The impact of Globalization

 I think globalization has both positive and negative effects.

1. Free trade

Free trade is a way for countries to exchange goods and resources. This means that countries can specialize in the production of goods with comparative advantages (which means that they can produce goods at a lower opportunity cost). When countries specialize, there are some benefits to trade:

Lower consumer prices

More commodity choices, such as food imports, can lead to a broader diet

Domestic manufacturers have a bigger export market

Economies of scale are achieved by focusing on certain commodities

2. Free flow of labor

The increase in labor migration has brought benefits to workers and recipient countries. If unemployment is high in one country, the chances of finding jobs elsewhere will increase. This labor migration process also helps to reduce regional inequality. This is very effective in the European Union, where many Eastern European workers are moving westward.

In addition, it helps countries with labor shortages fill important jobs. Britain, for example, needs to recruit nurses from the Far East to fill the shortage. However, this issue is also controversial. Some people worry that the free flow of labor will put too much pressure on housing and social services in some countries, and countries like the United States are coping with the process by preventing immigrants from other countries.

3. Increase of scale economy

Production is becoming more and more specialized. Globalization enables goods to be produced in different parts of the world, and this greater specialization can lower average costs and lower consumer prices.

4. More intense competition

In the past, domestic monopolies were protected for lack of competition. However, globalization means that companies face greater competition from foreign companies.

5. Increase investment

Globalization has raised the level of investment. It can play a more important role in attracting investment from developing countries in the short term and in the long term.

Bad influence

1. Free trade may harm developing economies

It is often difficult for developing countries to compete with developed countries, so some people think that developed countries have more free trade benefits. There is a baby industry argument that industries in developing countries need to protect free trade in order to develop. However, developing countries are often hurt by tariff protection, and Western economies have an impact on agriculture.

2. Environmental cost

One problem with globalization is that it increases the use of non renewable resources. It also leads to increased pollution and global warming. Enterprises can also outsource production to places with less stringent environmental standards. However, it can be said that the problem is not globalization, but the failure to set satisfactory environmental standards.

3. Labor loss

Globalization allows workers to move more freely. As a result, some countries find it difficult to capture the best skilled workers who are paid higher elsewhere.

4. Reduce cultural diversity

Globalization leads to the increase of economic and cultural hegemony. With globalization, it can be said that there is less cultural diversity; however, it also brings more choices for some people.

5. Tax competition and tax avoidance

Multinationals like Amazon and Google can set up offices in countries such as Bermuda and Luxembourg with very low corporate tax rates and then pool profits through these subsidiaries. This means that they pay very little tax in the countries where most of their business is done. This means that the government must increase the value-added tax and income tax. This is also seen as unfair competition for domestic companies that do not use the same tax avoidance measures. The increase in capital liquidity means that countries seek to encourage foreign investment by offering the lowest corporate tax. (Ireland, for example, has very low tax rates). This encourages lower corporate taxes, leading to higher forms of other taxes.