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Who are the Winners of Globalization?

Posted by Paul Martinez
Paul Martinez
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on Saturday, 13 July 2019
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In the modern conditions, the problem of globalization is urgent and relevant due to the identification of the general trends of world development. As a social phenomenon, globalization has been studied for many years. It is possible to say that such attention is observed due to the need for understanding the phenomenon, as well as the clarification the causes of globalization and its main characteristic features. Globalization should be viewed as a new stage of a transnationalization of the economic life of the planet, which is expressed in the increasing interdependence of the national economies. Its essence is in moving the economic power from the national and state level to the global one. In particular, it means that the world market plays the leading role in economic regulation while the domestic markets operate under its control. However, the impact of globalization still has to be assessed. On the one hand, it raises the efficiency of the global market and provides for the creation of strong ties between the countries. However, at the current stage of its development, the globalization is based on the recognition of the market economy values and free trade, i.e. a global liberalism, which possesses an overarching authority and power. Therefore, since the process of globalization is guided by the economic principles, it is likely to violate the human rights of the people of the countries affected by it. Therefore, the following work is dedicated to the study of the positive and negative effects of globalization, as well as the definition of the sides that gain and lose the most due to its impact.

Economic Inequalities within Nations

Economic inequality has always been present within both advanced and underdeveloped nations, but the process of globalization has exacerbated the problem. In particular, In the U.S., there is a huge difference between the incomes of the richest and poorest citizens, with 1% of the population receiving approximately 50% of total income. The economic inequality between rich and poor has been growing steadily since 1970 and has reached unprecedented levels, with approximately 47% of Americans living below the poverty line. The primary cause of such phenomenon is considered to be globalization, which has lead to an influx of a cheap workforce to the country, as well as the outsourcing of the manufacturing processes abroad. As a result, finding a job with average earnings and requiring medium skill level is rather difficult. Moreover, the people that have no qualifications (i.e. the ones that did not graduate from college due to various reasons) cannot expect to receive anything other than a low stagnating wages. Thus, the people that can afford their children to study in the college or university will always have an advantage over those that cannot, leading to the further development of inequality. At the same time, the countries of the so-called Third World may also experience economical inequality due to globalization. In particular, the investments made in their economies by the rich countries are not aimed at their development but rather at the increasing of the efficiency of a particular industry (mining, agriculture, etc.). As a result, the people engaged in it can expect to receive a higher income than those involved in other activities. In turn, a gap between the wages in the country increases. In this regard, globalization is no different from colonization, which is manifested in the exploitation of the underdeveloped countries, and is a violation of human rights.

Positive and Negative Outcomes of Globalization

In terms of global trade policies, globalization has the following outcomes. It leads to the international division of labor, an efficient allocation of resources, and ultimately – the improvement of living standards. Moreover, it forms the base to solve the economic problems of the mankind, due to the possibility of combining the efforts of the international community, the consolidation of resources, and coordination of actions in various fields of the global trade. Finally, it provides an opportunity to mobilize significant financial resources in the time of need. Moreover, in terms of economic development, it promotes the liberalization of trade, provides economies of scale, reduces costs and promotes lower prices, thus creating the conditions for sustainable economic growth. In addition, globalization strengthens the competition, promoting the further development of the new technologies and leading to their rapid spread in the global economy.

Globalization is also aimed at achieving the equality between the countries. In particular, the World Bank organizes financing for developing countries by providing them with loans on favorable conditions, thus ensuring their further development. At the same time, in the recent years, the activities of the World Bank have had an impact not only on the world economy as a whole and the economy of individual countries, but also on their political situation, as well as the domestic policy. Often, the lender provides loans to the state under the unofficial condition of certain internal and external policies of the borrower that infringes upon its sovereignty, violating certain human rights, namely the right to freedom of choice.

The final outcome of globalization is the establishment of the free trade agreements, such as NAFTA between the U.S., Canada, and Mexico. On the one hand, the liberalization of trade between such countries provides the U.S. and Canada with access to the enormous market of cheap labor, the fast-growing export markets, and a stable source of oil supplies. At the same time, Mexico experiences an expansion and growth in the number of companies engaged in the tertiary and quaternary sectors of the economy, as well as increasing political stability. At the same time it can serve as an example of inconsistencies between the plans for liberalization of trade and reality. Since 1994, the country has carried out reforms in the area of trade. During the first 10 years, since the establishment of NAFTA, the increase in the number of jobs in Mexico was minor and almost 30% jobs in assembly plants, which were created in the 1990s, have been lost. Real wages for most workers has decreased, and economic inequality has aggravated. Thus, the development of trade alone is not sufficient to achieve a sustainable development of a country.

Winners

The primary beneficiaries of the globalization are the developed countries. In particular, it has lead to the emergence of a new model of the world – the world of 20:80, where 80% of all the resources are controlled by a fifth of the world’s population. The thriving 20% of the countries dispose of 84.7% of the global GDP and their citizens (namely those belonging to upper class) possess 84.2% of the world trade and 85.5% of domestic savings accounts. Thus, it is clear that such people occupy a dominating position in the world, being able to influence the global economic policy in the way that brings them maximum profits.

The emerging markets benefit from the globalization, as well. In particular, over the past 20 years, the scope of globalization has increased significantly due to the liberalization of the Chinese and Indian economies. Possessing the vast labor resources, the countries can achieve even greater success than Europe or Japan, the aging workforce of which can reduce the rate of their economies growth. After the gradual integration of China, India, and the other emerging markets, into the world economy, hundreds of millions of workers will have access to the global labor market, which is becoming even more interdependent under the influence of trade and investment flows. As a result, the global standards of production, trade, labor and wages will be reviewed in the favor of such countries.

Losers

Globalization has the most severe consequences for the middle and lower classes of the society, especially for the first one. According to the World Bank, the middle class includes people whose income ranges from 10 to 100 dollars per day (approximately 2 billion people in total). However, the globalization has led to the fact that jobs that were occupied by the representatives of the middle class or small officials have moved to developing countries. As a result, the people find it more difficult to find a well-paid job. Moreover, the global crisis provoked by the uneven development of a global market has exacerbated the situation, namely due to the changes in taxation. In a crisis, states are trying to raise taxes to increase the fees. However, it does not affect lower class, which is supported by various state programs (at least in the advanced countries), and those with high income are much more mobile than the middle class representatives, i.e. they can avoid the taxation. Thus, middle class will have to carry the largest part of the increased tax burden.

At the same time, the lower class (namely in the developing countries) still may be affected by globalization. In particular, during the mentioned events in Mexico, the agricultural sector of the country has been deteriorating due to the low manufacturing standards that did not allow exporting their production. In addition, the presence of the imported agricultural goods in the market has increased the competition, lowering their income. The same situation can be observed in the many developing countries, which are forced to operate in similar conditions. Thus, the globalization has negative effect on the lower-class rural population of the developing countries, namely the ones that do not have skills to be engaged in the manufacturing sector.

 

Globalization is a complex process, which cannot be viewed unambiguously. On the one hand, it liberalizes the global trade, removing certain barriers between the countries, providing equal opportunities for the participants of the world market, and giving developing countries a possibility of an effective start. At the same time, it leads to a degradation of the uncompetitive domestic industries that may be affected by many entrepreneurs and undermine the country’s economy. Moreover, it may lead to a loss of control over the economy in less developed countries. In fact, the states having a strong economic position can monitor the economic developments in such countries, which results in a partial loss of sovereignty. Finally, it is accompanied by an uneven distribution of benefits both between the country’s citizens and the industries of the national economy. In other words, globalization can lead to a rapid development of high-tech industries but cause irreparable damage to agriculture. Thus, it is clear that globalization brings benefits only to a limited number of people. However, such process is an inseparable part of the modern economy and, therefore, it must be monitored to avoid stagnation of certain industries and ensure the even distribution of the benefits it provides, as well as the respect for human rights.

 

About the author:
Paul Martinez, as a former journalist, he knows how powerful a word could be. Now he is a blogger and writer at Writer-elite company. Working with experts in academic writing is a pleasure. And he is happy to share my experience with those who are only learning. His motto is: "Live the life you love, love the life you live".

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Michael John
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on Friday, 22 June 2018
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