Globalization’s definition is the interaction between people, businesses and governments across the globe. Advancements in transportation and technology make this easier than ever before. Businesses have more opportunities and a broader customer base through globalization. Globalization has positives and negatives for economies.
Definition of Globalization
Globalization is the transmission of products, technology, information and jobs across the globe. The definition of globalization refers to the interdependence of nations through free trade in economics. International trade, investments, information technology and outsourcing jobs interlock countries together in globalization.
The definition of globalization goes back centuries. Humans had it before they realized what it was. Explorers and traders traveled miles for goods to bring back to their home countries. Since the 1990’s globalization has accelerated due to advancements in technology and public policy. The following paragraphs will explain the benefits and drawbacks of economic globalization.
Globalization’s Definition in Economics
Economics see positive effects from globalization including Foreign Direct Investments (FDI), technological advancements and economies of scale.
Foreign Direct Investments
FDI is when a business in one country has an entity in another country that controls its ownership. FDI helps the economic growth of a country. Countries receive foreign investment help in FDI. It increases employment opportunities because new industrial units are built in foreign countries. It brings new knowledge and technology to other countries.
Globalization advances technological advancements. Trading goods, product development, investing are more efficient worldwide because of technology. The definition of globalization includes the sharing of ideas. Technology makes it possible for information to transmit at any time, any place. Globalization’s definition means ideas cross borders of countries with ease.
Economies of Scale
Economies of scale happen when a company reduces cost and production increases. Since the production cost of a product decreases, the consumer price is decreases. An economy then grows when there is more demand for a lower price good or product. Governments, nonprofits and consumers benefit from economies of scale. However, economies of scale can close a smaller business for good. Larger businesses are able to lower costs easier than a smaller business.
Globalization’s definition generally has a positive undertones. There are some drawbacks to globalization have a catastrophic effect on the world.
Increased competition leads to fluctuating prices. Companies may lower prices to gain more customers. Lower prices lead to less profit, which often leads to worker layoffs. There are always winners and losers in competition. Businesses look for ways to cut costs. This may come through by automating jobs, improving efficiency and employee layoffs. Information and technology are easily shared in globalization. A workforce is often replaced by technology. The workforce is a casualty of globalization. In developed countries, jobs are lost because companies employ a workforce in a developing country for cheaper. International companies are also often blamed for unfair working conditions, worker exploitation, slave labor wages and more.
When a company decides to build its products or technology overseas, it puts them at a risk to have their intellectual property stolen. International corporations have the potential to influence political decisions. As international companies gain power, many perceive them as a threat to take over foreign governments. Corporations rule the world in this scenario.
Throughout the world there are major discrepancies in wealth. According to the United Nations (UN) development program, 20% of the world’s population have 86% of the world’s wealth. The poorest 80% of the world’s population have 14% of the world’s wealth. One of globalization’s biggest complaints is that the rich get richer and the poor get poorer.
Deadly diseases spread at an alarming rate. HIV/AIDS, COVID-19, Swine flu and many others spread quickly to all parts of the world. People and products travel across the globe, coming in contact with diseases.
The definition of globalization assumes that the world will work together. Countries will cooperatively work to end diseases, conduct fair trade and enforce fair labor regulations
However, this is not always the case.
Globalization calls for strong leaders who will call out other countries when they cheat on trading. Some of the United State’s trading partners finagle their currencies. This increases their exports and decreases their imports. This is illegal under the World Trade Organization (WTO). World leaders need to recognize which countries are doing this. Then, enforce penalties.
Trade agreements need to be fair for all parties involved. Recent agreements like the South Korean Korus trade agreement took jobs from American workers. A trade agreement must be beneficial to all parties involved.
Globalization is Happening
Globalization is happening. It can’t be stopped. Information, technology and products move around the world with ease. FDI, economies of scale, and technological advancements have helped businesses expand in developing countries. Economic development does bring issues such as unemployment issues, unfair working conditions and disease transmission. The world needs firm leadership to deescalate the problems globalization causes.