person that believes in the power of trade. His hard work helped to get the US-Peru Free Trade Agreement passed. He also always speaks out in favor of giving the poor access to wider markets. Elites can only be globalizing with the current existing globalization. Elites can only gain access in developing countries, because the costs of entry are high. Increased trade and open markets are key to eliminating poverty. Once the poor enter the legal system and have access they need, they will definitely prosper as per the evidence gathered by the institute of liberty and democracy (ILD). There are many overall benefits of trade. According to law of comparative advantage, the less productive countries will benefit from trade with countries that are more productive. This is because producers who are stronger can trade in order to free up resources thus enabling them to specialize. The lower prices that an economy of scale and specialization engenders are some of the things that the customers will benefit from. The video clearly illustrates that globalization process had already taken place in the late 19th century. The foreign investment and trade were fairly globalised before world war1. Labor markets were more globalised at the beginning of the twentieth century than at its end simply because of low political obstacles to international migration. The great depression and two world wars halted the process of global market integration for almost half a century. The process later regains speed and force. Due to faster, reliable and inexpensive transport and communication, some service providers and producers of goods in low-wage countries have been able to challenge high-cost producers in rich countries on their home turf. This technological innovation is not the only cause of globalization. From the video, it is evident that globalization is strongly contributed by also political decisions in both poor and rich countries. They have reduced nontariff barriers to trade and tariffs. To realize gains from trade and economies of scale, many countries enhance their competitive advantage by looking for sellers and buyers everywhere. All nations will benefit from trade if trade between such countries is truly free. From Adam Smith’s publication in 1976 on Wealth Nations, we can deduce that division of labor boosts productivity and innovation and the size of the market limits division of labor. The logical endpoint of economic evolution is globalization and it began when families switched from household production and subsistence farming to production for sale. Since globalization increases competitive pressure, and the fact that it springs from political decisions and technological innovation that tend to promote free trade; it has not gone well with many thus leading to resistance. The unskilled labor is always much productive in rich countries than those in poor countries. Unit labor costs are not affected by international difference pay if the wage gap is neutralized by a countervailing productivity gap. Since the services of a low-skilled western worker become substitutable than previously, their wages may suffer from downward pressure. This however may result in income inequality and growing volatility of earnings as in the United States or, high unemployment in continental Europe. Globalization provides a reason for hope with regard to the expansion of economic freedom and secures property rights. It blocks politicians from pursuing politically attractive but self-defeating policies. David Ricardo who is perceived as the history’s first polemicist against protectionism and the first modern economist. His opposition to England’s Corn Laws motivated his career. He reveals precisely how all nations benefit from free trade through the principle of comparative advantage. There can be an increment in the world’s total product together with our own income if the resource of the country or, the population’s talent allows production of one good better than the other. In free markets, production allocation in which allows for greater prosperity is one natural result of economic pressures. The move by government to protect industries which are not performing will disadvantage itself since they will have allocated its capital to inefficient uses. It leads to decrease exports that could have been used to buy more valuable imports, thus reducing the total income of the nation. There is a claim by many scholars that there are situations where globalization and trade are unfair to the weaker party. The collapse of some of the major performing industries leads to massive loss of jobs thus unemployment. Furthermore, economists have not yet achieved a complete consensus, which states that free trade is always good for developing countries. The media is constantly concerned by economic globalization despite this. They tend to inform us less on the benefits and more on the pains of economic change. When protectionism stops jobs from being created, we do not see it on media but when a manufacturing plant closes and moves across the border, it is covered on news and we see it. The goods of globalization are given less concern and attention than the bads. In protecting dying industries, the politicians feel more pressured and they always end up failing. Political interference cannot maintain this pressure for long taking in consideration the fact that the economic force can cause a nation to lose its comparative advantage in an industry. Every time taxes and tariffs are being raised for protection, jobs are destroyed. Enormous economic benefits are brought about by globalization. It has dragged billions out of poverty and contributed to American prosperity. Furthermore, it has brought about extended freedom. From the above video, it is conclusive that globalization forces are irresistible. It should be used to the greatest advantage rather than fighting them. In an economic point of view, globalization brings greatest prosperity though there are some transitional difficulties. Mitigating transitional challenges and manifesting the advantage as much as we can are our major goals. Things may be more difficult culturally. Furthermore, the good life may be threatened by the breakdown in community in which solidarity and unity may flourish. The intervention by state to preserve communities is dangerous at worst and impractical at best. Preserving mediating institutions that we value is our major goal. In times of globalization, those with religion should cherish it. The university should recognize its roles as more important than ever. It is the duty of every individual to realize that our communities are no longer determined for us by class, location, and the circumstances of birth or, religion, the impetus is upon us to actively sustain and seek out communities, even those of our own choosing. To speed up productivity gains and economic growth ant to increase division of labor globalization promises to enlarge market. On the other hand, It remains misguided by political activities and it is under attack from special-interest groups. Those who criticize globalization know nothing about benefits of free trade and internal-security. They forget globalization for developing countries and benefits of free trade and for their poor and underemployed workers. Advice on institutional and legal foundations of capitalism, and economic policies are conceivable instruments to promote economic freedom, prosperity, capitalism, and free trade. The credibility for free-market institutions and policies is generated by open markets in rich countries for exports from poor countries. When rich counties become capitalist, they tend to provide more effective model for emulation to poor countries as well as a market and investment and a source of technology. Western nations may simultaneously strengthen their own economies and improve the lot of poor in third world countries by resisting protectionism and the creeping socialism of the welfare state. Works Cited Commanding Heights Part 3: New Rules of the Game http://www.pbs.org/wgbh/commandingheights/hi/story/ch_f03_01.html http://www.youtube.com/watch?v=5Wu9FH4O1qY The Meltdown http://www.pbs.org/wgbh/pages/frontline/meltdown/view/ The warning http://www.pbs.org/wgbh/pages/frontline/warning/view/ Read More