The Good, Bad, And Ugly Side Of Globalization
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For most of the period since World War II, globalization posted steady increases. But today, we find ourselves in an age of ambiguity. Some exult about “hyper globalization,” 1. With one source predicting that global flows could triple by 2025. 2. But others worry that the “age of globalization” that defined the last few decades may have ended and started going into reverse. This ambiguity adds to the importance of measuring globalization. GLOBALIZATION:
David Held et al., defined globalization as a “transformation in the spatial organization of social relations and transactions—assessed in terms of their extensity, intensity, velocity and impact—generating transcontinental or interregional flows”. Globalization, the increasing integration and interdependence of domestic and overseas markets, has three sides: the good side, the bad side, and the ugly side. Good Side of Globalization:
The opportunities and efficiencies open markets create, depicts the good side of globalization. This facilitates good communication in the business world. It allows the business to communicate effectively and efficiently with the customers, traders, partners and suppliers across the globe. This helps them to manage their inventories and distribution network. The domestic players can now sell their products in foreign markets with ease as in their home country. For example Samsung can sell its mobiles in India with the same ease as in Korea. Similarly Apple, Intel and Cisco can sell their high tech gear with the same ease in Tokyo as in New York. The easy credit and rising leverage are also considered to be good side of globalization. The flow of money is easy across the boundaries of the countries, thanks to globalization. The creditors are not in a position to differentiate between good and bad borrowers, which results in an increase in the aggregate demand, thus setting the world economy into a vicious cycle of income and employment growth.
Bad Side of Globalization:
The bad side of globalization is all about the new risks and uncertainties brought about by the high degree of integration of domestic and local markets, intensification of competition, high degree of imitation, price and profit swings, and business and product destruction. Corporations that previously have been enjoying the benefits of globalization, now face unstable and unpredictable demand and business opportunities and their products quickly become commodities, leaving them little or no pricing power and under constant pressure by new competitors that undermine profitability. As everything in the world, Globalization along with its good side also has a bad side. Some of the negative sides of globalization are:
High degrees of integration of domestic and local markets which brings new risks and uncertainties. Intensified Competition.
High degrees of imitation. Instability in the profits and price which leads to business and product destruction. The firms which previously enjoyed high range of profits due to globalization are now facing the problem of unstable & unpredictable demand and business opportunities. The bargaining power of consumers has now increased, because of information symmetry, which turned the products of the firm into commodities. Thus leaving them little or no pricing power and under constant pressure by new competitors that undermine profitability. Globalization has adversely affected the balance of payments position of most of the underdeveloped countries. These countries needed capital goods for their development so they relied heavily on import of foreign goods.
The decrease in the exports and the constant demand in the imports required high foreign exchange. The third world countries export mostly primary commodities. Due to the bad weather, slow productivity growth there was a decline in the investment in the agricultural sector. If government stimulates agriculture exports, it will adversely effect on balance of payments. Tight credit, deleverage, and declining money flows across local and national boundaries are also considered as the bad side of globalization. This is because the creditors will tighten the credit to both good and bad borrowers. This causes a decrease in the aggregate demand in the countries. This will further lead the world into a vicious cycle of reduction in income and employment.
Ugly Side of Globalization:
The ugly side of the globalization can be seen when the nations across the globe devalue their currencies in order to escape from the vicious cycle of income and employment. These countries also raise their trade barriers, which puts an end to globalization and leads to trade wars, as was the case in 1930s. Effects in Application
The trend with globalization in coordination with the domestic economy is interconnected to the other countries. That is, if one country is struggling they’ll bring down the economy of another country slightly, but if many countries are struggling then there can be a drastic downward spiral. The benefit to this interconnectedness is just as countries’ economies go down together at a magnified rate; they also tend to come back up together during a recovery.
To say definitively that globalization is good or bad is nearly impossible to say without pointing out the benefits and the downfalls of globalization. Ultimately globalization appears to help countries that dip down temporarily, but in turn through the interconnectedness hurts countries that may be doing well both economically and on a social and environmental level.