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Effects of Economic Globalization

Globalization has led to increases in standards of living around the world, but not all of its effects are positive for everyone.

Social Studies, Economics, World History

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The garment industry in Bangladesh makes clothes that are then shipped out across the world. It employs as many as four million people, but the average worker earns less in a month than a U.S. worker earns in a day.

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Put simply, globalization is the connection of different parts of the world. In economics, globalization can be defined as the process in which businesses, organizations, and countries begin operating on an international scale. Globalization is most often used in an economic context, but it also affects and is affected by politics and culture. In general, globalization has been shown to increase the standard of living in developing countries, but some analysts warn that globalization can have a negative effect on local or emerging economies and individual workers. A Historical View Globalization is not new. Since the start of civilization, people have traded goods with their neighbors. As cultures advanced, they were able to travel farther afield to trade their own goods for desirable products found elsewhere. The Silk Road, an ancient network of trade routes used between Europe, North Africa, East Africa, Central Asia, South Asia, and the Far East, is an example of early globalization. For more than 1,500 years, Europeans traded glass and manufactured goods for Chinese silk and spices, contributing to a global economy in which both Europe and Asia became accustomed to goods from far away. Following the European exploration of the New World, globalization occurred on a grand scale; the widespread transfer of plants, animals, foods, cultures, and ideas became known as the Columbian Exchange. The Triangular Trade network in which ships carried manufactured goods from Europe to Africa, enslaved Africans to the Americas, and raw materials back to Europe is another example of globalization. The resulting spread of slavery demonstrates that globalization can hurt people just as easily as it can connect people. The rate of globalization has increased in recent years, a result of rapid advancements in communication and transportation. Advances in communication enable businesses to identify opportunities for investment. At the same time, innovations in information technology enable immediate communication and the rapid transfer of financial assets across national borders. Improved fiscal policies within countries and international trade agreements between them also facilitate globalization. Political and economic stability facilitate globalization as well. The relative instability of many African nations is cited by experts as one of the reasons why Africa has not benefited from globalization as much as countries in Asia and Latin America. Benefits of Globalization Globalization provides businesses with a competitive advantage by allowing them to source raw materials where they are inexpensive. Globalization also gives organizations the opportunity to take advantage of lower labor costs in developing countries, while leveraging the technical expertise and experience of more developed economies. With globalization, different parts of a product may be made in different regions of the world. Globalization has long been used by the automotive industry , for instance, where different parts of a car may be manufactured in different countries. Businesses in several different countries may be involved in producing even seemingly simple products such as cotton T-shirts. Globalization affects services, too. Many businesses located in the United States have outsourced their call centers or information technology services to companies in India. As part of the North American Free Trade Agreement (NAFTA), U.S. automobile companies relocated their operations to Mexico, where labor costs are lower. The result is more jobs in countries where jobs are needed, which can have a positive effect on the national economy and result in a higher standard of living. China is a prime example of a country that has benefited immensely from globalization. Another example is Vietnam, where globalization has contributed to an increase in the prices for rice, lifting many poor rice farmers out of poverty. As the standard of living increased, more children of poor families left work and attended school. Consumers benefit also. In general, globalization decreases the cost of manufacturing . This means that companies can offer goods at a lower price to consumers. The average cost of goods is a key aspect that contributes to increases in the standard of living. Consumers also have access to a wider variety of goods. In some cases, this may contribute to improved health by enabling a more varied and healthier diet; in others, it is blamed for increases in unhealthy food consumption and diabetes. Downsides Not everything about globalization is beneficial. Any change has winners and losers, and the people living in communities that had been dependent on jobs outsourced elsewhere often suffer. Effectively, this means that workers in the developed world must compete with lower-cost markets for jobs; unions and workers may be unable to defend against the threat of corporations that offer the alternative between lower pay or losing jobs to a supplier in a less expensive labor market. The situation is more complex in the developing world, where economies are undergoing rapid change. Indeed, the working conditions of people at some points in the supply chain are deplorable. The garment industry in Bangladesh, for instance, employs an estimated four million people, but the average worker earns less in a month than a U.S. worker earns in a day. In 2013, a textile factory building collapsed, killing more than 1,100 workers. Critics also suggest that employment opportunities for children in poor countries may increase negative impacts of child labor and lure children of poor families away from school. In general, critics blame the pressures of globalization for encouraging an environment that exploits workers in countries that do not offer sufficient protections. Studies also suggest that globalization may contribute to income disparity and inequality between the more educated and less educated members of a society. This means that unskilled workers may be affected by declining wages, which are under constant pressure from globalization. Into the Future Regardless of the downsides, globalization is here to stay. The result is a smaller, more connected world. Socially, globalization has facilitated the exchange of ideas and cultures, contributing to a world view in which people are more open and tolerant of one another.

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Is globalization an engine of economic development?

All people living in today's world have experienced some of the benefits of globalization: the expansion of foreign trade has meant that vaccines and antibiotics produced in a handful of countries have been widely used all over the world to eradicate diseases and treat deadly infections. Since 1900, life expectancy has increased in every country in the world , and global average life expectancy has more than doubled .

Globalization has also been a key driver of unprecedented economic growth and as a result, we now live in a world with much less poverty .

Yet these achievements are the product of multiple forces, and globalization is only one of them. The increasing potential of governments to collect revenues and redistribute resources through social transfers has been another important factor contributing to improved standards of living around the world. Neither free market capitalism nor social democracy alone has been responsible for economic development. On the contrary, they often work together.

In this blog post, we discuss in more detail the evidence behind these claims.

The rise of globalization

International trade has been part of the world economy for thousands of years . Despite this long history, the importance of foreign trade was modest until the beginning of the 19th century—the sum of worldwide exports and imports never exceeded 10% of global output before 1800 .

Then around 1820 things started to change quickly. Around that time, technological advances and political liberalism triggered what we know today as the 'first wave of globalization'.

This first wave of globalization came to an end with the beginning of the First World War, when the decline of liberalism and the rise of nationalism led to a collapse in international trade. But this was temporary and after the Second World War, trade started growing again. This second wave of globalization, which continues today, has seen international trade grow faster than ever before. Today, around 60% of all goods and services produced in the world are shipped across country borders. (In our entry on International Trade you find more details regarding the particular features that characterize the first and second waves of globalization.)

The chart here shows the remarkable growth of foreign trade since 1800. The series shows the value of world exports in constant prices—world exports have been indexed, so that values are relative to the value of exports in the year 1913.

The broad trend in this chart is striking: Trade followed an exponential path. Other metrics of trade, such as the share of imports and exports in global output , tell the same story.

In just a few generations, globalization completely changed the world economy.

The correlation between globalization, economic growth and poverty reductions

In the period in which international trade expanded, the average world income increased substantially and the share of the population living in extreme poverty went down continuously.

GDP per capita is a common metric used for measuring national average incomes. By this measure, average incomes followed a similar growth pattern to international trade. For thousands of years, global GDP per capita had a negligible growth rate: technological progress in the preindustrial world produced people rather than prosperity . Over the course of the 19th century, however, alongside the first wave of globalization, this changed substantially. In this period, economic growth started accelerating and global GDP per capita has been growing constantly over the last two centuries—with the exception of lower growth rates during the years between the two world wars. (You can read more about these trends in our entry on Economic Growth .)

Regarding extreme poverty, the available evidence shows that up until 1800, the vast majority of people around the world lived in extreme deprivation , with only a tiny elite enjoying higher standards of living. In the 19th century we began making progress and the share of people living in extreme poverty started to slowly decline. This trend is shown in the chart here. As we can see, today, two hundred years later, the share of people living in extreme poverty is less than 10%. This is an achievement that would have been unthinkable to our ancestors. 1

The stark trend in the incidence of poverty is particularly remarkable if we consider that the world population increased 7-fold over the same period. In a world without economic growth, such an increase in the population would have resulted in less and less consumption for everyone. And yet, as the chart shows if you switch to the 'absolute' view, the exact opposite happened: in a time of unprecedented population growth, we managed to lift more and more people out of poverty.

Living with less than 1.90 dollars per day is difficult by any standard—the term 'extreme poverty' is appropriate. However, recent estimates show that no matter what global poverty line you choose, the share of people below that poverty line has declined . (In our entry on Global Extreme Poverty you can find more evidence supporting this important historical achievement.)

The link between globalization and absolute poverty

The fact that trade and average incomes followed similar upward trajectories in a period of unprecedented poverty reduction is of course not proof of a causal relationship. However, both evidence and theory suggest that what we observe is more than an accidental correlation.

Trade facilitates efficiency gains that are materialized in aggregate economic growth. From a conceptual point of view, international trade contributes to economic growth by allowing nations to specialize, in order to produce goods that they are relatively efficient at producing, while importing other goods. There is substantial empirical evidence backing this causal mechanism .

If trade leads to growth in average incomes, what does this mean for poverty? In a much-cited 2002 academic article, David Dollar and Aart Kraay empirically showed that on average, the income of the poorest grew one-for-one with average national incomes over the last four decades of the 20th century. 2 This means that trade has helped raise the incomes of the poor as much as it has helped raise average incomes. More recent articles have confirmed the original findings from Dollar and Kraay. 3

When taken together, the evidence thus tells us that globalization has contributed to reducing poverty around the world.

The link between globalization and inequality

That globalization is good for the poor is a statement that is true on average . In some countries and in some periods the poor did better than average, and sometimes they did worse.

Looking at the long-run average effect is very helpful to form an opinion regarding broad trends. However, these broad trends are not necessarily informative about how trade has affected the distribution of incomes generally; nor about how trade has affected specific groups of people in specific periods.

The same economic principles that suggest we should lend serious consideration to the efficiency gains from trade, suggest that we should do likewise for the distributional consequences from trade. If globalization generates growth by allowing countries to specialize in the production of goods that intensively use locally abundant resources, it is natural to expect that differences in the way resources are endowed will translate into differences in the way benefits are reaped.

If we take a look at the data, we observe that the process of globalization and growth that led to historical achievements in poverty reductions went along with a substantial increase in global income inequality .

The chart shows this by comparing the global income distribution at three points in time: 1800, 1975, and 2015. We can see that the world today is both much richer and more unequal than it was in 1800.

There are two forces that can drive global income inequality : within-country differences in incomes, and between-country differences in incomes. Which of the two is driving the trend we observe in this chart? The evidence suggests that it is the latter—global inequality increased in the period 1800-1975 because the countries that industrialized earlier grew faster.

In 1800, only a few countries had achieved economic growth while the majority of the world still lived in poverty. In the following century, more and more countries achieved sustained economic growth, and the global income distribution became much more unequal: there was a clear divergence between early-industrialized countries (where extreme forms of poverty were virtually eradicated) and the rest of the world. In the following decades and up until today, early-industrialized countries have continued growing, but the biggest changes have taken place at the bottom of the distribution. Today, global income inequality is lower than it was in 1975. But still, despite the ‘catch-up growth’ in recent decades, our world today is both much richer and more unequal than it was in 1800.

So, what does the data tell us about globalization? Over the last century, the gains from international trade were substantial and generally equally distributed within countries, but global inequality increased because for a long period early-industrialized countries had larger gains to distribute among their citizens.

The distribution of the gains from trade

The above conclusion that globalization has not had substantial effects on global inequality may seem paradoxical to some people—there is substantial evidence of growing inequality in many countries, including countries that have vehemently pursued trade liberalization. A notable case in point is the US, where income inequality has been on the rise in the last four decades, with incomes for the bottom 10% growing much more slowly than incomes for the top 10% . (You can read more about these within-country trends in our entry on Income Inequality .)

How can we reconcile these two empirical facts? In a recent article, Elhanan Helpman provides an answer informed by a meta-analysis of the available evidence: factors such as automation, technological changes, and market frictions, have contributed to the rise of inequality more than growth in international trade has. 4

If this is the case, then why has the view that globalization is bad for the working class captured the political debate in rich countries? Part of the answer has to do with the fact that people are misinformed about the evidence. But another important reason is that, while globalization may not have been the prime cause of growing inequality within many rich countries, it remains true that there are specific groups of people who have not reaped many of the benefits from globalization in recent years.

Daniel Trefler published a paper in 2004 showing that the 1989 free trade agreement between the US and Canada temporarily increased (for about three years) the level of unemployment in Canada. 5 And David Autor and colleagues published another much cited article in 2013 showing that imports from China had diverging effects on employment across various geographical zones in the US, with employment declining more in zones where industries were more exposed to import competition from China. 6

These effects on specific groups are real and need to be taken into account, even if they do not imply that ‘globalization is bad for the poor’. Public policies should protect and compensate workers whose earnings are adversely affected by globalization. And as a matter of fact, public policies in rich countries have done this to some degree in the past. As painful as job losses are for the affected workers, it is thanks to unemployment benefits and other safety-net policies that we do not observe unemployment leading to widespread extreme poverty in rich countries.

Which way forward?

Has globalization been an engine of economic development? The answer is yes. Globalization has had a positive effect on economic growth, contributing to rising living standards and the reduction of extreme poverty across the world.

Can we conclude from this that we should strive for a ‘hyper-globalized’ world economy in which there is completely free trade with no room for public policy and regulation? The answer is no.

The point is that the worldwide historical achievements that we can attribute to globalization are not independent of other factors, including the potential of governments to redistribute resources. Indeed, as the last chart here shows, the process of globalization that we have experienced in the last couple of centuries took place at the same time as governments increased their potential for taxing and redirecting resources through public policies, particularly social transfers.

How much integration in global markets would be optimal? I would be skeptical of anyone who offers a definitive answer. But it seems unlikely that the optimal degree of integration is either of the two extremes—neither ‘hyper-protectionism’ nor ‘hyper-globalization’ is likely to be the answer.

Policies aimed at liberalizing trade, and policies aimed at providing social safety nets, are often advocated by different groups, and it is common for these groups to argue that they are in conflict. But both economic theory and the empirical evidence from the successful fight against extreme poverty suggests this is a mistake: globalization and social policy should be treated as complements rather than substitutes.

The data in the chart here measures ‘extreme poverty’ as defined by the World Bank; people are considered to live in extreme poverty if they have to get by with less than 1.90 ‘international dollars’ per day. International dollars are a hypothetical currency that corrects incomes for differences in price levels in different countries as well as for inflation (explained by us here ).

Dollar, David, and Aart Kraay. "Growth is Good for the Poor." Journal of economic growth 7.3 (2002): 195-225.

See, for example, Dollar and Kraay (2004), "Trade, growth, and poverty." The Economic Journal 114.493 (2004) ; and Dollar, Kleineberg and Kraay (2014), "Growth, inequality, and social welfare : cross-country evidence." Policy Research Working Paper.

Helpman, Elhanan. Globalization and Wage Inequality. No. w22944. National Bureau of Economic Research, 2016.

Trefler, Daniel. "The long and short of the Canada-US free trade agreement." The American Economic Review 94.4 (2004): 870-895.

David, H., David Dorn, and Gordon H. Hanson. "The China syndrome: Local labor market effects of import competition in the United States." The American Economic Review 103.6 (2013): 2121-2168.

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Globalization and Economic Growth

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• Taha Egri 9  

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Demir, I., Canakci, M., Egri, T. (2021). Globalization and Economic Growth. In: Leal Filho, W., Azul, A.M., Brandli, L., Lange Salvia, A., Wall, T. (eds) Decent Work and Economic Growth. Encyclopedia of the UN Sustainable Development Goals. Springer, Cham. https://doi.org/10.1007/978-3-319-71058-7_90-1

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ENCYCLOPEDIC ENTRY

Globalization.

Globalization is a term used to describe the increasing connectedness and interdependence of world cultures and economies.

Anthropology, Sociology, Social Studies, Civics, Economics

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Globalization is a term used to describe how trade and technology have made the world into a more connected and interdependent place. Globalization also captures in its scope the economic and social changes that have come about as a result. It may be pictured as the threads of an immense spider web formed over millennia, with the number and reach of these threads increasing over time. People, money, material goods, ideas, and even disease and devastation have traveled these silken strands, and have done so in greater numbers and with greater speed than ever in the present age. When did globalization begin? The Silk Road, an ancient network of trade routes across China, Central Asia, and the Mediterranean used between 50 B.C.E. and 250 C.E., is perhaps the most well-known early example of exchanging ideas, products, and customs. As with future globalizing booms, new technologies played a key role in the Silk Road trade. Advances in metallurgy led to the creation of coins; advances in transportation led to the building of roads connecting the major empires of the day; and increased agricultural production meant more food could be trafficked between locales. Along with Chinese silk, Roman glass, and Arabian spices, ideas such as Buddhist beliefs and the secrets of paper-making also spread via these tendrils of trade. Unquestionably, these types of exchanges were accelerated in the Age of Exploration, when European explorers seeking new sea routes to the spices and silks of Asia bumped into the Americas instead. Again, technology played an important role in the maritime trade routes that flourished between old and newly discovered continents. New ship designs and the creation of the magnetic compass were key to the explorers’ successes. Trade and idea exchange now extended to a previously unconnected part of the world, where ships carrying plants, animals, and Spanish silver between the Old World and the New also carried Christian missionaries. The web of globalization continued to spin out through the Age of Revolution, when ideas about liberty , equality , and fraternity spread like fire from America to France to Latin America and beyond. It rode the waves of industrialization , colonization , and war through the eighteenth, nineteenth, and twentieth centuries, powered by the invention of factories, railways, steamboats, cars, and planes. With the Information Age, globalization went into overdrive. Advances in computer and communications technology launched a new global era and redefined what it meant to be “connected.” Modern communications satellites meant the 1964 Summer Olympics in Tokyo could be watched in the United States for the first time. The World Wide Web and the Internet allowed someone in Germany to read about a breaking news story in Bolivia in real time. Someone wishing to travel from Boston, Massachusetts, to London, England, could do so in hours rather than the week or more it would have taken a hundred years ago. This digital revolution massively impacted economies across the world as well: they became more information-based and more interdependent. In the modern era, economic success or failure at one focal point of the global web can be felt in every major world economy. The benefits and disadvantages of globalization are the subject of ongoing debate. The downside to globalization can be seen in the increased risk for the transmission of diseases like ebola or severe acute respiratory syndrome (SARS), or in the kind of environmental harm that scientist Paul R. Furumo has studied in microcosm in palm oil plantations in the tropics. Globalization has of course led to great good, too. Richer nations now can—and do—come to the aid of poorer nations in crisis. Increasing diversity in many countries has meant more opportunity to learn about and celebrate other cultures. The sense that there is a global village, a worldwide “us,” has emerged.

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✍️Essay on Globalisation: Samples in 100, 150 and 200 Words

• Updated on  
• Oct 25, 2023

Globalisation means the combination of economies and societies with the help of information, ideas, technology, finance, goods, services, and people. It is a process where multinational companies work on their international standing and conduct operations internationally or overseas. Over the years, Globalisation has had a profound impact on various aspects of society. Today we will be discussing what globalisation is and how it came into existence with the essay on globalisation listed below.

Table of Contents

• 1 How Globalisation Came Into Existence?
• 2 Essay on Globalisation in 100 Words
• 3 Essay on Globalisation in 150 Words
• 4 Essay on Globalisation in 200 Words

How Globalisation Came Into Existence?

For all those unaware, the concepts of globalisation first emerged in the 20th century. Here are some of the key events which led to the development of globalisation in today’s digital world.

• The ancient Silk Route as well as the maritime routes led to the exchange of goods, ideas and culture in several countries. Although these were just trade routes, but later became important centres for cultural exchange.
• Other than this, the European colonial expansion which took place from the 15th to the 20th century led to the setting up of global markets where both knowledge and people were transferred to several developing countries. 
• The evolution and exchange of mass media, cinema and the internet further led to the widespread dissemination of cultures and ideas.

Also Read: Essay on the Importance of the English Language for Students

Essay on Globalisation in 100 Words

Globalization, the interconnectedness of nations through trade, technology, and cultural exchange, has reshaped the world. It has enabled the free flow of goods and information, fostering economic growth and cultural diversity. However, it also raises challenges such as income inequality and cultural homogenization. 

In a globalized world, businesses expand internationally, but local industries can suffer. Moreover, while globalization promotes shared knowledge, it can erode local traditions. Striking a balance between the benefits and drawbacks of globalization is essential to ensure a more equitable and culturally diverse global community, where economies thrive without leaving anyone behind.

Also Read: Essay on Save Environment: Samples in 100, 200, 300 Words

Essay on Globalisation in 150 Words

Globalization is the process of increasing interconnectedness and interdependence among countries, economies, and cultures. It has transformed the world in various ways.

Economically, globalization has facilitated the flow of goods, services, and capital across borders. This has boosted economic growth and reduced poverty in many developing nations. However, it has also led to income inequality and job displacement in some regions.

Culturally, globalization has resulted in the spread of ideas, values, and cultural products worldwide. While this fosters cultural exchange and diversity, it also raises concerns about cultural homogenization.

Technologically, globalization has been driven by advances in communication and transportation. The internet and smartphones have connected people across the globe, allowing for rapid information dissemination and collaboration.

In conclusion, globalization is a complex phenomenon with both benefits and challenges. It has reshaped the world, bringing people closer together, but also highlighting the need for responsible governance and policies to address its downsides.

Also Read: Essay on Unity in Diversity in 100 to 200 Words

Essay on Globalisation in 200 Words

Globalization, a multifaceted phenomenon, has reshaped the world over the past few decades. It involves the interconnectedness of economies, cultures, and societies across the globe. In this essay, we will briefly discuss its key aspects and impacts.

Economically, globalization has led to increased international trade and investment. It has allowed companies to expand operations globally, leading to economic growth in many countries. However, it has also resulted in income inequality and job displacement in some regions.

Culturally, globalization has facilitated the exchange of ideas, values, and traditions. This has led to a more diverse and interconnected world where cultures blend, but it can also challenge local traditions and languages.

Socially, globalization has improved access to information and technology. It has connected people across borders, enabling global activism and awareness of worldwide issues. Nonetheless, it has also created challenges like cybercrime and privacy concerns.

In conclusion, globalization is a double-edged sword. It offers economic opportunities, cultural exchange, and global connectivity, but it also brings about disparities, cultural tensions, and new global challenges. To navigate this complex landscape, the world must strive for responsible globalization that balances the interests of all stakeholders and promotes inclusivity and sustainability.

Related Articles

The movement of goods, technologies, information, and jobs between countries is referred to as globalisation. 

Globalization as a phenomenon began with the earliest human migratory routes, or with Genghis Khan’s invasions, or travel across the Silk Road.

Globalisation allows wealthy nations to access cheaper labour and resources, while also providing opportunity for developing and underdeveloped nations with the jobs and investment capital they require.

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• Essay On Globalisation

Globalisation Essay

500+ words essay on globalisation.

Globalisation can be defined as a process of integration of the Indian economy with the world economy. Globalisation has been taking place for the past hundred years, but it has sped up enormously over the last half-century. It has increased the production and exchange of goods and services. Globalisation is a positive outcome of privatisation and liberalisation. Globalisation is primarily an economic process of interaction and integration associated with social and cultural aspects. It is said to be an outcome of different policies to transform the world towards greater interdependence and integration. To explain, in other words, Globalisation is a concept or method of interaction and union among people, corporations, and governments universally.

The top five types of globalisation are:

1. Cultural globalisation

2. Economic globalisation

3. Technological globalisation

4. Political globalisation

5. Financial globalisation

Impact of Globalisation on the Indian Economy

After urbanisation and globalisation, we can witness a drastic change in the Indian economy. The government-administered and established economic policies are imperative in planning income, investment, savings, and employment. These economic policies directly influence while framing the basic outline of the Indian economy.

Indian society is critically impacted by cross-culture due to globalisation, and it brought changes in different aspects of the country in terms of political, cultural, economic and social.

However, the main factor is economic unification which contributes maximum to a country’s economy into an international economy.

Advantages of Globalisation

Labour access: Due to globalisation, nations can now access a broader labour pool. If there is any shortage of knowledgeable workers in any developing nation, they can import labour from other countries. On the other hand, wealthier countries get an opportunity to outsource their low-skill work to developing nations with a low cost of living to reduce the cost of goods sold and move those savings to the customers.

High standard of living: After Globalisation, the Indian economy and the standard of living have increased. The change can be observed in the purchasing behaviour of an individual, especially those associated with foreign companies. Hence, most cities are upgraded with a better standard of living and business development.

Resource Access : The primary reason for trade is to gain access to the resources of other countries. It would have been impossible to produce or manufacture luxurious goods if the flow of resources across countries was not permissible—for example, Smartphones.

Impact of Globalisation

Globalisation in terms of economy is associated with the development of capitalism. The introduction of Globalisation has developed economic freedom and increased the living standard worldwide. It has also fastened up the process of offshoring and outsourcing. Due to outsourcing, transnational companies got an opportunity to exploit medium and small-sized enterprises intensively at a low price worldwide. As a kind of economic venture, outsourcing has increased, in recent times, because of the increase in quick methods of communication, especially the growth of information technology (IT).

Privatization of public utilities and goods, such as security, health, etc., are also impacted by Globalisation. Other goods, such as medicines or seeds, are considered economic goods and have been integrated into recent trade agreements.

This essay on Globalisation will help students to understand the concept more accurately. Students can also visit our BYJU’S website to get more CBSE Essays , question papers, sample papers, etc.

Frequently Asked Questions on Globalisation Essay

What are the benefits of globalisation.

Globalisation gives countries access to foreign cultures and technological innovation from more advanced countries. It provides improved living standards to people. The global exposure it gives has resulted in the emergence of new talent in multiple fields.

What are the main elements of globalisation?

Principle elements of globalisation are international trade, foreign investment, capital market flows, labour migration, and diffusion of technology.

What are the different types of globalisation?

Political, economic and cultural globalisation are the main types of globalisation.

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Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities

Parisa samimi.

1 Faculty of Management, Universiti Teknologi Malaysia (UTM), Johor, Malaysia

2 Department of Management, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran

Hashem Salarzadeh Jenatabadi

3 Applied Statistics Department, Economics and Administration Faculty, University of Malaya, Kuala Lumpur, Malaysia

Conceived and designed the experiments: PS. Performed the experiments: PS. Analyzed the data: PS. Contributed reagents/materials/analysis tools: PS HSJ. Wrote the paper: PS HSJ.

Associated Data

This study was carried out to investigate the effect of economic globalization on economic growth in OIC countries. Furthermore, the study examined the effect of complementary policies on the growth effect of globalization. It also investigated whether the growth effect of globalization depends on the income level of countries. Utilizing the generalized method of moments (GMM) estimator within the framework of a dynamic panel data approach, we provide evidence which suggests that economic globalization has statistically significant impact on economic growth in OIC countries. The results indicate that this positive effect is increased in the countries with better-educated workers and well-developed financial systems. Our finding shows that the effect of economic globalization also depends on the country’s level of income. High and middle-income countries benefit from globalization whereas low-income countries do not gain from it. In fact, the countries should receive the appropriate income level to be benefited from globalization. Economic globalization not only directly promotes growth but also indirectly does so via complementary reforms.

Introduction

Globalization, as a complicated process, is not a new phenomenon and our world has experienced its effects on different aspects of lives such as economical, social, environmental and political from many years ago [1] – [4] . Economic globalization includes flows of goods and services across borders, international capital flows, reduction in tariffs and trade barriers, immigration, and the spread of technology, and knowledge beyond borders. It is source of much debate and conflict like any source of great power.

The broad effects of globalization on different aspects of life grab a great deal of attention over the past three decades. As countries, especially developing countries are speeding up their openness in recent years the concern about globalization and its different effects on economic growth, poverty, inequality, environment and cultural dominance are increased. As a significant subset of the developing world, Organization of Islamic Cooperation (OIC) countries are also faced by opportunities and costs of globalization. Figure 1 shows the upward trend of economic globalization among different income group of OIC countries.

Although OICs are rich in natural resources, these resources were not being used efficiently. It seems that finding new ways to use the OICs economic capacity more efficiently are important and necessary for them to improve their economic situation in the world. Among the areas where globalization is thought, the link between economic growth and globalization has been become focus of attention by many researchers. Improving economic growth is the aim of policy makers as it shows the success of nations. Due to the increasing trend of globalization, finding the effect of globalization on economic growth is prominent.

The net effect of globalization on economic growth remains puzzling since previous empirical analysis did not support the existent of a systematic positive or negative impact of globalization on growth. Most of these studies suffer from econometrics shortcoming, narrow definition of globalization and small number of countries. The effect of economic globalization on the economic growth in OICs is also ambiguous. Existing empirical studies have not indicated the positive or negative impact of globalization in OICs. The relationship between economic globalization and economic growth is important especially for economic policies.

Recently, researchers have claimed that the growth effects of globalization depend on the economic structure of the countries during the process of globalization. The impact of globalization on economic growth of countries also could be changed by the set of complementary policies such as improvement in human capital and financial system. In fact, globalization by itself does not increase or decrease economic growth. The effect of complementary policies is very important as it helps countries to be successful in globalization process.

In this paper, we examine the relationship between economic globalization and growth in panel of selected OIC countries over the period 1980–2008. Furthermore, we would explore whether the growth effects of economic globalization depend on the set of complementary policies and income level of OIC countries.

The paper is organized as follows. The next section consists of a review of relevant studies on the impact of globalization on growth. Afterward the model specification is described. It is followed by the methodology of this study as well as the data sets that are utilized in the estimation of the model and the empirical strategy. Then, the econometric results are reported and discussed. The last section summarizes and concludes the paper with important issues on policy implications.

Literature Review

The relationship between globalization and growth is a heated and highly debated topic on the growth and development literature. Yet, this issue is far from being resolved. Theoretical growth studies report at best a contradictory and inconclusive discussion on the relationship between globalization and growth. Some of the studies found positive the effect of globalization on growth through effective allocation of domestic resources, diffusion of technology, improvement in factor productivity and augmentation of capital [5] , [6] . In contrast, others argued that globalization has harmful effect on growth in countries with weak institutions and political instability and in countries, which specialized in ineffective activities in the process of globalization [5] , [7] , [8] .

Given the conflicting theoretical views, many studies have been empirically examined the impact of the globalization on economic growth in developed and developing countries. Generally, the literature on the globalization-economic growth nexus provides at least three schools of thought. First, many studies support the idea that globalization accentuates economic growth [9] – [19] . Pioneering early studies include Dollar [9] , Sachs et al. [15] and Edwards [11] , who examined the impact of trade openness by using different index on economic growth. The findings of these studies implied that openness is associated with more rapid growth.

In 2006, Dreher introduced a new comprehensive index of globalization, KOF, to examine the impact of globalization on growth in an unbalanced dynamic panel of 123 countries between 1970 and 2000. The overall result showed that globalization promotes economic growth. The economic and social dimensions have positive impact on growth whereas political dimension has no effect on growth. The robustness of the results of Dreher [19] is approved by Rao and Vadlamannati [20] which use KOF and examine its impact on growth rate of 21 African countries during 1970–2005. The positive effect of globalization on economic growth is also confirmed by the extreme bounds analysis. The result indicated that the positive effect of globalization on growth is larger than the effect of investment on growth.

The second school of thought, which supported by some scholars such as Alesina et al. [21] , Rodrik [22] and Rodriguez and Rodrik [23] , has been more reserve in supporting the globalization-led growth nexus. Rodriguez and Rodrik [23] challenged the robustness of Dollar (1992), Sachs, Warner et al. (1995) and Edwards [11] studies. They believed that weak evidence support the idea of positive relationship between openness and growth. They mentioned the lack of control for some prominent growth indicators as well as using incomprehensive trade openness index as shortcomings of these works. Warner [24] refuted the results of Rodriguez and Rodrik (2000). He mentioned that Rodriguez and Rodrik (2000) used an uncommon index to measure trade restriction (tariffs revenues divided by imports). Warner (2003) explained that they ignored all other barriers on trade and suggested using only the tariffs and quotas of textbook trade policy to measure trade restriction in countries.

Krugman [25] strongly disagreed with the argument that international financial integration is a major engine of economic development. This is because capital is not an important factor to increase economic development and the large flows of capital from rich to poor countries have never occurred. Therefore, developing countries are unlikely to increase economic growth through financial openness. Levine [26] was more optimistic about the impact of financial liberalization than Krugman. He concluded, based on theory and empirical evidences, that the domestic financial system has a prominent effect on economic growth through boosting total factor productivity. The factors that improve the functioning of domestic financial markets and banks like financial integration can stimulate improvements in resource allocation and boost economic growth.

The third school of thoughts covers the studies that found nonlinear relationship between globalization and growth with emphasis on the effect of complementary policies. Borensztein, De Gregorio et al. (1998) investigated the impact of FDI on economic growth in a cross-country framework by developing a model of endogenous growth to examine the role of FDI in the economic growth in developing countries. They found that FDI, which is measured by the fraction of products produced by foreign firms in the total number of products, reduces the costs of introducing new varieties of capital goods, thus increasing the rate at which new capital goods are introduced. The results showed a strong complementary effect between stock of human capital and FDI to enhance economic growth. They interpreted this finding with the observation that the advanced technology, brought by FDI, increases the growth rate of host economy when the country has sufficient level of human capital. In this situation, the FDI is more productive than domestic investment.

Calderón and Poggio [27] examined the structural factors that may have impact on growth effect of trade openness. The growth benefits of rising trade openness are conditional on the level of progress in structural areas including education, innovation, infrastructure, institutions, the regulatory framework, and financial development. Indeed, they found that the lack of progress in these areas could restrict the potential benefits of trade openness. Chang et al. [28] found that the growth effects of openness may be significantly improved when the investment in human capital is stronger, financial markets are deeper, price inflation is lower, and public infrastructure is more readily available. Gu and Dong [29] emphasized that the harmful or useful growth effect of financial globalization heavily depends on the level of financial development of economies. In fact, if financial openness happens without any improvement in the financial system of countries, growth will replace by volatility.

However, the review of the empirical literature indicates that the impact of the economic globalization on economic growth is influenced by sample, econometric techniques, period specifications, observed and unobserved country-specific effects. Most of the literature in the field of globalization, concentrates on the effect of trade or foreign capital volume (de facto indices) on economic growth. The problem is that de facto indices do not proportionally capture trade and financial globalization policies. The rate of protections and tariff need to be accounted since they are policy based variables, capturing the severity of trade restrictions in a country. Therefore, globalization index should contain trade and capital restrictions as well as trade and capital volume. Thus, this paper avoids this problem by using a comprehensive index which called KOF [30] . The economic dimension of this index captures the volume and restriction of trade and capital flow of countries.

Despite the numerous studies, the effect of economic globalization on economic growth in OIC is still scarce. The results of recent studies on the effect of globalization in OICs are not significant, as they have not examined the impact of globalization by empirical model such as Zeinelabdin [31] and Dabour [32] . Those that used empirical model, investigated the effect of globalization for one country such as Ates [33] and Oyvat [34] , or did it for some OIC members in different groups such as East Asia by Guillaumin [35] or as group of developing countries by Haddad et al. [36] and Warner [24] . Therefore, the aim of this study is filling the gap in research devoted solely to investigate the effects of economic globalization on growth in selected OICs. In addition, the study will consider the impact of complimentary polices on the growth effects of globalization in selected OIC countries.

Model Specification

This study uses a dynamic panel data model to investigate the effect of globalization on economic growth. The model can be shown as follows:

Methodology and Data

This paper applies the generalized method of moments (GMM) panel estimator first suggested by Anderson and Hsiao [38] and later developed further by Arellano and Bond [39] . This flexible method requires only weak assumption that makes it one of the most widely used econometric techniques especially in growth studies. The dynamic GMM procedure is as follow: first, to eliminate the individual effect form dynamic growth model, the method takes differences. Then, it instruments the right hand side variables by using their lagged values. The last step is to eliminate the inconsistency arising from the endogeneity of the explanatory variables.

The consistency of the GMM estimator depends on two specification tests. The first is a Sargan test of over-identifying restrictions, which tests the overall validity of the instruments. Failure to reject the null hypothesis gives support to the model. The second test examines the null hypothesis that the error term is not serially correlated.

The GMM can be applied in one- or two-step variants. The one-step estimators use weighting matrices that are independent of estimated parameters, whereas the two-step GMM estimator uses the so-called optimal weighting matrices in which the moment conditions are weighted by a consistent estimate of their covariance matrix. However, the use of the two-step estimator in small samples, as in our study, has problem derived from proliferation of instruments. Furthermore, the estimated standard errors of the two-step GMM estimator tend to be small. Consequently, this paper employs the one-step GMM estimator.

In the specification, year dummies are used as instrument variable because other regressors are not strictly exogenous. The maximum lags length of independent variable which used as instrument is 2 to select the optimal lag, the AR(1) and AR(2) statistics are employed. There is convincing evidence that too many moment conditions introduce bias while increasing efficiency. It is, therefore, suggested that a subset of these moment conditions can be used to take advantage of the trade-off between the reduction in bias and the loss in efficiency. We restrict the moment conditions to a maximum of two lags on the dependent variable.

Data and Empirical Strategy

We estimated Eq. (1) using the GMM estimator based on a panel of 33 OIC countries. Table S1 in File S1 lists the countries and their income groups in the sample. The choice of countries selected for this study is primarily dictated by availability of reliable data over the sample period among all OIC countries. The panel covers the period 1980–2008 and is unbalanced. Following [40] , we use annual data in order to maximize sample size and to identify the parameters of interest more precisely. In fact, averaging out data removes useful variation from the data, which could help to identify the parameters of interest with more precision.

The dependent variable in our sample is logged per capita real GDP, using the purchasing power parity (PPP) exchange rates and is obtained from the Penn World Table (PWT 7.0). The economic dimension of KOF index is derived from Dreher et al. [41] . We use some other variables, along with economic globalization to control other factors influenced economic growth. Table S2 in File S2 shows the variables, their proxies and source that they obtain.

We relied on the three main approaches to capture the effects of economic globalization on economic growth in OIC countries. The first one is the baseline specification (Eq. (1)) which estimates the effect of economic globalization on economic growth.

The second approach is to examine whether the effect of globalization on growth depends on the complementary policies in the form of level of human capital and financial development. To test, the interactions of economic globalization and financial development (KOF*FD) and economic globalization and human capital (KOF*HCS) are included as additional explanatory variables, apart from the standard variables used in the growth equation. The KOF, HCS and FD are included in the model individually as well for two reasons. First, the significance of the interaction term may be the result of the omission of these variables by themselves. Thus, in that way, it can be tested jointly whether these variables affect growth by themselves or through the interaction term. Second, to ensure that the interaction term did not proxy for KOF, HCS or FD, these variables were included in the regression independently.

In the third approach, in order to study the role of income level of countries on the growth effect of globalization, the countries are split based on income level. Accordingly, countries were classified into three groups: high-income countries (3), middle-income (21) and low-income (9) countries. Next, dummy variables were created for high-income (Dum 3), middle-income (Dum 2) and low-income (Dum 1) groups. Then interaction terms were created for dummy variables and KOF. These interactions will be added to the baseline specification.

Findings and Discussion

This section presents the empirical results of three approaches, based on the GMM -dynamic panel data; in Tables 1 – 3 . Table 1 presents a preliminary analysis on the effects of economic globalization on growth. Table 2 displays coefficient estimates obtained from the baseline specification, which used added two interaction terms of economic globalization and financial development and economic globalization and human capital. Table 3 reports the coefficients estimate from a specification that uses dummies to capture the impact of income level of OIC countries on the growth effect of globalization.

The results in Table 1 indicate that economic globalization has positive impact on growth and the coefficient is significant at 1 percent level. The positive effect is consistent with the bulk of the existing empirical literature that support beneficial effect of globalization on economic growth [9] , [11] , [13] , [19] , [42] , [43] .

According to the theoretical literature, globalization enhances economic growth by allocating resources more efficiently as OIC countries that can be specialized in activities with comparative advantages. By increasing the size of markets through globalization, these countries can be benefited from economic of scale, lower cost of research and knowledge spillovers. It also augments capital in OICs as they provide a higher return to capital. It has raised productivity and innovation, supported the spread of knowledge and new technologies as the important factors in the process of development. The results also indicate that growth is enhanced by lower level of government expenditure, lower level of inflation, higher level of human capital, deeper financial development, more domestic investment and better institutions.

Table 2 represents that the coefficients on the interaction between the KOF, HCS and FD are statistically significant at 1% level and with the positive sign. The findings indicate that economic globalization not only directly promotes growth but also indirectly does via complementary reforms. On the other hand, the positive effect of economic globalization can be significantly enhanced if some complementary reforms in terms of human capital and financial development are undertaken.

In fact, the implementation of new technologies transferred from advanced economies requires skilled workers. The results of this study confirm the importance of increasing educated workers as a complementary policy in progressing globalization. However, countries with higher level of human capital can be better and faster to imitate and implement the transferred technologies. Besides, the financial openness brings along the knowledge and managerial for implementing the new technology. It can be helpful in improving the level of human capital in host countries. Moreover, the strong and well-functioned financial systems can lead the flow of foreign capital to the productive and compatible sectors in developing countries. Overall, with higher level of human capital and stronger financial systems, the globalized countries benefit from the growth effect of globalization. The obtained results supported by previous studies in relative to financial and trade globalization such as [5] , [27] , [44] , [45] .

Table (3 ) shows that the estimated coefficients on KOF*dum3 and KOF*dum2 are statistically significant at the 5% level with positive sign. The KOF*dum1 is statistically significant with negative sign. It means that increase in economic globalization in high and middle-income countries boost economic growth but this effect is diverse for low-income countries. The reason might be related to economic structure of these countries that are not received to the initial condition necessary to be benefited from globalization. In fact, countries should be received to the appropriate income level to be benefited by globalization.

The diagnostic tests in tables 1 – 3 show that the estimated equation is free from simultaneity bias and second-order correlation. The results of Sargan test accept the null hypothesis that supports the validity of the instrument use in dynamic GMM.

Conclusions and Implications

Numerous researchers have investigated the impact of economic globalization on economic growth. Unfortunately, theoretical and the empirical literature have produced conflicting conclusions that need more investigation. The current study shed light on the growth effect of globalization by using a comprehensive index for globalization and applying a robust econometrics technique. Specifically, this paper assesses whether the growth effects of globalization depend on the complementary polices as well as income level of OIC countries.

Using a panel data of OIC countries over the 1980–2008 period, we draw three important conclusions from the empirical analysis. First, the coefficient measuring the effect of the economic globalization on growth was positive and significant, indicating that economic globalization affects economic growth of OIC countries in a positive way. Second, the positive effect of globalization on growth is increased in countries with higher level of human capital and deeper financial development. Finally, economic globalization does affect growth, whether the effect is beneficial depends on the level of income of each group. It means that economies should have some initial condition to be benefited from the positive effects of globalization. The results explain why some countries have been successful in globalizing world and others not.

The findings of our study suggest that public policies designed to integrate to the world might are not optimal for economic growth by itself. Economic globalization not only directly promotes growth but also indirectly does so via complementary reforms.

The policy implications of this study are relatively straightforward. Integrating to the global economy is only one part of the story. The other is how to benefits more from globalization. In this respect, the responsibility of policymakers is to improve the level of educated workers and strength of financial systems to get more opportunities from globalization. These economic policies are important not only in their own right, but also in helping developing countries to derive the benefits of globalization.

However, implementation of new technologies transferred from advanced economies requires skilled workers. The results of this study confirm the importance of increasing educated workers as a complementary policy in progressing globalization. In fact, countries with higher level of human capital can better and faster imitate and implement the transferred technologies. The higher level of human capital and certain skill of human capital determine whether technology is successfully absorbed across countries. This shows the importance of human capital in the success of countries in the globalizing world.

Financial openness in the form of FDI brings along the knowledge and managerial for implementing the new technology. It can be helpful in upgrading the level of human capital in host countries. Moreover, strong and well-functioned financial systems can lead the flow of foreign capital to the productive and compatible sectors in OICs.

In addition, the results show that economic globalization does affect growth, whether the effect is beneficial depends on the level of income of countries. High and middle income countries benefit from globalization whereas low-income countries do not gain from it. As Birdsall [46] mentioned globalization is fundamentally asymmetric for poor countries, because their economic structure and markets are asymmetric. So, the risks of globalization hurt the poor more. The structure of the export of low-income countries heavily depends on primary commodity and natural resource which make them vulnerable to the global shocks.

The major research limitation of this study was the failure to collect data for all OIC countries. Therefore future research for all OIC countries would shed light on the relationship between economic globalization and economic growth.

Supporting Information

Sample of Countries.

The Name and Definition of Indicators.

Funding Statement

The study is supported by the Ministry of Higher Education of Malaysia, Malaysian International Scholarship (MIS). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

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Investigating Global Aquatic Food Loss and Waste

Despite the critical role aquatic food systems play in nutrition and food security worldwide, these value chains encounter significant loss and waste challenges. In 2021, approximately 23.8 million tonnes of aquatic foods were lost or wasted, representing 14.8% of global production.

This insight underpins the Investigating Global Aquatic Food Loss and Waste white paper, which delivers updated estimates and thorough analysis across the value chain. The paper is a collaborative effort by the World Economic Forum’s Ocean Action Agenda, the World Resources Institute and MarFishEco, supported by the UK Government’s Blue Planet Fund. It highlights the urgent need for interventions across supply chain actors, identifying hotspots of loss and waste in terms of region, species group and product type.

The paper calls on policy-makers, industry and civil society for collective, targeted actions, offering strategies to significantly reduce aquatic food loss and waste, thereby enhancing the sustainability and resilience of global food systems.

World Economic Forum reports may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License , and in accordance with our Terms of Use .

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Nearly 15% of the seafood we produce each year is wasted. Here’s what needs to happen

Improvements in processing, storage and new technologies can help to reduce the amount of aquatic food lost, according to a new World Economic Forum report.

Economic Globalization: Arguments For and Against Essay

Introduction, benefits of globalization, the similarity between privatization and globalization, global operations by tncs, negative influence of globalization.

Bibliography

Many people associate economic globalization with the controversial issue of free trade. In some cases, economic globalization is associated with free trade and liberalization, improvements in economic conditions of less developed countries and enormous opportunities for multinational (MNEs) and transnational corporations (TNCs). Thus, there are many critics and economists who oppose economic globalization citing alleged benefits of globalization.

Wade criticizes economic benefits of globalization and states that rich and powerful states exploit less developed countries. One of the ways by which the rich get richer (and the poor are made poorer) is through increased economic globalization. Globalization has been defined as the collapse of time and space, but more detailed explanations distinguish between “interdependence of markets and production in different countries;” “(perception of) living and working in a world-wide context;” and a “process that affects every aspect in the life of a person, community or nation” (Brown & Lauder 2001, p. 43).

In return for supplying much-needed loans to developing countries, the IMF and the World Bank demand from their creditor nations the implementation of so-called ‘structural adjustment programs’. Unleashed on developing countries in the 1990s, this set of neo-liberal policies is often referred to as the ‘Washington Consensus’. The various sections of the program were mainly directed at countries with large foreign debts remaining from the 1970s and 1980s.

The official purpose of the document was to reform the internal economic mechanisms of debtor countries in the developing world so that they would be in a better position to repay the debts they had incurred. In practice, however, the terms of the program spelled out a new form of colonialism (Wade et al 2006). The ten points of the Washington Consensus, as defined by Williamson, required governments to implement the following structural adjustments in order to qualify for loans: It is no coincidence that this program is called the ‘Washington Consensus’ (Hirst & Thompson 1999), for, from the outset, the United States has been the dominant power in the IMF and the World Bank.

Unfortunately, however, large portions of the ‘development loans’ granted by these institutions have either been pocketed by authoritarian political leaders or have enriched local businesses and the Northern corporations they usually serve. Sometimes, exorbitant sums are spent on ill-considered construction projects (Hirst & Thompson 1999). Most importantly, however, structural adjustment programs rarely produce the desired result of ‘developing’ debtor societies, because mandated cuts in public spending translate into fewer social programs, reduced educational opportunities, more environmental pollution, and greater poverty for the vast majority of people. Typically, the largest share of the national budget is spent on servicing outstanding debts.

Economic globalization increases world poverty in less developed nations. An addition to all of the factors making for world poverty has cropped up during the last few decades, in the form of widespread privatization of former governmental and voluntary functions. The most common meaning of privatization is the shifting of governmental functions and services to non-governmental entities, either to voluntary not-for-profit organizations, or to for profit businesses (Hirst & Thompson 1999).

The net result of privatization is more profit for some and less well-being for a vastly greater number of others; and purported efficiency at the cost of effective distribution among the population as a whole, with widening gaps, both socially and economically. “Even though growth opens the doors, the traction in the legs of the poor may not be enough to carry them through these doors. For example, tribal areas in India where poverty is acute may not be connected sufficiently to the mainstream economy where growth occurs” (Bhagwati 2004, p. 57).

Such critics as Ohmae (1985) and Stiglitz (2002) underline that there is a symbiotic relationship between privatization and globalization. They go hand-in-hand because they both have the same ultimate goal: profits— profits at all costs and regardless of consequences. Corruption, ecological disaster, fraudulent practices, poverty, human degradation and a score of other ills stem from the oft-expressed (although usually cynical) ideology that in the long run, the market-driven society improves the lot of everyone. Stiglitz (2002) underlines that globalization is not simply a market-driven phenomenon; it has an ideological and political base.

That base holds that anything that increases profits is not only desirable and even moral, but absolutely imperative. This drive for profits enables and causes multinational corporations to exploit the cheapest labor, methods and materials they can find. Unfortunately, even the rise of such a person or persons would probably lead to minimal change in their own country or countries at best, since the very essence of globalization, as its name implies, is that it is supra-national. Consequently, even a towering figure with mobs of adherents in any one country would probably make little impact on events world-wide (Hirst & Thompson 1999).

Where privatization and globalization are concerned, there are very few organizations as such with the declared aim of opposing them, or even ameliorating their effects, although a few have come into being. Interestingly, the anti-capitalist movement— so far disparate, to judge by its many names—seems to be beginning once again to coalesce, and is taking on the nature of a movement formed through protests, rather than protests sponsored by movements. Its most significant activity so far has been the organization of demonstrations at international meetings of world-wide financial institutions, such as G-8, the World Bank, the International Monetary Fund and the World Trade Organization, as well as international conferences concerning social protest.

As concerns poverty as such, there is a dearth of anti-poverty organizations, movements against domestic poverty, or even protests specifically naming poverty as the enemy (Hirst & Thompson 1999). Israel, as one exception, has an anti-poverty lobby made up of representatives of organizations and individuals (including some of the poor), concentrating almost entirely on pressuring politicians. Most activities of anti-poverty organizations elsewhere are subsumed under general anti-capitalist activities, which may focus on ecology, empowerment, governmental changes, etc. It is difficult to conceive of a figure so popular and so powerful that he or she could halt the relentless growth of privatization and globalization. Kenichi Ohmae (1985) states:

“The global economy is becoming so powerful that it has swallowed most consumers and corporations, made traditional national borders almost disappear, and pushed bureaucrats, politicians, and the military toward the status of declining industries” (45).

Increase investments from rich to poor countries subordinate developing economies and prevent their unique economic growth. A distinction has been made between internationalization, in which a national unit engages in international trade; international agreements such as GATT; and globalization, in which the national unit ceases to exist and becomes a global enterprise A number of factors have led to the process called “globalization.”

As large corporations began diversifying their products and services by buying up smaller enterprises—usually for stock-market, income tax or other financial benefits—they became conglomerates.. The economic breakdown of the Soviet Union gave further impetus to globalization as many foreign firms hurried to establish units in so-called economies in transition. Free trade agreements of various kinds further supported this process. MNCs now account for between a quarter and a third of the world’s output, 70 percent of world trade and 80 percent of direct international investment (Yip 1995).

Contracting economies invariably react by cutting spending in the social sector, thereby exacerbating the condition of the poor. The paradox here is that when countries think they are doing well economically, they believe this is enough to lighten the burden on the lower-income classes; and when they are in a recession, they obviously don’t have the money to spend helping the same classes (Hirst & Thompson 1999).

On the one hand, globalization of financial trading allows for increased mobility among different segments of the financial industry, with fewer restrictions and greater investment opportunities. Dominated by highly sensitive stock markets that drive high-risk innovation, the world’s financial systems are characterized by high volatility, rampant competition, and general insecurity. Following Stiglitz (2002):

”Globalization can further be defined as the arrival of ‘self-generating capital’ at the global level: that is, capital as capital, capital in the form of the TNC, free of national loyalties, controls, and interests. This is different from the mere internationalization of capital, which assumes a world of national capitals and nation states; it is the supersession by capital of the nation state (10).

Global speculators often take advantage of weak financial and banking regulations to make astronomical profits in emerging markets of developing countries. However, since these international capital flows can be reversed swiftly, they are capable of creating artificial boom-and-bust cycles that endanger the social welfare of entire regions. Wade et al (2006) underline a negative impact of MNEs and TNCs on developing countries and their growth opportunities. This means that while MNCs may be sued or charged by the individual countries in which they operate, insofar as they operate in tens of countries, with immense resources, and the power to withdraw both personnel and assets at will, they are almost invulnerable to local laws. Following Friedman (2000):

“Globalization is the inexorable integration of markets, nation-states and technologies to a degree never witnessed before—in a way that is enabling individuals, corporations and nation-states to reach around the world far­ther, faster, deeper and cheaper than ever before” (p. 9).

The tobacco industry is one of the vivid examples of globalization and its impact on developing countries. Heavily fined for mendacity and creating health risks in the United States, they have blithely paid the fines (by raising their prices) and continued these practices in other parts of the world. For instance, in Papua-New Guinea, almost the only billboards on the roads—including narrow, unpaved country roads—are those of foreign cigarette companies (Brown & Lauder 2010).

Throughout Europe, the umbrellas that deck the much-vaunted sidewalk cafes are almost invariably decorated with ads for tobacco companies. Indeed, tobacco corporations have publicly declared that their next areas of exploitation are in Europe and in Africa where anti-tobacco legislation lags far behind (Yip 1995). Transnational corporations are the contemporary versions of the early modern commercial enterprises. Powerful firms with subsidiaries in several countries, their numbers skyrocketed from 7,000 in 1970 to about 50,000 in 2000 (Brown & Lauder 2001).

Enterprises like General Motors, Walmart, Exxon-Mobil, Mitsubishi, and Siemens belong to the 200 largest TNCs, which account for over half of the world’s industrial output. None of these corporations maintains headquarters outside of North America, Europe, Japan, and South Korea. This geographical concentration reflects existing asymmetrical power relations between the North and the South. Yet, clear power differentials can also be found within the global North. In 1999, 142 of the leading 200 TNCs were based in only three countries – the United States, Japan, and Germany (Brown & Lauder 2001).

Rivaling nation-states in their economic power, these corporations control much of the world’s investment capital, technology, and access to international markets. In order to maintain their prominent positions in the global marketplace, TNCs frequently merge with other corporations (Bhagwati 2004). Some of these recent mergers include the $160-billion marriage of the world’s largest Internet provider, AOL, with entertainment giant Time-Warner; the purchase of Chrysler Motors by Daimler-Benz for $43 billion; and the $115-billion merger between Sprint Corporation and MCI WorldCom.

A close look at corporate sales and country GDPs reveals that 51 of the world’s 100 largest economies are corporations; only 49 are countries. Hence, it is not surprising that some critics have characterized economic globalization as ‘corporate globalization’ or ‘globalization-from-above’ (Brown & Lauder 2004).

TNCs have consolidated their global operations in an increasingly deregulated global labor market. The availability of cheap labor, resources, and favorable production conditions in the global South has enhanced corporate mobility and profitability.

Accounting for over 70% of world trade, TNCs have boosted their foreign direct investments by approximately 15% annually during the 1990s. Their ability to disperse manufacturing processes into many discrete phases carried out in many different locations around the world reflects the changing nature of global production. Such transnational production networks allow TNCs like Nike, General Motors, and Volkswagen to produce, distribute, and market their products on a global scale. Nike, for example, subcontracts 100% of its goods production to 75,000 workers in China, South Korea, Malaysia, Taiwan, and Thailand (Yip 1995).

Transnational production networks augment the power of global capitalism by making it easier for TNCs to bypass nationally based trade unions and other workers’ organizations. Anti-sweatshop activists around the world have responded to these tactics by enlisting public participation in several successful consumer boycotts and other forms of nonviolent direct action. As a consequence, TNCs have become extremely important players that influence the economic, political, and social welfare of many nations.

High inflation and the frequent attempts of the government to deal with it created extremely turbulent and unpredictable business conditions. Economic stabilization plans caused turmoil all across industry as firms tried to understand the new rules of the game. Even minor interventions such as changes in price adjustment rules, foreign exchange regulations, or changes in interest rates and credit regulations caused problems. There was a strong incentive for firms to try to insulate themselves as much as possible from this environment, and vertical integration was one means of doing this (Yip 1995).

Thirdly, the regulatory regime used to be, and actually continues to be, complex, contradictory, and lack transparency. It is in fact almost impossible for an entrepreneur to be a law-abiding citizen, respecting all tax, safety, and other regulations that exist. Therefore, firms have various matters to hide at any given time. This creates a situation where firm owners and managers are suspicious of any contact that goes beyond arm’s-length business transactions. Firm owners repeatedly told me that this was one reason why they would neither let outsiders enter their premises, nor enter into any kind of information exchange with other business people (Wade et al 2006).

Following Hirst & Thompson (1999) there is evidence that some national economies have increased their productivity as a result of free trade. Moreover, there are some benefits that accrue to societies through specialization, competition, and the spread of technology. It is less clear whether the profits resulting from free trade have been distributed fairly within and among countries. Most studies show that the gap between rich and poor countries is widening at a fast pace. Free trade proponents have encountered severe criticism from labor unions and environmental groups who claim that the elimination of social control mechanisms has resulted in a lowering of global labor standards, severe forms of ecological degradation, and the growing indebtedness of the global South to the North. Following Bhagwati (2004):

The problem with this policy was that it often resulted in bad debts. A breakthrough, however, came with the invention of microcredit programs, which go down to the very poor. The problem was solved by lending very small sums to a number of poor clients for tiny investments that improved their ability to earn a livelihood, and by letting each borrower effectively monitor other borrowers” (p. 57).

The existing power structure and the compliance of the middle classes to date has militated against widespread success by this means in the more developed countries though it is difficult to foretell what direction middle class protest might take, were its own well-being to be threatened by the increasing tendency of the global economy to stream the world into rich and poor (Wade et al 2006).

Economic globalization has a negative impact on social security funds are invested, how they used by governments, and other such fiscal changes. Among the most widely bruited of these is the proposal to privatize social security by investing premiums in stock market shares, banks, insurance companies, and other financial institutions. In some of these proposals, the government would simply invest the sums received through the payroll tax, and make payments from the profits (Wade et al 2006).

In other cases, the investments would be made in the name of the individual beneficiaries. In still others, workers would be free to make their own investments with the funds they would previously have paid into the program; and in still others there would be a combination of investments and continuation of social security coverage (Stiglitz 2002).

In sum, economic globalization has a negative impact on developing countries and allows rich states and their corporations exploit poor countries and use their resources as the main source of profits. During the last decade, wealthy countries have increased their attempts to establish a single global market through regional and international agreements such NAFTA and GATT. Rich states assure the public that the elimination or reduction of existing trade barriers among nations will enhance consumer choice, increase global wealth, secure peaceful international relations, and spread new technologies around the world. Thus, these actions and liberalization of trade lead to poverty and slow economic development of less developed states around the globe.

• Bhagwati, J. 2004, In Defense of Globalization. Oxford: Oxford University Press.
• Brown, P. and Lauder, H. Capitalism and Social Progress: The Future of Society in a Global Economy, London: Palgrave, 2001.
• Friedman, Th. 2000, The Lexus and the Olive Tree: Understanding Globalization. Anchor; 1 Anchor edition.
• Hirst, P. and Thompson, K. 1999, Globalization in Question: The International Economy and the Possibility of Governance, Second Edition; Cambridge: Polity Press.
• Levitt, Theodore. 1983, “The Globalization of Markets.” Harvard Business Review , pp. 92-102.
• Ohmae, Kenichi. 1985, Triad Power – The Coming Shape of Global Competition . New York: Freepress.
• Stiglitz, J. 2002, Globalization and its Discontents , London: Allen Lane.
• Wade, R., Kambhampati, U. S., Guista, M. D. 2006, Critical Perspectives on Globalization . Edward Elgar Publishing.
• Yip, George S. 1995, Total Global Strategy – Managing for Wordwide Competitive Advantage . Prentice Hall, New Jersey.
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IvyPanda. (2021, August 15). Economic Globalization: Arguments For and Against. https://ivypanda.com/essays/economic-globalization-arguments-for-and-against/

"Economic Globalization: Arguments For and Against." IvyPanda , 15 Aug. 2021, ivypanda.com/essays/economic-globalization-arguments-for-and-against/.

IvyPanda . (2021) 'Economic Globalization: Arguments For and Against'. 15 August.

IvyPanda . 2021. "Economic Globalization: Arguments For and Against." August 15, 2021. https://ivypanda.com/essays/economic-globalization-arguments-for-and-against/.

1. IvyPanda . "Economic Globalization: Arguments For and Against." August 15, 2021. https://ivypanda.com/essays/economic-globalization-arguments-for-and-against/.

IvyPanda . "Economic Globalization: Arguments For and Against." August 15, 2021. https://ivypanda.com/essays/economic-globalization-arguments-for-and-against/.

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4.1.1 Globalisation (Edexcel)

Last updated 20 Sept 2023

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This Edexcel study note covers globalisation

a) Characteristics of Globalisation:

• Increased International Trade: Globalisation involves the growing interconnectedness of economies through the exchange of goods and services across borders. It has led to a significant increase in international trade.
• Information and Communication Technology (ICT): Advances in technology, particularly the internet and communication technologies, have played a pivotal role in globalisation by facilitating instant communication and information sharing across the globe.
• Multinational Corporations (MNCs): Globalisation is characterized by the rise of multinational corporations that operate in multiple countries, seeking markets, resources, and labor efficiency.
• Cultural Exchange: Globalisation has led to the exchange of cultures, ideas, and values through media, travel, and immigration. This has resulted in greater cultural diversity and cross-cultural influences.
• Interconnected Financial Markets: The global financial system has become highly interconnected, allowing capital to flow easily across borders and impacting the stability of economies worldwide.
• Migration and Labor Mobility: Increased global mobility has led to the movement of people across borders for work, education, and other opportunities.
• Global Supply Chains: The fragmentation of production processes across countries has given rise to complex global supply chains, where components of products are manufactured in different countries before being assembled elsewhere.
• Standardization: Globalisation often leads to the standardization of products, services, and business practices to meet international expectations and norms.

b) Factors Contributing to Globalisation in the Last 50 Years:

• Technological Advances: The rapid development of information technology, including the internet and mobile communications, has significantly reduced communication and transportation costs, facilitating global business operations.
• Trade Liberalization: The removal of trade barriers through international agreements like the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) has promoted international trade.
• Economic Liberalization: Many countries have adopted market-oriented economic policies, including deregulation and privatization, which have encouraged foreign investment and trade.
• Transport Infrastructure: Improvements in transportation infrastructure, such as containerization and the expansion of shipping routes, have made it easier and cheaper to move goods globally.
• Financial Integration: The liberalization of financial markets and the ease of cross-border capital flows have connected global economies more closely.
• Multinational Corporations: The expansion of multinational corporations into new markets and the establishment of global production networks have furthered globalisation.
• Political Stability: Greater political stability in many regions has reduced the risks associated with doing business abroad.

c) Impacts of Globalisation:

• Economic Growth: Globalisation can stimulate economic growth by increasing trade and foreign investment.
• Income Inequality: It can also exacerbate income inequality within countries, as benefits may not be evenly distributed.
• Reduced Control: Governments may have reduced control over their economies due to international trade agreements and global market forces.
• Policy Coordination: International cooperation becomes essential in areas like climate change and financial stability.
• Access to Markets: Producers gain access to larger consumer markets, but face increased competition.
• Consumer Choices: Consumers benefit from a wider variety of products and lower prices.
• Job Opportunities: Globalisation can create job opportunities, but it can also lead to job displacement in certain industries.
• Labor Standards: Concerns arise over labor standards, worker rights, and exploitation in some countries.
• Environmental Impact: Globalisation can contribute to environmental degradation through increased resource extraction and pollution.
• Sustainable Practices: There's a growing emphasis on sustainability and responsible business practices to mitigate environmental harm.

In summary, globalisation has profound effects on economies, societies, and the environment. While it can promote economic growth and cultural exchange, it also poses challenges such as inequality, environmental degradation, and the need for international cooperation. The impact of globalisation varies widely depending on the specific context and policies of individual countries and regions.

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• Globalisation
• Deglobalisation
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IMF head projects slightly stronger global growth in 2024 and warns of potential long-term pitfalls

FILE - Kristalina Georgieva, Managing Director of the International Monetary Fund takes part in a panel discussion at the Annual Meeting of World Economic Forum in Davos, Switzerland, Jan. 17, 2024. Strong economic activity in the United States and emerging markets is projected to help drive global growth by about 3% in 2024, the International Monetary Fund chief said Thursday, below the annual historic average and a warning sign about potential lackluster performances through the 2020s. (AP Photo/Markus Schreiber, File)

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WASHINGTON (AP) — Strong economic activity in the United States and emerging markets is projected to help drive global growth by about 3% this year, the International Monetary Fund’s chief said Thursday, below the annual historic average and a warning sign about potential lackluster performances through the 2020s.

“Without a course correction, we are indeed heading for ‘the Tepid Twenties’ -– a sluggish and disappointing decade,” said Kristalina Georgieva, the organization’s managing director, in announcing the economic projection and longer-term outlook.

She said global economic activity is weak by past measurements and debt is up, posing major challenges to public finances in many parts of the world.

“The scars of the pandemic are still with us. The global output loss since 2020 is around $3.3 trillion, with the costs disproportionately falling on the most vulnerable countries,” she said.

The anticipated growth rate of just more than 3% is slightly above last year’s projection. The historic average is 3.8%.

“Global growth is marginally stronger on account of robust activity in the United States and in many emerging market economies,” Georgieva said.

The IMF and its fellow lending agency, the World Bank, will hold their spring meetings next week in Washington, where finance ministers, central bankers and policymakers will discuss the global economy’s most pressing issues.

The annual gathering will take place as several conflicts threaten global financial stability, including Russia’s invasion of Ukraine and the war between Hamas and Israel in Gaza.