Economic Effects of Globalization - Term Paper Example

Globalization Economic effects of globalization. Globalization can be seen to have various effects in many countries in the world in regards to economy. Through globalization there has been emergence of industries that produce various products for worldwide consumption. This has led to a widened market and a wide range of products available to customers all over the world. This has been greatly contributed by the ease in movements from one nation to another nation. Many industries also exist in many countries in the world depending on such things as availability of resources, technology among others. This has boosted economies of those nations with vast industrial investments and contributed highly towards trade of the industrial products (Sheila, 10). Financially, emergence of world wide financial markets has also improved external borrowing terms and relations; this has greatly contributed to the global financial structure instability. This is because the structures have grown dramatically than any other transitional regulatory regime. This can be seen in the current global economic crisis being experienced, the world economy has been intertwined and thus depends on the out comes of the bigger economies (Murray, 8). Economically, common markets are based on freedom of exchange in goods and services .Collapse of one market can therefore not be contained. This creates a generalized risk because if one country which for example is the market economy collapses the effects will be impacted also to the country which produces those goods or services because they will not be in a position to buy them (Sheila, 10). Politically globalization has been used to create cartels which are target towards particular motives or interests for example the World Bank, IMF among others. These cartels provide a means of control and regulations which deters relations between governments and mandates rights in regard to social and economic globalization. The United States for example has enjoyed a power stratus compared to other powers because of its vast wealth and resources backed by a very strong economy. This is because no other power may be able to compete with its vast wealth, resources, industries, technology among others (Jurgen, 8). With increase in technology communication links and networks have been established both in developed and geographically remote locations. The world nowadays has been linked with such things as satellite, fibre optics telephone and internet technologies .When flow of information is therefore considered the world is all connected to a one small global village. Globalization also has contributed to the use of one common language in most parts of the world, for example English is widely used because most of the communication equipment s e.g. the telexes mails among others are in English (Jurgen, 8). Globalization also means that various and vast range of products will be at the world market. This means that only the best goods or services will fetch market and good prices .This leads to competition where countries try to improve quality of their products as well as increasing value of these products in order to have the competing edge in the world market. Ranges of products are also coming up each and every world in through trade market in order for them to participate in the trade (Steiger, 8). Industrialization has also lead to climatically change that is currently being experienced. This has lead to change in climatic patterns thus lower production mostly affecting agricultural sectors where Africa can be cited as an example. This because most industries emit gases which are destructive to the ecological composition. They also require dirty industrial stage where they dumb the waste; this has led to environmental pollution for Example Rivers, lakes, soil etc (Jurgen, 8). Globalization had its effects in the world of business. Pressure is applied to lowly industrialized third world countries which operate on the same business plat foam with highly industrialized countries. This has been brought by e-commerce and internet banking which has shrinked business in one business packge, This has equalized big investments banks with third world cooperatives which are driven by small scale manure labor production (Sheila, 10). Globalization has brought about demographic characterization of the workforce acoording to age, gender, ethnicity, and among many other demographic factors. This has brought about hindrances in trying to cope with these demographical differences (Jurgen, 8). Looking at the positive effects of globalization, it has in a great deal reduced the cost of transportation and communication especially in the private sector. Technology advancement has driven this cost down not to mention the innovations being continuously made in the sector. This includes shipping costs for containers, flown cargo road transport among others .Communication has been greatly advanced through use of satellites, internet, and telephone s among others (Murray, 8). Globalization has also created ease in business transaction regulations. It has tried to eliminate most if the barriers of movement to businessmen and their goods and services. This means the rates at which business transactions occur around the world have been increased. This because of formation of world markets which allows people to do free trade and ease in transport and communication (Jurgen, 8). Globalization has also led to off shoring and outsourcing of work force. Company's especially American countries have outsourced workers in order to promote efficiency in their industries and also cut cost on expensive lab our costs. This has led to lose of work which in most cases causes strains to the economy. This has been enabled by international trade agreements which allow for free movement of goods and services (Sheila, 10). Many countries have benefited from economic and financial effects of globalization; expansion of world trade has also been a factor. However the current crisis can be blamed on globalization, through reverse of capital flow and global trade shrinking. This is one of the risks accompanied by globalization. This is a result of volatile capital movement (Steger, 8). The global crisis which has been generating for a time from the mid 2007 and 2008 has fallen large stock markets, financial institutions .Governments have been forced to come up with alternatives to bail out their financial systems, this applies to even wealthy countries because the effects are affecting every part of the world. These effects are to be felt in lively hoods of everyone even though they are not responsible for the problem. The problems can be managed by change in ideologies supporting the current economic models which can be seen as highly influential and not considerate of others (Jurgen, 8). Globalization has brought about recession which is a general slow down in countries for a lengthy period of time. During recession many macroeconomics indicators vary in the same pattern. It has caused general fall down of household incomes and sharp fall in business profitability. This leads to hard economic times characterized by unemployment, low production and increased costs of living among May other effects.Goverments therefore deals with problems through macroeconomic policies expansion for example increasing money supply increasing government spending and reducing taxation rates. Below is a graph showing the effects of recession over a lengthy period of time (Murray,, 10). Conclusion Globalization have played a very major role in ensuring that the world economies are improving and this can be witnessed by the fact that such world regions as East Asia which had been adversely affected by globalization have witnessed an improvement in their per capita income. The other regions which have not been affected largely by globalization have remained stagnant in their per capital income and this can be witnessed by the fact that such regions as Sub Saharan Africa have not improved in their income per capita. It has also played a major role in ensuring that various industries and sectors are offering competitive services and products which have improved on the outlook of the various sectors of the world. However, globalization has also played a role in increasing the inequality levels in the world. Due to globalization, the inequality levels have escalated to such levels that various organizations and institutions are worried about this trend. It is a fact that while the rich are getting richer, the poorer are getting poorer and this has been a cause of concern for various concerned organizations. This applies to regions, countries and individuals. The poorest regions in the world are not getting a respite and this can be attributed to the fact that the developed regions are taking advantage of the undeveloped regions. This keeps the poor regions poorer and the richer regions richer. A good example of this is the European and North American regions which are prospering as a result of globalization while such regions as Sub Saharan Africa are still struggling with poverty which can be attributed to the effects of globalization. Globalization Statistics 1. Globalization as a tool of inequality in income distribution Distribution of World GDP 1999 Quintile Population Income Richest 20% 82.7% Second 20% 11.7% Third 20% 2.3% Fourth 20% 1.4% Poorest 20% 1.2% The table above shows the inequality of income distribution in the world ranging from the richest to the poorest people in the world. (World Trade Organization, 2002) 2. Globalization effects on world income Area Demographics 1981 % 1990 % 2002 % % Change since 1981 to 2002 East Asia and Pacific Less than $1 a day 57.7 29.6 11.1 -80.76 Less than $2 a day 84.8 69.9 40.7 -52.00 Latin America Less than $1 a day 9.7 11.3 8.9 -8.25 Less than $2 a day 29.6 29.5 23.4 -29.94 Sub-Saharan Africa Less than $1 a day 41.6 44.0 44.0 5.77 Less than $2 a day 73.3 74.6 74.9 2.18 The table above shows that areas that have been affected by globalization have improved on their income per capita while other areas remain stagnant in their poverty levels. (World Trade Organization, 2002) Works Cited Jurgen Osterhammel and Niels P.Petersson. Globalization: a short history. (2005). Murray, Warwick E. (2006). Geographies of Globalization. New York: Routledge/Taylor and Francis. Sheila L. Croucher. Globalization and Belonging: The Politics of Identity in a Changing World. Rowman & Littlefield. (2004). Steger, Manfred (2003). Globalization: A Very Short Introduction. Oxford, New York: Oxford University Press. World Trade Organization. Globalization. (2002). Read More