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Tam Pham (Landry Bado)
Dr. Gayle
English 0812
14 April 2015
Globalization and Its Positive Effects on the World Economy
Globalization has been carried out in many forms, in many different countries.
Globalization has brought a lot of people into contact with the world by declining the
barriers of the free flow of goods and services. This development has made the people
around the world to be connected to each other. Information and money flow quicker
than ever. Products produced in one town are available to the rest of the world. It
becomes much easier for anyone to travel, communicate and do business internationally.
While it is true that globalization widens economic inequality, poses threats on local
market, and increases abuses of workers in developing countries, other aspects must also
be taken into account. For instance, among the proponents of globalization Johan
Norberg notes that globalization has influenced the world through promoting the
ideology of human rights, freedom and democracy. Considering these ideas, globalization
should be seen on its positive side and how it influences the economic because
globalization encourages foreign investments, promotes free trade, and provides people
with better life quality.
Foreign investment takes place when investors located in one country decide to
invest directly into the economy of another country, or invest into holdings and securities
overseas. Foreign investments have numerous benefits upon the country it goes to. For
instance, Yuriy Gorodnichenko, Jan Svejnar, and Katherine Terrell (2010) point out that
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“With the opening of borders to trade and foreign investment, globalization brings
opportunities and pressures for domestic firms and emerging market economies to
improve their competitive competition” (194). Competitions are created among human in
order to encourage each other to reach a goal or thrive to make improvements. On the
same token, by having such a great opportunity, domestic manufacturing now has a
chance to sharpen itself so that it can stay in the marketing game with foreign
manufacturing. It is also an initial step for a domestic business to reflect itself and adjust
by raising their capabilities to be able to compete with other emerging markets around the
globe. Of course, there is always a price to a competition. As an example, Kenneth J.
Arrow (1962) has traditionally argued that competition is good for economy by providing
incentives for efficient organization of production, putting downward pressure on costs,
and making innovation flourished (619). Arrow has successfully counter opponents of
globalization by showing them a sense of a developed future.
In addition, foreign investment also brings with it different modern technologies
and helps making those accessible to people in poor countries. Investment in technology
guarantees continuous productivity growth and potential for inclusive and sustainable
industrial development. For example, De and Pal state that “... expansion of technology
from one region to another and thus would contribute to the growth process of various
countries across the globe” (1). Globalization plays a major role in this particular
scenario. It is seen as a bridge which connects different countries and contributes to the
growth of economy in that country.
Certainly, coming along with foreign investment is employment opportunities.
With this in mind, companies have taken advantage of economic globalization to spread
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their business which create thousands of jobs in foreign lands and bring that country into
the developing scope. As an illustration, Edmonds (2002) shows that “globalization can
enhance employment and earnings in developing countries because of inflows of foreign
investment or increases in the value of a developing country’s export products” (3). As a
result, if economic globalization is carried out properly, poverty will be eliminated
effectively in many countries in many continents such as Africa, South America, and
Asia. That is to say, people will be able to support their family financially.
Besides foreign investment, free trade is also brought to the development process
of a country by economic globalization. What free trade does is that it makes the access
to higher-quality and lower-priced goods easier which allows consumers to buy more and
make the most out of those products. This positive effect of economic globalization can
also be seen in many countries as well as the U.S. By way of example, Auer and Fischer
(2010) confirm that cheaper imports, particularly from countries such as China and
Mexico, have eased inflationary pressure in the U.S. and prices are held down by more
than two percent for every one-percent share in the market by imports from low-income
countries like China (491). What is more, free trade does require American workers and
businesses to adapt to the shifting demands of the worldwide marketplace. These
adjustments must be made in order to stay competitive in the market. Subsequently,
competition can also happen in free trade and is what fuels long-term growth of a global
business.
Further, free trade works with other markets processes to shift workers and
resources to more productive uses. This has allowed many industries to thrive efficiently.
According to Donald Boudreaux (2008), the outcome for this matter is higher wages,
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investment in such things as infrastructure, and a more dynamic economy that continues
to create new jobs and opportunities (55). That is to say, employment levels within any
country depend deeply on the freedom of that particular country’s labor market and on its
macroeconomic performance. Foreigners are similar to Americans: they produce and sell
goods only because they expect something with the same quality and value. Therefore,
there is nothing to fear when Americans or other countries’ citizens buy goods and
services from abroad people thereby contribute to a decline in the number of employment
opportunities.
Some scholars such as Giddens argues that economic globalization widens
economic inequality (22). However, recent research has suggested that free trade which is
a benefit of economic globalization can promote fairness in the global business industry.
For instance, Boudreaux (2013) states “When everyone follows the same rules-based
system, there is less opportunity for cronyism, or the ability of participating nations to
skew trade advantages toward favored parties. In the absence of such a system, bigger
and better-connected industries can more easily acquire unfair advantages, such as tax
and regulatory loopholes, which shield them from competition” (2). Indeed, Boudreaux’s
claim is true about fairness in free trade. If “the same rules-based system” does not exist,
the global market playground would not be in order as it is today. Thus, unfair
competition will happen and domestic firms will not be able to compete with
international businesses for profits.
Not only the positive factors of economic globalization can be seen in foreign
investment and free trade but in also can be seen in people’s quality of life. Regarding
quality of life, Sapkota (2011) shows that quality of life definitions emphasize degree of
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choice, meaning the greater the degree of choice, the higher quality of choice (8). In this
concept, workers are free to make their own choice on occupation even if they are laid off
from their old job. Notably, Thomas Grennes (2003) observes that “The new jobs created
did not all require the same skills or have the same location as the old jobs, and workers
had to acquire new skills and migrate to new locations to get new jobs” (543-544).
Although, everyone knows wages for unskilled workers fall, especially in developed
country, economic globalization helps those to manage layoff threats by acquiring
additional skills, which benefits the whole of society and themselves. By taking
advantage of this opportunity, worldwide workers have directly helped reducing global
income inequality.
With higher wages, people can eventually afford for their own life, from food to
travel. This claim is undeniable. For example, Norberg (2006) observes “Ten years ago,
when Nike was established in Vietnam, the workers had to walk to the factories, often for
many miles. After three years on Nike wages, they could afford bicycles” (228). This
example shows the positive side of economic globalization is taking place even at a poor
developed country such as Vietnam. Regarding this, it slowly raises the quality of
people’s life regardless where they come from and effectively erases poverty. In addition,
Norberg confirms that “It is not altruism that is at work here; it is globalisation” (228).
The major message of the finding of Norberg is that there should not be any fear of
globalization, in general. Instead of fearing, countries around the world should open their
commercial gate for economic globalization to positively make changes and serve as a
solid foundation for a country to develop.
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Clearly, from the overall analysis that foreign investment, free trade, and human
life quality are closely related to the positive perspective of economic globalization and
they should be considered to be the only side to see. In fact, they have successfully
contributed to the global economic growth. The debate over economic globalization has
eventually become a hot discussion topic that has yet to be fully resolved. While it is true
that globalization widens economic inequality, poses threats on local market, and
increases abuses of workers in developing countries, however, economic globalization’s
advantages has outweighed its disadvantages significantly. As a final point, critics always
suggest that better policies and proper governing will matter in making every element
significant in this globalization process.
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Work Cited
Arrow, Kenneth J. 1962. "Economic Welfare and the Allocation of Resources for
Invention." In The Rate and Direction of Inventive Activity, ed. National Bureau
of Economic Research, 609-25. Princeton: Princeton University Press.
Auer, Raphael, and Andreas M. Fischer. "The Effect of Low Wage Import Competition
on US Inflations Pressure." Journal of Monetary Economics 57.4 (2010): 491503. Web.
Boudreaux, Donald J. "A Diversion." Globalization. N.p.: Greenwood, 2008. 55-67.
Print.
De, Utpal Kumar, and Manoranjan Pal. "Dimensions of Globalization and their Effects
on Economic Growth and Human Development Index." Asian Economic and
Financial Review 1.1 (2011): 1-13. ProQuest.
Edmonds, Eric V. “Child Labor in the Global Economy.” Vol. 19. N.p.: Journal of
Economic, 2005. 1-6. Print. Ser. 1.
Giddens, Anthony. "Globalization." Runaway World: How Globalization Is Reshaping
Our Lives (2003): 14-22. Print.
Gorodnichenko, Yuriy, Jan Svejnar, and Katherine Terrell. "Globalization and Innovation
in Emerging Markets." American Economic Journal: Macroeconomics 2 (2010):
194-226. JSTOR. Web. 02 Apr. 2015.
Grennes, Thomas. "CREATIVE DESTRUCTION AND GLOBALIZATION." Cato
Journal 22.3 (2003): 543-57. Print.
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Norberg, Johan. "The Noble Feat of Nike." The New World Reader : Thinking and
Writing about the Global Community. 2nd ed. Boston: Houghton Mifflin College
Division, 2006. 227-30. Print.
Sapkota, Jeet Bahadur. "Impacts of globalization on quality of life: evidence from
developing countries." (2011): 1-28.
Tan, Clarence JK. "International Trade and Economic Growth: Evidence from
Singapore." (2012): 1-58. Columbia University.