Multitudes of influences of globalization on national economies
Question:
Discuss about the Socio-Economic Impact of Globalization.
One of the core concepts driving behind today’s integrated and internationally connected countries in the world is the process of globalization. The terms refer to a process under which nations are eligible to conduct free trade without falling under the jurisdiction of tariff and other trade restrictions or barriers (Stromquist and Monkman 2014). The free trade includes uninterrupted share and exchange of goods, services, capital, idea, technologies and even culture. The basic intention behind the concept is to integrate and expand market globally allowing nations to benefit and derive economic gain from international trade.
The paper aims to trace out the multitudes of the influences that globalization as process of economic integration exerts upon the national economies of the world. The effects have two-way aspect of interpretation. One is national another is international point of view. Globalization has both inter and intra country impacts that determines the economic performance of the nation. The paper helps in identifying the effects of free and unrestricted trade that further take us to the positive as well as negative side affecting the social and economic aspect of population as a whole of an economy. This analysis rightly justifies the efficacy of the process and it intension at core.
The discussion is essential in understanding the efficacy of globalization as model of international trade. The concept reaps its essence and is well erected exploiting the theoretical concept of comparative advantage. How far the reality goes hand in hand with the theory is justified in this presentation. Moreover, whetehr the influences of globalization falls in places or makes deviation from the expected structure is also the motive of the paper. The discussion has wider scope of briefing out the overall evaluation of globalization that helps further in devising strategies adopted by nations in order to frame the international trade policies.
Conceptual Framework:
Social Impact of Globalisation: According to Glatzer (2012), the process of globalization has ample effect not only the economy of a nation but also on the personal lives and society as whole through detraining standard of living as well as access to amenities of life. This refers to the quality of life in the nations around the world after the process of globalization has started to leave its deep-rooted impact upon global economic condition (Hay and Marsh 2016). The world economies are broadly subdivided among three wide categories of developed, developing and transition economy. Development on wider note is linked with the definition of growth of economy over the course of industrialization. Globalization is a newly evolved terminology to reflect the recent world comprehensive development process. It ensures increased interdependence among countries, its resources, markets, people, goods and services, capital, culture and information. There is severe social impact of the globalization process. One of the important societal aspects that are considered in the developmental phase is the quality of life that further explains the standard of living. The developed world acknowledged quality of life as one of the major social goal from 1960 which is much early than other poor nations. Quality of is one of the objective condition that follows investigation made by technical and social experts along with subjective perception of people.
Understanding the efficacy of globalization as a model of international trade
With time the societal goals got new definition and required different parameters to assess the procedures being established worldwide. The author unveils the concepts of social well-being through scientific discussion made upon quality of life. It is termed both objectively and subjectively. The dimension pertaining to objectivity outline s quality of life with the indicators like Human Well-Being Index, Human Development Index, Weighted Index for Social Progress and so on. The implication of all these indices is in finding out the similarity of differences of the results obtained (Hay and Marsh 2016). The subjective dimension regarding quality of life deals with the concept of Overall Satisfaction of Life. The assessed impact of Personal and National Well-being and indices that combine both subjective ad objective aspects of life like Happy Life Expectancy gives better social view of national economies (Dreher Gassebner and Siemers 2012).
The worldwide comparison of these indices shows that the developed nations benefits from the globalization process and its consequent free market access, increased output through unrestricted trade. The impacts diverge between developed and developing nation. The social condition of the developed nations is not that hampered as compared to the developing nations if we get a broad picture of the outcomes. The combined effect of technological advances and complexity of the social structure leads to acceleration in the social changes, which is one of the important spheres of the global integration (Baud and Durand 2012). Social dimension of globalization captures the influence the process has upon the life, employment, of societies, families and people. Beyond the common and visible aspect like income, employment there are some factors that are attributive yet important to ensure social justice and the equality as one of the major social aspects (Baylis, Owens and Smith 2017) . The globalization has consolidated the political and economic environment of the world which has greater implication upon the social factors like equality in accessing basic amenities, marketed goods, enjoy legal and special rights pertaining to human rights keeping up the dignity, solidarity and equality of people residing in nation (Fominaya 2014).
The major impact of globalization in recent economic world has been severe inequality among nations broadly categorized in two strata of countries developed and developing. With subsequent increase in the income inequality globalization also affects the populations’ ability to access basic services in terms of health care services (McMichael 2013). The uninterrupted spread of markets cross border allows no prevention for spread of various non-communicable diseases and hazardous impact on the society. Globalization makes regulations less impacting as wee as less binding. As a result the there has been acceleration in the new infectious diseases. Moreover deregulated trade practice followed in international labor market increases the risk of health operated through unsafe workplace. The positive impact of it on health is the free flow of information, awareness and better technology to deal with complex cases. Globalization allows nations enhanced coordination in the vaccination programs and methods to cure the infectious disease (Baylis, Owens and Smith 2017). The poor and less developed countries benefitted from the flow of improvised techniques coming from the compact research and development of developed nations. Another important social concern regarding globalization is the environmental standard. The free flow of trade shifted the production process to less developed or under developed nation that exacerbated the environmental condition of them even if it favored developed nations with sustenance. Overall the resultant effect of globalization is the increased market operation and output that further exploits resources and pose various threats related to environmental standards, resource scarcity all of which directly impacts the social condition of a nation. Income inequality might be an economic aspect of globalization but it is the source of various social inequality pertaining to access if education, food, health care and broadly shapes the frame of poverty, climatic change in the nation (McMichael 2013)
Social impact of globalization
Economic Impact of Globalisation:
The major impact of globalization is visible in the economic aspect only through various modifications. Greater changes the world experiences is the expansion of markets through cross border allowing the nations much relaxation regarding rules of trade. The process led to open market for trading with foreign countries along with access to Foreign investments like FDI and FPI. Increased foreign direct investment mostly channelized to the less developed nation by the capitalist developed nation led to growth and development of economic output of them (Sunkel and Inotai 2016). The stagnation in economic sectors like agriculture, industry and service required big push in form of huge capital investment. According to Gurgul and Lach (2014), globalization is embodiment of extended economic activities across the nation irrespective of borders. This enhances the economic integration as well as the interdependence of the economies. Globalization enhances the market operations and output that increases further the trade volume and brings forth more trade possibilities. This consolidates the industrialization process and its further spread. There is structural shift in the demand pattern followed by consumer on the face of increased economic activities and production. The interdependence of the nations further consolidates the transportations and communication among nations (Beeson 2014). Globalization is came as major economic reform policy for many nations that were initially a closed economy. It made the economies open its gate to the world economies and allow them to enter the domestic market. The post world war II time period required nations to achieve stability and as result Bretton Woods conference was signed by 44 nations. This gave birth to the international institutions like World Bank, IMF and International Trade organizations, which is considered a second stage in the development. The economic reform followed by Chin in 1980s not only opened China to globalization but also motivated various economies like India to experience the same with institutionalization of privatization and liberalization (Sunkel and Inotai 2016). The process of globalization brought newer scopes and potential for the nations to create more wealth. The trade among nation increased and comparative advantage is the driving factor that led the nations follow the line of production in which they generate lesser opportunity cost and trade and exchange it with others.
There are also the dark side of the process that has accused globalization of accentuating the economic problems like income inequality, poverty, unemployment. There is a debate regarding whether globalization actually could reduce these aspects or enhanced eve further exacerbating the general picture of the entire country (Guo 2013). The biggest concern that has been evoked by the process of globalization is the increased inequality gap of the poor and rich countries. Instead of bridging the gap it actually enhances by making poor poorer and rich richer (Arora 2012). The optimism of Heckscher-Ohlin model did not materialize in the reality as neither employment increased that much nor the within country inequality was removed or automatically assured as it has been expected by the theory (Margalit 2012). The exposure of free trade and free flow of FDI could not actually eradicate the economic issues the nations were infected with. The globalization brought changes in the economic transaction and trade that allowed developing nations to receive much of the investments. The role of investment in producing more jobs, employment through increased production and income are of greater importance.
Inequality among nations due to globalization
In the paper that analyses the impact of globalization in its first two decades Gurgul and Lach explains how this stimulated growth in various economic and social dimension of economies around the world. This indicates how the expansion of international trade,, growth of foreign investment led to developed internet system as well television and print media strongly impacted the economic development of CEE countries (Beeson 2014). Reduction in tariff barriers and changes in tax policy impacted the overall economic condition.
As per Jaumotte, Lal and Papageorgiou (2013), the relationship between increased pace of trade and financial globalization is well explained by the rising income inequality. It has been observed widely across countries in past two decades. Their research unveils importance of technological progress on 51 countries reported over 23 years of time ranging 1981-2003 against the impact of globalization on them. They conclude two broader reflection of globalization tendencies that offset each other. The trade globalization on one hand involves into reducing the inequality and on the other hand financial globalization led to increased inequality through spread of more and more foreign direct investment. In the opinion of Baud and Durand (2012), globalization through its financial expansion paved way for making more profits through various complementary ways. The return on equity on the retail sector specifically increased after the process of globalization became more intense after 2000 worldwide. The capitalist nation having more access to capital channeled them in order to conduct financialization of asset and use and management of working capital judiciously in order to make market power transformed into financial gains.
Theoretical Framework of Globalisation:
The basic intention lying at the core of globalization is the free and uninterrupted trade. This reinforces the importance of international trade theory in shaping up the operation going on in real world. The concept of Heckscher-Ohlin model, comparative advantage and absolute advantage are the biggest factor driving the theory behind the international trade taking place among nations. The model explains that a country should produce the goods in which it has comparative advantage relative to the other nations and export that to the world market in return of goods it forgo in producing that (Arora 2012). Export should be made on the production that has greater abundance of the factors used in production. It makes import of the good sit cannot produce efficiently and has lesser availability in factors of production. Absolute and comparative advantages are two important framework that explains the logic behind why should nations be associated with trading than itself producing all the goods and services. A nation has absolute advantage inn certain line of production if it requires less unit of labor too produce one unit of good compared to other nations. This makes them capture higher labor productivity that drives the trade among nations (Margalit 2012). This explanation takes labor as only input of production. The nation with higher labor productivity that is taking lower labor to produce unit of goods is required to produce and export the good with other nations. This lead to specialization of the nation in that good which further reduces the cost making production more efficient.
|
Labor hour per unit of production |
||
|
Country |
Food |
Weapon |
|
A |
30 |
40 |
|
B |
50 |
20 |
Impact of globalization on access to healthcare services
Figure 1: Absolute Advantage
Country A seems to require lesser unit of labor in production of food and Country B has little labor requirement in production weapon. The doctrine of absolute advantage would suggest A to produce food and trade it for weapon with B.
Figure 2: Graph of Absolute Advantage
Another important concept is comparative advantage that is more realistically followed up by nations in the recent globalised world. It suggests a nation should produce only that good in which it has lower opportunity cost. Instead of assessing the direct labor requirement per unit of goods produces this captures the intrinsic capability of per unit of labor if used in alternative sphere of production (Stromquist and Monkman 2014). A nation (say A)that produces food and weapon, is said to have lesser opportunity cost in production of food if in order o produce one unit of food it has to let go fewer unit of weapon production. The nation B on the other hand has lesser opportunity cost in weapon production that implies it let go fewer unit of food production than A to produce one unit of weapon production (Arora 2012). This lesser opportunity cost allows the nations to follow that particular line of production and specialize in that and further trade it with other nations of the world in return of the good that they are less efficient in producing as Country A in weapon production and Country B in food production in our example. This makes trade beneficial for both the nation as both of them capture economic gain .
Conclusion:
It is to be concluded from the discussion that globalization as major social and economic integrating process has not only positive impacts but more of negative impacts upon the socio-economic condition of the nations. It evokes free flow of trade, increased output, income, flow of technology and capital on one hand and on the other it raises social inequality and leaves adverse economic effect on them. Unemployment, falling income and rising inequality gap between rich and poor countries are major concern emanating from the process of globalization deviating from its expectation made by the theorists.
References:
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Baud, C. and Durand, C., 2012. Financialization, globalization and the making of profits by leading retailers. Socio-Economic Review, 10(2), pp.241-266.
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McMichael, A.J., 2013. Globalization, climate change, and human health. New England Journal of Medicine, 368(14), pp.1335-1343.
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