The concept of globalization is inevitable and, therefore, it affects almost every aspect of human existence with a considerable influence on three major areas, including economic, social, and political dimensions (Olimpia and Stela 29). Economically, countries and trade regions in the world are increasingly becoming interconnected (Olimpia and Stela 31; Spooner 4; Naghi and Para 2). Thus, political and geographical boundaries/distances are reducing in their influences on the world economy, especially with drastic developments in technology and transport infrastructural systems.
Each country is striving to make good out of its international connections and augment its local economy. As such, the global economy is significantly influenced. It is argued that some authors face challenges in expressing the effects of globalization on the economy, the major ones of which are apparent (Olimpia and Stela 29). Most of the effects of globalization could be categorized into negative or positive. For instance, globalization has enhanced the efficiency with which a citizen in the US would get products from other countries in the world (Lee 133; Moghaddam and Redzuan 55). On the other hand, globalization is linked to enhanced economic inequalities manifested in the world, which significantly affect developing countries.
This paper describes what globalization is while discussing its positive and negative influences on the world economy. As such, globalization is portrayed as both a positive and a negative concept in its influences on the global economy. Arguments used in the paper are based on information from peer-reviewed journal articles, scholarly books, and other pertinent and credible data sources.
What is Globalization?
Globalization has been one of the most popular topics in world economics. As such, numerous scholars and pundits have put considerable effort into it. With the intensified focus, different viewpoints and approaches to what globalization is existed (Moghaddam and Redzuan 54). A critical question regarding globalization would be whether globalization is a process or a final product (Spooner xvii). As such, it is worth evaluating whether globalization is achievable.
It is argued that globalization is founded on the development of transport and communication systems over a long period (Lee 111). It is asserted that globalization could be older than 5000 years (Naghi and Para 1). The transformation has been associated with active economic opening policies where countries lower tariffs and barriers. The acceleration of economic globalization became more evident in the mid-20th century (Lee 111; Naghi and Para 1). Nevertheless, different views regarding globalization are provided.
One perspective on globalization is an unstoppable integration of markets, countries, and technology with market capitalism spreading to almost every region globally (Moghaddam and Redzuan 54). Moreover, globalization could be viewed as changes in the international structure that result in decreasing national boundaries and increasing economic interrelations (Moghaddam and Redzuan 54). The changes, which include but are not limited to foreign direct investment, liberalization, expansion of markets, the formation of new financial organizations, and privatization in different economies globally, are evident.
Most definitions and descriptions of globalization have the elements of intercountry impacts with citizens being able to buy/sell goods/services and move the capital from and to any part of the world, liberalization of markets, and the opening of local markets to the world (Juergensmeyer 3; Moghaddam and Redzuan 55; Lee 111). It is worth noting that globalization affects other dimensions of human life including social and political aspects and, therefore, the definition is broadened further.
It is imperative to indicate that all the descriptions and definitions of globalization are based on the world economy and international trade (Lee 110). As such, globalization as a trend highly influences the global economy. While some experts link globalization to the advancement of economic development and poverty reduction, others link it to critical economic problems.
Moreover, it is notable that globalization is connected with the creation of global customers and global products. Some of the most notable global products include Coca-Cola, Mercedes, Microsoft, and Toyota among others (Naghi and Para 2). Therefore, there are needs for companies to have global marketing strategies.
Positive Effects of Globalization on the World Economy
Globalization as a positive phenomenon has attracted the attention of many researchers and, therefore, there are numerous literature materials on the topic. Most pieces of literature carry out single country studies while others take more than one country’s studies. Notably, the effects of globalization on single countries have net effects on the global economy.
One study examined the effects of globalization on eight countries, including Brazil, China, India, the Korean Republic, Malaysia, Singapore, Iran, and Turkey using the aspect of foreign direct investment (FDI) about the GDP of these countries (Moghaddam and Redzuan 55). It is worth noting that FDI is a significant indication of economic globalization and, therefore, it has a significant impact on the world economy. The authors noted that FDI has had significant increases in the eight countries since the 1970s. Among them, it was evident that positive FDI resulted in positive GDP, while negative FDI resulted in reduced GDP. As such, it is evident that local resources have crucial limitations and cannot significantly contribute to economic development (Moghaddam and Redzuan 56). Therefore, there is a need to attract multinationals and global companies and international investment to local developing economies. Free trade, privatization, and an inflow of FDI are, hence, important elements in global economic growth. Moreover, it was established that globalization has positive impacts on importation and exportation, which significantly increase global economic growth (Moghaddam and Redzuan 56). As such, globalization is a vital element in the global economy.
A journal article focused on the effect of globalization on marketing. Companies are continually extending sales, supply, and production operations to the global market while widening their structures to incorporate global economic dimensions and, therefore, obtain and transmit information from different parts of the world (Naghi and Para 2). As such, new and broader markets are reached and competition is intensified. Therefore, robust marketing strategies are necessary.
Globalization has positively influenced marketing strategies in several ways. Firstly, there are prospects of generating crucial economies of scales through standardization of marketing, especially in packaging and communication (Naghi and Para 2). Secondly, globalization has significantly increased the speed of marketing since multinationals and companies with global markets can centrally strategize marketing in introducing new products globally within twelve months (Naghi and Para 2). Thirdly, globalization has enhanced the processes of the creation of unique global brands and worldwide companies, which has significant positive impacts, especially on the reduction of communication costs through duplicating strategies in similar markets/consumers (Naghi and Para 2). Next, companies can expand their markets and, therefore, increase sales. Finally, global companies can easily access new resources and financing. It is worth noting that the five advantages are linked to growth in the global economy through improving standards of living in developing and developed countries. Also, globalization’s influence on marketing changed economies’ orientations, especially Communism.
Another study was done to investigate the effects of globalization on economic growth in Romania. It was revealed that there are positive statistical impacts of globalization on the single economy, which is integrated into the global economy (Olimpia and Stela 38). In comparison to other dimensions of globalization, the economic aspect was the most influential. Economic globalization had critical impacts on the Romanian GDP per capita (Olimpia and Stela 38). Moreover, there was a positive link between overall national development and globalization. An additional suggestion was made to the effect that Romania should globalize further, especially through more trade liberation and export orientation for it to realize optimal economic growth and contribute to the global economy.
Negative Effects of Globalization on the World Economy
Although countries throughout the world are positively affected by globalization, they suffer several drawbacks. It is worth noting that the negative effects of globalization on the world economy are not uniform in all countries and are more intense in the third world economies.
One author asserts that global economic inequality between the North and the South witnessed during the 1970s/1980s could be attributed to globalization (Sharma 25). It is argued that the economic gap would have been widened if the economies in the South were more egalitarian (Sharma 24). Further, the author links recent wage inequalities in the US to globalization, especially with the liberalization and with the increased immigration of unskilled workers from the third world economies (Sharma 25). Moreover, the author associates globalization with inequalities in East Asia and Latin America.
Although liberalization has resulted in a sevenfold increase in the global income and real GDP since the mid-20th century, developed countries have had the upper hand and accrued more benefits about developing countries. As such, the economic gap has been widened by globalization with falling or stagnating economies, especially in Africa.
It is imperative to note that inequalities in the global economy are associated with increased levels of poverty in the developing world. Another author adopted the new Keynesian perspective to indicate that inequality in wealth distribution would negatively affect economic growth (Lee 114). As such, governments in third world countries may face difficulties in managing local economies due to aggravated macroeconomic instabilities associated with globalization. With stagnation in third world countries, therefore, the world economy will experience wider inequality gaps.
In another research, it was revealed that positive economic growth from globalization is associated with countries with skilled and educated labor force and properly developed systems (Samimi and Jenatabadi 6). As such, globalization is asymmetric to developing countries and, therefore, it has negative effects on the global economy.
Although some theorists, including Hirsch and Thompson, consider globalization a myth, it is a perfect representation of the triumph of classism as advanced by theorists such as Adam Smith, David Ricardo, and Locke (Sharma 21). Nations and economies are opening up to global economics, liberalism, and eliminating national boundaries. This was heightened by the invalidity of Keynesian prescriptions, especially on the aspect of public intervention and state-assisted capitalism in the 20th century.
Globalization has significantly influenced the global economy in positive ways. The emergence of global companies increased FDI (and the corresponding increased GDP/ standards of living), contributed to the ease in exportation/importation and the growth of different economies in the world as a result of liberalization (Lee 111; Sharma 21). Nevertheless, globalization has considerable negative effects on some economies, especially in third world countries. It is linked to intensified income inequalities and poverty in Africa, South America, and some parts of Asia.
Therefore, globalization could be considered to have both negative and positive effects on the global economy. However, it is worth noting that the negative effects of globalization could be reduced. Notably, even third world economies cannot evade globalization. As such, policies to mitigate the negative effects of globalization should be formulated and enacted.
Globalization is a significant aspect of the world economy. It has been part of the global economy for a long period with critical intensity witnessed in the 1970s and the 1980s. During this period, there were significant changes in world economies as postulated by theorists such as Adam Smith and David Ricardo. The economic modifications resulted in reduced impacts of local governments on economies. As such, market liberalization, intercountry integrations, global products/brands, and global consumers have become key aspects of the global economy.
Globalization has had remarkable positive effects on the world economy. For instance, increased FDI in local economies has resulted in growth in GDP in most countries globally. Moreover, globalization is linked to sevenfold growth in global real income and GDP. On the other hand, globalization is liked to inequalities and poverty, especially in developing countries. Considering its inevitability, policies must be formulated to address negative effects, especially wealth inequalities, and poverty experienced in developing economies.
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