The past two weeks we looked into the threats of an international trade war as result unilateral hiking of tariffs, while we also looked into protectionism as compared to free trade. We concluded that although the hiking of tariffs by the USA seems to have been made with a WIN-LOSE mentality, most likely all affected by such measure may lose, including sectors and workers in the country that was supposed to gain by the move. Whether we like it or not, we live in a globalized world, in which economies have become interdependent as compared to dependent on each other. There are arguments both for and against globalization, which is often blamed for workers losing their jobs as their input is replaced by cheaper manufacturing elsewhere. Most consumers will not think about this while buying their clothes for example but let us have a closer look at both sides of the globalization coin.
Firstly, globalization makes more goods and services available to more people, often at lower prices. If you have disposable income and you’re buying a product that comes from abroad, you’re benefiting from globalization to some extent. Business owners also benefit by having access to a bigger market for their goods and services.
The argument that globalization has lifted people in developing countries out of poverty is somewhat controversial because opinions differ as to the quantity – and quality – of the jobs created by globalization. But the general thinking is that globalization has increased job opportunities in capital-scarce, labour-rich countries, i.e. emerging economies.
Globalization is also said to have increased cross-cultural understanding and sharing. A globalized society boosts the rate at which people are exposed to the culture, attitudes and values of people in other countries. That exposure can inspire artists, strengthen ties between nations and dampen xenophobia. Globalization might also lead to more cultural homogeneity if people’s tastes converge. If everyone wears jeans, learns English and watches Hollywood movies we may lose precious cultural practices and languages. Some critics of globalization worry that it’s creating a monoculture.
Art and culture aren’t the only things that spread more easily in a globalized society. The same goes for information and technology. As examples, see the rise of mobile banking or the practice of microlending. Civil society organizations can look to other countries for inspiration and good ideas can spread more easily.
On the flip side of the coin we see that when established economies compete with less-developed economies, their big advantage is their access to capital, whereas less-developed economies’ big advantage is their cheap labour.
Globalization increases the returns to capital in rich countries like the U.S. and decreases the returns to labour in those same countries. In other words, low-skill jobs in a developed economy can disappear because of globalization. The result may be a decrease in the inequality between countries but an increase in the inequality within countries.
Globalization can also be an opportunity to spread values and practices like environmentalism and labour rights throughout the world. In practice, that spread is slow and imperfect. For example, rather than exporting the labour protections it abides by in Europe, a company might follow lower standards in, say, Bangladesh.
Some argue that globalization has caused a “race to the bottom” in which companies actively seek the countries with the weakest labour and environmental protections and the lowest wages. And while globalization has increased the flow of goods, services and capital, there are still plenty of tax havens, meaning that much of the value added by globalization is not captured and redistributed by governments.
It is also said that globalization has empowered multinational corporations at the expense of governments and citizens. This reduces state sovereignty and citizens’ ability to hold their leaders accountable for conditions in their countries. It’s another reason that labour and environmental protections are harder to enforce than many critics of globalization would like. Multinational corporations may also lobby for favourable provisions in trade agreements.
In conclusion, supporters and opponents of globalization generally agree that the phenomenon has created winners and losers. Supporters argue that the benefits outweigh the drawbacks, while critics want to either improve the conditions of global trade or, in some cases, roll back globalization. What is your take?
Reference: The Pros and Cons of Globalization by Amelia Josephson