Pro and cons of Globalization

Figure 1Trade in Goods and Services (IMF)2.1 Increase employment opportunity hence reducing unemploymentOne of the positive outcomes by globalization is increasing of employment opportunities hence reducing the unemployment.High unemployment remains serious problems in the world and globalization has given rise to new stresses in labor markets.Unemployment has been widespread since the late post-war period. Unemployment happened when people in the work force but do not have a job.The work force is made up of those people who want to work (excludes who are retired or disabled).Unemployment is universally recognized as a bad thing.Unemployment will impose significant costs on the individual, society and the country.First and foremost, in individual aspect, unemployment will impact on the person’s standard of living. Besides that, effects of unemployment are bad to society too. For example, crime is rates rising as people are unable to meet their needs through work, divorce rates is raising because people cannot solve their financial problems. (Caplan, 2009 ) In additional, when there is high unemployment, people pay less in income taxes and also pay less in sales taxes because they purchase fewer goods and services. (Simpson, 2011)Globalization has the potential to create large numbers of new jobs. According to the International Labor Organization (ILO), in year 1999, there were 150 million people fully unemployed and up to one billion underemployed (a third of the world’s labor force). (Hilary, 1999) Globalization can led to job creation, either through new businesses being created or companies outsourcing from others countries.There are 27 million people working in 850 EPZs worldwide (213 of which are in the USA, 124 in China and 107 in Mexico). Export Processing zones (EPZs) is the areas that focus to production for the export market, with special incentives such as low taxes and tariffs, good infrastructure) to attract foreign invest. (Hilary, 1999) However, those people must upgrade themselves to meet the challenges of globalization. For example, local people must increase their skill.In year 2015, International Labor Organization (ILO) had done a survey based on “World Employment and Social Outlook”. They have analysis of employment patterns in over 180 countries at all levels of development. The ILO estimates that global unemployment reached 201 million in 2014, it is about 30 million higher than year 2008. (International LabourOrganisation, 2015) However, there are about 40 million additional people who enter the global labor market every year. The graph below illustrates “Global and regional jobs gaps by age group and sex between year 2009 and 2014.(International Labour Organisation, 2015)According to the graph above, we can see that number of people was employed is increase from year 2008 compare to year 2014. The number of people was employed is increase maybe is because of job opportunity increase due to globalization.2.2 More Comparative AdvantageA comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors. Meaning of comparative advantage is the ability of a firm or individual to produce goods at a lower opportunity cost than other firms. (, 2015) Globalization will provide an incentive for countries to specialize in its special product and benefit from the application of the principle of comparative advantage. For example, if a country found that it had a comparative advantage over other counties, it might encourage the company to focus on that product, and hence overall production can increase.The total between them is now 150 wheat and 75 TV's, which is obviously better than theirwilling to trade 2 wheat or less for Country B's TV's. They can each get the same amount of TV's as before and also have some extra wheat. Hence, everyone is better off and no one is worse off.However, comparative advantage is under assumptions are that there are no or low transaction costs, that there are no negative externalities to more production, and that there are some restrictions on the flow of capital. Comparative advantage is a critical concept for free trade proponents. Hence, globalization which emphasis on no barriers of trade between countries is meets this assumption (, 2015).2.3 Free TradeGlobalization brings the most important benefit across the world, free trade. Previously, free trade was not available between countries due to the trade barriers that stand by each country. Companies come from different countries is not able to trade with each other. Nowadays, the most political barriers that separating people and regions are move out enable the trading and investment conduct across countries. The companies can purchase their raw material or other resources needed not only from home country but also from foreign countries which are cheaper than home country. The companies also can invest their capital in other countries which can bring in more profits and advantage to company.Free trade plays an important role in promoting the foreign direct investment. The companies have incentive to move their production into certain region provided that there is appropriate level of physical infrastructure, low-tariff, and non-tariff trade barriers. For example, The ASEAN Free Trade Area (AFTA) has attracted Japanese car manufacturers to produce different parts of the final products in countries of that area.Similarly, in North America, the passage of the North American Free Trade Agreement (NAFTA) in 1994 induced some US companies move their production segment to Mexico. In Europe, the creation of the European Monetary Union (EMU) in the mid-1990s has promoted FDI within the region, giving rise to the so-called German-Central European Supply Chain (GCESC)(International Labor Organisation, 2015).Figure 2: Inflow of FDI to Developing East Asia 1970-2009As we can see in Chart 1, inflows of FDI to East Asia have risen since the 1970s, with interruptions, and accelerated after the opening of China around 1990. The inflow was declined in the mid-1970s, in the mid-1980s, and by the 1997 crisis, and then again, by the troubles of the IT industry in the early 2000s, a major beneficiary of FDI capital inflow. At 2008, although there is financial crisis, the inflow declined in next year, 2009, but still remained close to the highest levels (Lipsey & Sjoholm, 2010).2.4 Market ExpansionMoreover, the markets became bigger. The finished good manufactured can sale to local market as well as foreign market. There are more than billions of people around the world. For example, the agreement of NAFTA, which significantly reduced the import and export restriction enable America, Canada, and Mexico exchange products and services freely. The companies within the free trade zone can benefit from free trade in term of larger export market. Compare to fewer countries previously, the companies now can sell their goods and services to wholesalers and consumers in large variety of countries.2.5 More Choice with Lower PriceConsumers also enjoy the benefits from globalization. Globalization bring the business nature compete globally. Now the company can reach to the foreign market that they were unable to do so before. The domestic companies can export their products and services to foreign market easily while other foreign companies also can sell their products and services into domestic market easily. Consumers have more choice of products and services as well as the overall lower price. It is because the more choice of products for sale increase the competition and drive the price down.2.6 Increase Wage Rate and Purchasing PowerAnother benefit of globalization is increasing the wage rates and purchasing power in previously low-income countries. Globalization has created the environment in which export-led economic growth can reduce poverty by bidding up wages in low income countries(Thompson, 2007). Companies always seek to move the production process to lower labor rates countries in order to maintain their competitiveness advantage. When a company set up its’ production process at lower labor country, definitely they will employ local people and in turn increase the income of local household. The local people gain the purchasing power as their income had increased. Thus, the market will become better for the products that produce by others. For example, after World War II, Japan manufacturing industries developed over time and move their production to Taiwan and South Korea to take the advantages of lower wage rates over there. As time passed, Taiwan and South Korea wage rates and purchasing power keep increasing until now. As a result, the labor cost at Taiwan and South Korea no longer at lower level and their purchasing power is high compare to other Asia countries.expectations and attitude. This may cause a high cost and take time to do the research. For example, the needs of an American consumer might be different from a South African consumer. It will cause company need to provide various type of products to fulfill the needs of all countries. If the nature of business of a company is producing clothes, this company needs to produce various types and sizes of clothes to the different countries. The company needs to produce the clothes according to the consumers’ need in various countries. When the company can produce the right taste for the consumers in that country, then the products can be popular in those countries. Besides that, the company also needs to produce different type of patents of the clothes. For example, Japanese might like a product to have a traditional touch, whereas an American might like the product to have a retro modern look to it. Therefore, if the company wants to business in Japanese, it must produce a traditional patents to them and whereas business in American need to produce more modern patents to them. In conclusion, if the company fails to fulfill the consumers’ need in other country, then it will leads to business failure or bankrupt in that country.3.3 Uneven wealth distributionThe third disadvantage is uneven wealth distribution. The poor countries are getting poorer while the rich countries are getting richer. This is because globalization unable to reduce poverty. It just will make poor countries become more poor because of the poor countries does not have new technology or budget to develop their business to other countries. For example, some of the poorest countries in the world, especially in Africa, may get even poorer. While the rich countries have the budget to buy new technology in order to produce their product in different countries. It can increase the profit of those countries. In the maquiladora trade zones along the U.S.-Mexican border, food, gas, rent, electricity, transportation, water, and refrigeration costs totaled $54 a week in 1998. The average net weekly pay for Maquila workers in Mexico is $55.77, leaving $1.77 a week to spend on education, clothing, health care, and other necessities (Robert Batterson, Murray Weidenbaum, 2001). Therefore, globalizations just will accumulation of wealth and power in the hands of a few developed economies. It will not decrease the gap of power and wealth between poor countries and rich countries. To understand how many inhabitants of a country are poor, it is not enough to know a country's per capita income. The number of poor people in a country and the average quality of life depend on how equally or unequally income is distributed across the population. On the below,Another negative impact is globalization might reduce the standard of the workers. When a country can outsource labor forces from other country, it can help the companies to save a lots money. But, anything comes with pros and cons. The pros are the companies can save a lot of labor cost and can increase the production of the companies. There are also some negative impacts. For example, the standard of labor force might be reduced. This is because the companies are using the skilled workers previously and they can do anything smoothly. Now, companies use the foreign labors without any skill in their production. This might lead to bad quality production. The companies need to teach the foreign workers to become skilled workers. This might also costly to incur the training fees. For example, in Malaysia, there are many companies that employ foreign workers to work with them. Foreign workers did not have much skill to complete the jobs. So, they make the production become inefficient and incurred more overhead cost.3.5 Globalization does not promote human rightThere are many companies that want to expand their business in order to maximize their profit. So, they expand their operations in other country. All these multinational corporations abuse the human right. To save the employee’s benefits such as EPF, medical care, these corporations used child labor instead of adult labor. The United Nations estimates that tens of millions of children are trafficked around the world as bonded labor or sex slaves; hundreds of thousands of children are forcibly recruited as soldiers in armed conflict. This can help the companies to save a lot of money but it is unethical and legally wrong because they are abusing human right.Besides that, these multinational corporations might force their employees to work overtime. This is unwilling condition. If the employee does not want to work overtime, then he or she will be fired by the employer and no compensations are giving to them. In addition, the labors might work in unhealthy wo rk condition. This will affect the employees’ health, but the corporations did nothing for their employees. They just let them work in the unhealthy work condition. According to one of the statistics taken from Washington University in St. Louis, 27 million people are working under various forms of slavery in the world today, and the number is growing (Robert Batterson, Murray Weidenbaum, 2001). According to the U.N., some 20 million are South Asians in debt bondage. Whole families, including children, are trapped in indentured servitude to pay debts incurred for medical expenses, crop failures, and food. Their debts areinflated by outrageous food prices and usurious interest rates. But even in the United States, the CIA estimates that 45,000 women and children are smuggled into the country each year and are forced to work as prostitutes or maids, on farms and in sweatshops. All these examples show that some of the multinational corporations abuse human right.3.6 Globalization does not provide any benefit to the developing countryPreviously, all the entities and government can only borrow the money within their own country. They cannot borrow money from other country or international body. When there was globalization, borrowing money from other country is not an issue. They can simply borrow money from the international body such as International Monetary Fund (IMF), World Bank and World Trade Organization (WTO). But, this external debt can always keep this developing country in debt, destroy their economies, and further impoverish their peoples. Why we say like this? This is because external debt is paid based on the foreign currency. There is foreign currency risk when the entities of developing country want to pay back the debt. When the currency of the developing country falls, that means the entities need to pay back more money to the lender. Besides that, the interest charged by these international bodies was high as compare to interest charged by local financial institutions. So, this makes the developing countries always in debt. The Asian financial meltdown of 1997-98 was precipitated by tough IMF lending requirements, including floating exchange rates, which let currencies collapse, and spending cuts and tax hikes, which pummeled domestic demand and made economic downturns in Asia even worse (Robert Batterson, Murray Weidenbaum, 2001).5.0 ReferencesCaplan, L. (2009 , July 11). What are the adverse effects of unemployment. Retrieved from /: /homework-help/what-adverse-effects-unemployment-391203Dani Rodrik. (1998). Has Globalization Gone Too Far. Taylor & Francis. Ltd.E. Zedillo. (2000). World Economic Forum. Davos, Switzerland.. (2015). Comparative Advantage. Retrieved from /micro_comparative.php:/micro_comparative.phpGap Between Rich and Poor: World Income Inequality. (n.d.). Retrieved from InfoPlease: /world/statistics/inequality-income-expenditure.htmlHilary, J. (1999, May). GLOBALISATION AND EMPLOYMENT. Retrieved from /: /wp-content/files/2011/03/globalisation_employmentlBDUSl.pdfIMF. (2006, May). 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Retrieved from /: /financial-edge/0811/the-cost-of-unemployment-to-the-economy.aspxThompson, R. L. (2007). Globalization and the Benefits of Trade. Chicago Fed Letter.。