Globalization and it's effects


Globalization refers to the spread of the flow of financial products, goods, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade .

Globalization is always important for any of the country because every country need to grow financially as well as in other matters also . Now people are aware of this process and tend to increase their knowledge about globalization basically it is beneficial for the country's people as well as for the country.

Benefits of globalisation

1. Socially, it leads to greater interaction among various populations.

2. Culturally, globalization represents the exchange of ideas, values, and artistic expression among cultures.

3. Globalization also represents a trend toward the development of a single world culture. 

4. Politically, globalization has shifted attention to intergovernmental organizations like the United Nations (UN) and the World Trade Organization (WTO).

5..Legally, globalization has altered how international law is created and enforced.

Effects of globalisation

Positive effects of globalisation 

1. Foreign Direct Investment

Foreign direct investment (FDI) tends to grow at a much greater rate than world trade does. This can help to boost technology transfer, industrial restructuring, and the growth of global companies.

2. Technological Innovation

Increased competition helps inspire new technology development. The growth in FDI helps improve economic output by making processes more efficient.

3. Economies of Scale

Increased global trade enables large companies to realize economies of scale. This reduces costs and prices, which in turn supports further growth. However, this can hurt many small businesses trying to compete at home.

Negative effects of globalisation 

1. Interdependence

Interdependence between nations can cause local or global instability. This occurs if local economic fluctuations end up impacting a large number of countries relying on them.5 For example, in 2020, Ukraine was the fifth larger exporter of wheat. When Russia invaded the country, it threatened food supply chains for countries like Pakistan, Lebanon, and Vietnam that import Ukranian wheat.6

2. National Sovereignty

Some see the rise of nation-states, global firms, and other international organizations as a threat to sovereignty. Ultimately, this could cause some leaders to become nationalistic.7

Two prominent examples of the rise of nationalism as a pushback to globalism include the 2016 election of Donald Trump in the U.S. and the British vote to leave the European Union (known as "Brexit"). These events contributed to the anti-globalization movement and stoked anti-immigration sentiments.

3. Equity Distribution

The pros of globalization can be unfairly skewed toward rich nations or individuals, creating greater economic inequalities.8 For example, in the wake of NAFTA, the average net weekly pay for maquila workers was $55.77 in 1998—less than $2 more than the average cost for basic needs in the maquiladora trade zone.9

4. Protectionism Through Tariffs

The 2008 economic crisis led many politicians to question the merits of globalization. In 2007, worldwide capital inflows accounted for more than 20% of the world's GDP. By 2019, this figure fell to less than 5%.11

The U.S. and Europe introduced new banking regulations that limited capital flows. Many countries put in place tariffs to protect vital industries at home. In the 1990s, the U.S. placed a 127% tariff on Chinese paper clips.12 And Japan has levied tariffs on imported rice as high as 778%.13

5. Future Outlook

Some economists suggest that businesses are not investing across borders to build capital infrastructure. They argue that companies seek countries with low taxes. Some form of globalization may be inevitable in the long run, but the historic bumps spurred by economic crises suggest that change is the only constant.

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