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Globalization is the process in which firms develop their international influence and begin to operate on a global level. From an economic perspective, it refers to the increasing interdependence of the emerging global economy.
Globalization today has allowed for worldwide development, but there is an imbalance in the distribution of progress across the world. Some economies have grown at a much faster rate than other economics. Already developed nations tend to benefit much more from globalisation compared to developing economies.
Globalization has influenced developing countries in a positive manner for various reasons. For instance, it played an important role in allowing some countries to achieve independence. One example of such a country is Ghana. At the end of the Second World War, Ghana was able to gain independence, and this was encouraged by globalization.
Another positive impact of globalization on developing countries is the rise in the standard of living experienced by the residents. Globalization aims to decrease the poverty in the world. This is achieved by the improved access to foreign funding from more developed and industrialized nations. These increased funds brought into the developing nation can be used to improve the level of education, healthcare, social interaction, and transport infrastructure. Improvements in these sectors result in an overall standard of living.
Additionally, as a result of globalization, developing countries are now able to access new markets which include the international markets. This permits the international movement of labour, foreign capital, new technology and management to developing countries. The level of foreign direct investment also increases thus encouraging greater levels of development in the developing country.
There are four main contributors that economists have predicted to be the main forces which increase the level of worldwide interdependence. These include entrepreneurship, liberalization of trade, technological advancements, and global social networks. It is true that many believe that instead of including all four of these factors, only two of them are considered when thinking of factors that have the most influence on globalization. These factors are entrepreneurship and technological innovation. However, it is important to note that these two alone cannot explain why there has been such a significant improvement in economic collaboration amongst different countries.
When considering world trade and the effects of globalisation on it, it is clear that there has been an improvement in the level of world trade and consequently enhancing economic growth. Globalization allows for economies to have open markets which allows them to be able to engage in free trade. It permits laws of demand and supply to direct the movement of the factors of production, leading to an efficient allocation of resources, and thus increased investment by producers. An example of this in action is in Uganda. In Uganda, reduced trade restrictions have led to a significant improvement in the nation’s economy.
Reductions in trade restrictions in a lot of developing countries mean that many foreign manufacturers choose to relocate there. This is because of the increased restriction in the more industrialized nations. One example of such reductions in protectionism is lower tax levels, or the removal of tariffs. These restrictions therefore motivate international investors to relocate from their domestic countries to these developing nations.
Consequently, the benefits for the developing nations are plentiful. One of the most obvious benefits is there is an increased derived demand for labour as the demand for goods and services increase. As a result, there is a decrease in unemployment as there is creation of more jobs. Also, the influx of foreign producers can lead to the introduction of new technology.
Globalisation leads to increased levels of global competition, and in the long run, to more domestic competition. This guarantees the improvement of creative abilities and innovative capabilities. Increased competition between the firms of different commodities makes sure that the quality of the products and services is improved but at the same time the prices are also reduced. This encourages firms to improve their efficiency and leads to increased levels of specialization. In addition to this, consumers are also not exploited as they pay reasonable prices for good quality products.
Other positive impacts of globalization on developing countries include better access to international backgrounds and cultures. Increased collaboration between governments also allows all the countries to work towards accomplishing common goals, and thus improving the worldwide society as a whole. Moreover, the improvement in technology allows easier communication and travel, demonstrating another positive of globalisation.
Even though globalization has had many positive impacts and created a lot of opportunities, it has a lot of negative effects, especially on developing economies. As mentioned previously, globalization is somewhat limited as developed economies benefit much more from it than developing countries.
Globalization is believed to have a negative impact on the level of poverty. However, the impact of globalization on poverty is very difficult to accurately assess. Globalization cannot be the sole reason for the increased levels of poverty in developing countries. There are many other contributing factors. These include poor authorities, weak economic policies, and feeble developments. But it must be recognised that globalization is indeed a vital factor. It makes the rich countries even richer, and the poor nations even poorer.
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