The advantages and disadvantages of globalisation

Created by: becky.65
Created on: 30-04-18 19:51


	The advantages and disadvantages of globalisation
	Advantages Economic growth - economic growth for all countries will improve as a result of globalisation due to the gains from trade made possible by specialisation, and the increased output generated from more competitive market structures. Whilst there will be groups of losers, the benefits to consumers of lower prices and higher quality will outweigh the costs experienced by stakeholders in domestic industries that close down. Equality and inequality - there has been a reduction in inequality between countries. The value of the Gini coefficient for the world has fallen, relative to 2000 and only 15% of the population lived in absolute poverty in 2015, in comparison to 50% in 1975. India and China have also started to catch up with Western economies and now developing economies produce more of GDP than developed economies. Increase international migration - net flows of migration from developing to developed countries has brought significant economic benefit to the migrants themselves as they gain access to societies whose political organisations, technologies, culture and relative lack of corruption makes higher living standards possible. More migrants have also made indigenous populations have more positive views of migrants, evidence suggests. Increased capital mobility - the ability of financial capital to move around the world quickly and cheaply provides a clear benefit to its owners as they can week out its most profitable uses. It also provides a strong benefit to entrepreneurs everywhere who are no longer reliant on the ability of their own country to save money in the banking system, and thereby make funds available.	Disadvantages Economic growth - individual groups within each economy will lose out, particularly in the short term. These will be all the stakeholders in domestic industries that dwindle away under overseas competitive pressures, such as low-to-medium-skill manufacturing in the West, who have lost out to Eastern European workers and Mexicans. The extent of these costs will depend on the speed with which affected workers can retrain in other areas. Shareholders will do less well than consumers as increased competition drives prices down. Equality and inequality - globalisation does not necessarily reduce inequality within each country. The groups of people who lose out may actually worsen inequality, especially in the short-term. The rapid technological change, though not necessarily linked to globalisation, is worsening inequality in the short term as the top 1% of income earners pull further ahead of the rest Increased international migration - at an economic level, the extent to which migration represents a net benefit depends on the skills the migrants bring: hence the reason why most countries allow migration to cover specific skill shortages. Migration has an impact on the host's country culture. The rise of anti-immigration parties across the world suggests a significant number of voters believe that this impact becomes adverse Increased capital mobility - the financial crisis of 2008-9 could have resulted in the collapse of the banking system world-wide. The more the financial sector becomes globally integrated, the greater risk that a bank failure in one country will pull down banks in other countries whom they owe money. The great fear is that a 'domino effect' could one day pull down the entire global financial sector.
	Evaluation Globalisation has brought both advantages and disadvantages across the globe and across stakeholders. Standards of living are vastly superior to what they were and globalisation is bringing these benefits to more and more of the world's population. In general, poor countries are becoming richer faster that rich countries are, thereby narrowing inequality. However, technological advance and globalisation will create groups of economic losers, as is inevitable in any process of dynamic change. Although, so far, economic benefits have vastly outweighed the costs. Rapidly increasing standards of living across the globe and the possibility of the elimination of absolute poverty within a generation are immense prizes which would not have been possible without the process of globalisation.

The advantages and disadvantages of globalisation

Advantages

Economic growth - economic growth for all countries will improve as a result of globalisation due to the gains from trade made possible by specialisation, and the increased output generated from more competitive market structures. Whilst there will be groups of losers, the benefits to consumers of lower prices and higher quality will outweigh the costs experienced by stakeholders in domestic industries that close down.
Equality and inequality - there has been a reduction in inequality between countries. The value of the Gini coefficient for the world has fallen, relative to 2000 and only 15% of the population lived in absolute poverty in 2015, in comparison to 50% in 1975. India and China have also started to catch up with Western economies and now developing economies produce more of GDP than developed economies.
Increase international migration - net flows of migration from developing to developed countries has brought significant economic benefit to the migrants themselves as they gain access to societies whose political organisations, technologies, culture and relative lack of corruption makes higher living standards possible. More migrants have also made indigenous populations have more positive views of migrants, evidence suggests.
Increased capital mobility - the ability of financial capital to move around the world quickly and cheaply provides a clear benefit to its owners as they can week out its most profitable uses. It also provides a strong benefit to entrepreneurs everywhere who are no longer reliant on the ability of their own country to save money in the banking system, and thereby make funds available.

Disadvantages

Economic growth - individual groups within each economy will lose out, particularly in the short term. These will be all the stakeholders in domestic industries that dwindle away under overseas competitive pressures, such as low-to-medium-skill manufacturing in the West, who have lost out to Eastern European workers and Mexicans. The extent of these costs will depend on the speed with which affected workers can retrain in other areas. Shareholders will do less well than consumers as increased competition drives prices down.
Equality and inequality - globalisation does not necessarily reduce inequality within each country. The groups of people who lose out may actually worsen inequality, especially in the short-term. The rapid technological change, though not necessarily linked to globalisation, is worsening inequality in the short term as the top 1% of income earners pull further ahead of the rest
Increased international migration - at an economic level, the extent to which migration represents a net benefit depends on the skills the migrants bring: hence the reason why most countries allow migration to cover specific skill shortages. Migration has an impact on the host's country culture. The rise of anti-immigration parties across the world suggests a significant number of voters believe that this impact becomes adverse
Increased capital mobility - the financial crisis of 2008-9 could have resulted in the collapse of the banking system world-wide. The more the financial sector becomes globally integrated, the greater risk that a bank failure in one country will pull down banks in other countries whom they owe money. The great fear is that a 'domino effect' could one day pull down the entire global financial sector.

Evaluation

Globalisation has brought both advantages and disadvantages across the globe and across stakeholders. Standards of living are vastly superior to what they were and globalisation is bringing these benefits to more and more of the world's population. In general, poor countries are becoming richer faster that rich countries are, thereby narrowing inequality. However, technological advance and globalisation will create groups of economic losers, as is inevitable in any process of dynamic change. Although, so far, economic benefits have vastly outweighed the costs. Rapidly increasing standards of living across the globe and the possibility of the elimination of absolute poverty within a generation are immense prizes which would not have been possible without the process of globalisation.

Get Revising

The advantages and disadvantages of globalisation