Jan 29, 2020 in Exploratory

The Effects of Globalization

The 21st century is characterized by the highest level of globalization in the entire human history. Various countries and regions are not isolated anymore but are dependent on one another. Although all people are aware of globalization and its role in the modern world, there are different evaluations of this process. The paper examines the positive and negative effects of globalization for both developed and developing countries and discusses the most probable future state of affairs. In general, globalization has altered the traditional social and economic framework, and the development of an effective international strategy may allow maximizing the expected positive effects.

Global exchange in such spheres as manufacturing industry, technologies, and ideas has become easier. Moreover, non-material goods such as ideas and technologies seem to play a more important role in the modern world. It is reasonable to specify the major positive and negative effects of globalization for both developed and developing countries. In the majority of cases, developing countries may be affected by globalization more severely due to the existing economic and technological gap between them and the developed countries. What are the major positive effects for developing countries? First, a large number of talented individuals from developing countries receive a broad access to global markets. In this way, they can apply their skills as well as increase their incomes considerably. Currently, it is mainly true for IT specialists, but in the future experts in all spheres may benefit from globalization. Second, many companies from developing countries can enter global markets utilizing their comparative advantage resulting from low costs of production. As the wages in developing countries are much lower than those in developed ones, many companies can expand their market share if they organize the production process properly. Third, many small businesses from developing countries can enter global supply chains and determine a proper position in the international division of labor.

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However, negative effects may also exist. First, the average income gap between developed and developing countries may continue to grow. Although some people may benefit from globalization substantially, the average standards of living may continue being low. Second, substantial market expansion of companies from developing countries is problematic because multinational corporations from developed countries control most capital and may develop effective response strategies. Third, developing countries may face problems related to the preservation of their unique culture and traditions.

Developed countries have different situations related to the major positive and negative effects of globalization. The first positive effect is more efficient global markets. It means that consumers will be able to satisfy their needs better and investors will have a wider access to investment options. In this way, the general effectiveness of the market mechanism will increase. The second positive outcome is higher competition and higher rates of technological progress. It is crucial for a long-term sustainability of all developed countries. The third positive effect is declining security risks. When all countries and regions of the world are connected with one another, they have fewer motives to become involved in military operations.

At the same time, some negative outcomes are also possible. First, additional risks may occur as economic problems in any part of the world will have a serious impact on other countries. Thus, the likelihood of new economic recessions and crises may increase dramatically. Second, some companies from developed countries will have to shift their operations to developing countries to reduce the average costs of production. It will have a serious impact on the national labor market and may decrease the domestic wages. Third, there is a possibility that a global monopoly will emerge and will control all stages of production and impose high prices on consumers. The global monopoly may also use its market power to maximize the revenues by reducing sales according to the elasticity of consumer demand.

Thus, globalization poses both considerable advantages and threats for the developed and developing countries. Although it is impossible to predict with an absolute certainty the future state of affairs, it is possible to make some assumptions. Modern countries will have to continue operating in the world as for them it is the only way of being effective and sustainable. For example, even Cuba (one of the most isolated countries) is beginning to integrate in the global markets actively. Therefore, globalization should be perceived as an objective necessity, and the main issue is to organize the production and global affairs so that it is beneficial for all countries.

In order to maximize the positive effects and minimize the negative ones, a global strategy should be developed. The governments and non-government organizations from developed and developing countries should participate in this process and make their proposals in a way that will balance the interests of all parties. One of the main points is to encourage global competition and prevent the emergence of monopolies. All companies from all countries should enjoy the same conditions and opportunities for their market expansion. No legal barriers or special privileges should exist in any country. Finally, only those methods of international trade that do not discriminate against any participants should prevail.

In conclusion, globalization is one of the key characteristics of the modern era. It affects both developed and developing countries. Some of its effects are positive, while others are negative. The impact of globalization is observed in such spheres as economics, culture, and social development. The international community should make all possible efforts to balance the interests of all parties involved and develop the global strategy that will satisfy the needs of entrepreneurs and consumers from different regions of the world. Equal social and economic conditions should be created for all market participants to maximize the positive synergic effect. Although the future economic dynamics are uncertain, there is a high probability that a successful strategy will be realized in the near future.

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