Globalization: Changing The World's Economy Essay

2539 words - 11 pages

Globalization: Changing the World’s Economy
Globalization is the process by which the interaction of economic, political, cultural, and environmental systems across geographical borders are accepted as part of a more integrated and interdependent world economy. Some people view it as an exchange of people, goods, ideas, capital, and cultures across national borders linked by the development of modern technologies, such as the Internet (Globalization, 2007). In the last few decades, the advantages of globalization have been debate because some argue that it is good for the world economy, while others argue that it can cause catastrophic economic and environmental consequences. Although ...view middle of the document...

Although some opponents of globalization argue that it can increase income inequality in some developing countries, overall, globalization improves countries’ economic growth through international trade and foreign investment. In the last few decades, the creation of international trade agreements by the GATT, now known as World Trade Organization (WTO), has allowed the liberation of markets and the reduction in trade protection. Consequently, trade barriers, such as tariffs and non-tariff, in goods and services have been reduced significantly, allowing countries to increase the access of their companies to larger and more diverse international markets. (Globalization, n.d.). Moreover, by participating in international markets with free trade, countries can specialize in the manufacture and export of some products. So that other countries can import products that are manufactured more efficient than they could domestically. For example, the United States specializes in the production and exportation of commercial jet aircrafts because it has abundant resources that are necessary for their production, such as a skilled labor force and advance technology. However, it makes sense for them to import textiles from China since China produces textiles more efficiently (Hill, 2009).
Similarly, the Bahamas is a prime example of the importance of globalization. Since the Bahamas does not have enough the natural and physical resources to sustain its population, it relies heavily on the importation of products and specializes in tourism and tourism-driven construction, which make approximately 60 percent of its GDP (The Economy, n.d.). Although some countries are capable of producing all the goods required to sustain its population, they benefit from international trade as well certain goods from specialization. According to Hill (2009), the adoption of open economies and the implementation of free trade will lead nations to achieve higher economic growth rates than those nations who do not.
Furthermore, the liberation of markets have led to an increase in the movement of capital through foreign investments and other factors of production. Some critics argue that foreign investment in host countries hurts the economy of the home country because many people lose their jobs when the production shifts abroad. However, foreign investment allows companies to move into countries where the production and labor costs are lower, allowing companies to focus on scale economies (unit cost reductions related to a large scale of output).Also, foreign investment forces domestic market to produce more efficiently because of the pressure of competition (Hill, 2009). Therefore, consumers can enjoy a wider variety of domestic and imported goods at lower prices. Furthermore, multinational corporations create jobs in the host country, usually developing countries, because they demand intensive unskilled labor. Another advantage for host countries is the spread of...

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