Globalization Case

The term ‘globalization' in the most basic level can mean the globalization of international trade, however it is also expansion of foreign direct investment (FDI), multinational corporations, integration of the world capital markets and much more. Thus, globalization can be defined as the interdependence of national economies through trade, finance, production and a growing web of treaties and institutions. The evidence of globalization is clear. Nowadays, over $4 trillion in foreign exchange transactions are made every day, where more than $15 trillion of goods and $3.7 trillion of services are sold across national borders. A more intuitive example can be a British person driving the German car with a Dutch engine that was assembled in Mexico from made in US components, which in turn, were fabricated from Korean steel. Globalization, without any doubt, has some positive effects. However, the adverse effects of globalization should not be forgotten. This essay, therefore, will discuss advantages, such as increased economical growth rate, the improvement of the nation's living standards, cheaper prices of the products, the creation of the jobs and its disadvantages, including the contraction of some industries, the growth of the global competition and the destruction of manufacturing jobs in developed countries.

One of the major advantages of the globalization is the stimulation of the economic activity and growth. The fall in average tariff rates since 1950s, the removed restrictions of FDI, technological advancement in telecommunications and transportations enabled firms to expand their production beyond the country of origin, leading to countries becoming more dependent on each others' goods and services. In other words international trade that resulted from globalization gave the national economies advantage to specialize in the production of goods that it produces most efficiently. Thus, the Ricardo's comparative advantage trade theory suggests that even if county buy goods from other countries, which it could produce more efficiently itself, and specializes in products its best at, both countries will still benefit as they can increase the combined production of goods, and consequently consumers will be able to consume more. Many economists, politicians and business leaders, therefore, argue that globalization resulted in increased GDP of the countries, leading to greater consumption and subsequent increase in nation's income levels, stimulating the economic growth and making the economies richer and boosting their living standards.