What is Globalisation? Advantages and Disadvantages of Globalisation

In international economics, globalisation can be defined as the web of relationships between the economies worldwide through international investments and trade. While the history of globalisation travels back to ancient times, the modern era started in the early nineteenth century.

The opposite of globalisation — also known as free-market trade across the borders — is protectionism. This economic policy attempts at protecting domestic businesses from foreign competitions and labour markets, generally by imposing trade barriers such as tariffs.

Advantages of Globalisation

As a result of globalisation, people all over the world enjoy many advantages.

Transfer of Technology: The transfer of technology all over the globe is excellent for us. Any country can choose to borrow the technology by the agreement and implement it in their country for the overall development. People can easily be in touch with people from any part of the world by using advanced technologies at a minimal cost, effort, and time.

Better Services: Globalisation always offers us better services. With technological advancement, services such as electricity supply, water supply, internet, mobile networking, and other services have become more accessible and better than before. Easy internet access throughout the world is also the contribution of globalisation.

Standardisation of Living: The critical process of globalisation is the integration of economics, enabling countries to fight against problems like poverty and improve people’s living standards. Many researchers have stated that when any country opens up its trade to the world, its economic growth rate is faster, and the living standards tend to improve.

Development of Infrastructure: Technological advancements and their spread throughout the globe help in improving the country’s infrastructure. Governments are more enabling of delivering their services to the citizens. Development of the infrastructure implies the overall development of the respective countries. Here it is essential to say that the economic growth and development of a country’s infrastructure are compatible with each other.

Foreign Exchange Reserves: By globalisation, countries are able to build foreign exchange reserves due to the international financial flows.

Economic Growth: Globalisation requires optimum utilisation of the resources wherein the deficit resources are procured, and surplus resources are exported to various other countries. This guarantees overall economic growth.

Contribution to the World GDP Growth Rate: Globalisation guarantees the contribution of each country to the world GDP growth rate.

Disadvantages of Globalisation

The globalisation keeps doing well to us is not always true. It impacts our lives in a multidimensional manner. So, it has a few disadvantages as well.

Growing Inequality: Globalisation increases inequality throughout the globe by expanding specialisation and trade. Even though profession and trade amp up the per-capita income, it might cause relative poverty.

To explain this, we will use an example. All dominated MNCs around the globe are located in the US. All these businesses are buying cheap labour from developing or underdeveloped countries for product manufacturing or assembling. India, China and Africa are significant examples of this. It increases the employment rates of these countries, but they are far behind lagging relatively developed countries. Again, these companies coming to such countries for cheap labour also deprive the country’s people of working. So, it showcases that relative unemployment and poverty are being created in these developed countries as well.

Increasing the Unemployment rate: Globalisation is increasing the unemployment rate. Where individuals are getting jobs, how is this possible? Here is the explanation.

Globalisation needs higher-skilled workers at cheaper rates. But countries where the Institutions are comparatively weaker, aren’t capable of producing highly skilled workers. As a result of which, the unemployment rates are increasing in these countries.

When foreign companies invest primarily in developing countries, they hire workers from that country. In some scenarios, their wages are significantly lower compared to the other developed countries – the demand for such employees in developed countries is much lower. Moreover, along with the emergence of the Global Economic Crisis, jobs are at risk.

Trade Imbalance: The trade balance refers to the value ratio between the country’s export and import services and goods. Due to globalisation, any country can trade to any part of the globe.

In some instances, the developing countries are highly dependent on developed countries for import goods, but the export capabilities are lower than the imports. The imbalance in trade has been taking place. So, trade imbalance balances values between any country’s import and export of goods and services. It is also known as trade deficits. Trade imbalance might be an increase in the developed countries by the competitors.

Environmental Loots: The pace at which industrialisation is increasing is an outcome of globalisation. Industrialisation encourages economic growth. However, it harms the environment. Globalisation destroys nature, and it hurts humans very severely.

Let’s try to understand the scenario with the example. Coca-Cola world’s leading soft drink company. This company consumes a large amount of water to make soft drinks. In a north Indian state, Uttar Pradesh, a bottling plant of Coca-Cola, was shut down by the government order due to the local farmers’ too much water usage.

In Kerala, a south Indian state, the Coca-Cola plant was also shut down due to water pollution supplied to the local communities. Also, MNCs are using the natural resources from different countries extensively for personal gain. Various chemical industries are highly harmful to the health of humans by polluting the soil, water, air.