Effects of
Globalization
• The term "globalization" describes
how economies all over the world are
becoming more interconnected. This
integration has both beneficial and
bad consequences. It is hoped that
increased international trade will
boost competition, which will help
Introduction distribute wealth more fairly. Those
who favor it also assert that
international trade will reduce the
number of wars. However, increasing
international trade has drawbacks.
Some detractors blame the rise of
nationalism and wealth inequality,
among other problems, in part on
globalization.
Positive Eff ects of
Globalization
• 1. Increases economic development:
• Globalization boosts economic
growth for all nations involved in the
global economy by enhancing
international trade in goods,
innovations in technology, and
information. A country's overall well-
being, or improved living standards,
higher incomes, increased wealth,
and, frequently, less poverty, are all
indicators of economic growth.
2. Foreign Direct
Investment
• World commerce typically grows
at a far slower rate than foreign
direct investment (FDI). This could
promote industrial restructuring,
technological transfer, and the
expansion of multinational
corporations. Large businesses
can achieve economies of scale
thanks to increased global trade.
Costs and prices are lowered as a
result, promoting future growth.
3. Makes
production more
affordable
• A global market gives
companies greater access
to consumers and
manufacturing
opportunities, which results
in a bigger choice of
products at a wider range of
pricing points.
4. Brings
opportunities to
poorer countries
• Due to globalization,
businesses can relocate
their manufacturing from
high-cost regions to less
expensive ones abroad,
which creates employment
possibilities, access to
information technology, and
other economic benefits for
nations with limited
resources.
Negative Eff ects
of Globalization
• 1. Causes Job
Displacement
• Globalization leads to increased
competition between companies, which
can result in closures, offshoring and job
losses. Globalization doesn’t result in an
increased number of jobs; rather, it
redistributes jobs by moving production
from high-cost countries to lower-cost
ones. This means that high-cost countries
often lose jobs due to globalization, as
production goes overseas.
2. Exploits
Cheaper
Labour Market
• Globalization has led to exploitation of
labor. Prisoners and child workers are used
to work in inhumane conditions. Safety
standards are ignored to produce cheap
goods. There is also an increase in human
trafficking. Studies show that globalization
has been associated with rising inequality,
because the poor do not always share in the
gains from trade.
3. Unequal
Economic
Growth
• Globalization can increase wage
inequality in a relatively rich
country by increasing the imports
of manufactured goods using
predominantly low-skilled labor
from developing countries.
Conversely, it opens more
opportunities for exports in high-
tech firms that use more high-
skilled labor.
4. Increases
Potential Global
Recessions
• When many nations’ economic
systems become interdependent, the
likelihood of a global recession
increases dramatically—because if
one country’s economy starts to
struggle, this can set off a chain
reaction that can affect many other
countries simultaneously, causing a
worldwide financial crisis.
