The term ‘globalization’ is increasingly used today, both in the positive and negative sense. The term will probably be familiar to you and is often linked to international trade and worldwide traveling. By globalization, areas/ countries are increasingly connected and the boundaries in the economic, political and cultural spheres are diluting. This ensures that both consumers and producers can move easily and make contact with other countries or cultures. As a result, products can be produced cheaply and it is easy for consumers to travel between countries. There are both advantages and disadvantages to globalization and this article will make a distinction on economic, political and cultural areas.
In the economic field, one of the major advantages of globalization is the simplification of trade. The Heckscher-Ohlin model explains this well and is based on the theory of comparative advantages. In short, this model explains that a country will produce and export what it can produce relatively cheaply compared to other products. Products that are relatively expensive to produce will be imported. In this way, production factors are used as efficiently as possible. The market is also being expanded, creating more competitiveness among companies. This is favourable for consumers. Politically, globalization would make it easier to respond to global challenges such as global warming.
Certain measures make little sense at national level, but can work well if they are applied at the global level.
However, there are also disadvantages to globalization. For example, inequality is growing within Western countries (, according to some theories also in developing countries) and a specialized country is more susceptible to fluctuations in the price of the product. As there is less demand for low-skilled workers and more demand for high-skilled workers, wages for the low-skilled will decrease and those of the high-skilled will increase. The winners will win more than the losers will lose, but inequality will increase without government intervention. There is also a lot of attention to costs, but less to additional effects such as emissions. When countries specialize a lot, products may have to be moved a lot and far. This is often not done in the most environmental friendly way, but in the cheapest way. Another negative effect of traveling and moving goods is epidemics or pests of certain animal species spread more easily. Should a pandemic like Corona occur more often in the future, because we can travel (often) and trade worldwide, will the profit of trade not be negated by the blow to the economy when a virus (or plague) hits a country? As said before, there are many political advantages on globalization. However, countries are less able to make their own policies.
Opinions on whether globalization is a good or a bad phenomenon are divided, and polarization is looming fast. This while there may also be good alternatives without flying around the world or closing the borders. It will also differ greatly per sector whether there are more advantages or disadvantages to globalization. There is no easy answer, because to combat climate change, for example, more globalization is needed with regard to regulations. While on the other hand, less flying (and therefore less globalization) could contribute to lower CO2 emissions. Besides, it is the question whether the phenomena of ‘globalization’ should be dealt with as a whole, or only some causes and therefore effects of globalization. Furthermore, there is no alternative offered in this article, but perhaps it will not hurt to think about this topic. Moreover, there will probably be more news about ‘globalization’ in the near future.
By: Wouter Pen