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ADVANTAGES OF GLOBALIZATION
Peaceful Relations- Most of the countries have resorted to trade relations with each other
in order to boost their economy, leaving behind any bitter past experiences if any.
Employment- Considered as one of the most crucial advantages, globalization has led to
the generation of numerous employment opportunities. Companies are moving towards
the developing countries to acquire labor force.
Education- A very critical advantage that has aided the population is the spread of
education. With numerous educational institutions around the globe, one can move out
from the home country for better opportunities elsewhere.
Product Quality- The product quality has been enhanced so as to retain the customers.
Today the customers may compromise with the price range but not with the quality of the
product. Low or poor quality can adversely affect consumer satisfaction.
Communication- Every single information is easily accessible from almost every corner
of the world. Circulation of information is no longer a tedious task, and can happen in
seconds. The Internet has significantly affected the global economy, thereby providing
direct access to information and products.
GDP Increase- Gross Domestic Product, commonly known as GDP, is the money value
of the final goods and services produced within the domestic territory of the country
during an accounting year.
Free Trade- Free trade is a policy in which a country does not levy taxes, duties,
subsidies or quota on the import/export of goods or services from other countries. There
are countries which have resolved to free trade in specific regions. This allows consumers
to buy goods and services, comparatively at a lower cost.
Travel and Tourism- Globalization has promoted tourism to great heights. International
trade among different countries also helps in increasing the number of tourists that visit
different places around the world.
External Borrowing- With the help of globalization, there is opportunity for corporate,
national, and sub-national borrowers to have better access to external finance, with
facilities such as external commercial borrowing and syndicated loans.
DISADVANTAGES OF GLOBALIZATION
Health Issues
Globalization has given rise to more health risks and presents new threats and challenges for
epidemics.
The dawn of HIV/AIDS. Having its origin in the wilderness of Africa, the virus has
spread like wildfire throughout the globe in no time.
Food items are also transported to various countries, and this is a matter of concern,
especially in case of perishable items.
The Corona Virus Pandemic.
Loss of Culture- With large number of people moving into and out of a country, the
culture takes a backseat. People may adapt to the culture of the resident country. They
tend to follow the foreign culture more, forgetting their own roots. This can give rise to
cultural conflicts.
Uneven Wealth Distribution- It is said that the rich are getting richer while the poor are
getting poorer. In the real sense, globalization has not been able to reduce poverty.
Environment Degradation -The industrial revolution has changed the outlook of the
economy. Industries are using natural resources by means of mining, drilling, etc. which
puts a burden on the environment.
Disparity- Though globalization has opened new avenues like wider markets and
employment, there still exists a disparity in the development of the economies. Structural
unemployment owes to the disparity created. Developed countries are moving their
factories to foreign countries where labor is cheaply available.
Conflicts- It has given rise to terrorism and other forms of violence. Such acts not only
cause loss of human life but also huge economic losses.
Cut-throat Competition- Opening the doors of international trade has given birth to
intense competition. This has affected the local markets dramatically. The local players
thereby suffer huge losses as they lack the potential to advertise or export their products
on a large scale. Therefore, the domestic markets shrink.
CAPITALISM AKA MARKET ECONOMY
In this type of economy, there is a separation of the government and the market. This
separation prevents the government from becoming too powerful and keeps their interests
aligned with that of the markets.
There is no government intervention in a pure market economy (“laissez-faire“).
In a free market economy, firms and households act in self-interest to determine how
resources get allocated, what goods get produced and who buys the goods. This is
opposite to how a command economy works, where the central government gets to keep
the profits
Advantages
Consumers pay the highest price they want to, and businesses only produce profitable
goods and services. There is a lot of incentive for entrepreneurship.
This competition for resources leads to the most efficient use of the factors of production
since businesses are very competitive.
Businesses invest heavily in research and development. There is an incentive for constant
innovation as companies compete to provide better products for consumers.
Disadvantages
Due to the fiercely competitive nature of a free market, businesses will not care for the
disadvantaged like the elderly or disabled. This lack of focus on societal benefit leads to
higher income inequality.
Since the market is driven solely by self-interest, economic needs have a priority over
social and human needs like providing healthcare for the poor. Consumers can also be
exploited by monopolies.
Advantages
If executed correctly, the government can mobilize resources on a massive scale.
This mobility can provide jobs for almost all of the citizens.
The government can focus on the good of society rather than an individual. This focus
could lead to a more efficient use of resources.
Disadvantages
It is hard for central planners to provide for everyone’s needs. This challenge forces the
government to ration because it cannot calculate demand since it sets prices.
There is a lack of innovation since there is no need to take any risk. Workers are also
forced to pursue jobs the government deems fit.
Mixed Economy
Advantages:
There is less government intervention than a command economy. This results in private
businesses that can run more efficiently and cut costs down than a government entity
might.
The government can intervene to correct market failures. For example, most governments
will come in and break up large companies if they abuse monopoly power. Another
example could be the taxation of harmful products like cigarettes to reduce a negative
externality of consumption.
Governments can create safety net programs like healthcare or social security.
In a mixed economy, governments can use taxation policies to redistribute income and
reduce inequality.
Disadvantages
There are criticisms from both sides arguing that sometimes there is too much
government intervention, and sometimes there isn’t enough.
A common problem is that the state-run industries are often subsidized by the
government and run into large debts because they are uncompetitive.
The Low-income Countries- The characteristics shared by countries at this income level are:
Limited industrialization and high percentage of the population engaged in agriculture
and subsistence farming.
High birth rates
Low literacy rates
Heavy reliance on foreign aid.
Political instability and unrest.
Concentration in Africa south of Sahara.
Low-Middle-Income Countries- Sometimes, countries that can be assigned to the lower income
and lower-middle income categories are known collectively as less-developed countries (LDCs).
This to indicate a contrast developing (upper-middle-income) countries and developed (high
income) countries.
Free-trade Area- A free trade area (FTA) is formed when two or more countries agree to
abolish all internal barriers to trade among themselves. Countries that belong the free trade area
can do and maintain independent trade policies with respect to non-FTA countries. A system of
certificates of origin is used to avoid trade diversion is in favor of low-tariff members.
Customs Union- A custom union represents the logical evolution of a free trade area. In addition
to eliminating internal barriers to trade, members of a custom s union establish common external
barriers. On January 1, 1996, the European Union and Turkey initiated a customs union in an
effort to boost two-way trade above the current annual level of $20 billion. The arrangement
called for elimination of tariffs averaging 14% that added $1.5 billion each year to the cost of
European goods imported by Turkey.
Common Market- A common Market is the next step in the spectrum of economic integration.
In addition to the removal of internal barriers to trade and the establishment of common external
barriers, the common market allows for free movements of factors of production, including
labor, capital and information.
North American Free Trade Agreement- The North American Free Trade is an agreement
signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North
America. The agreement came into force on January 1, 1994. It superseded the 1988 Canada–
United States Free Trade Agreement between the U.S. and Canada, and is set to be replaced by
the 2018 United States–Mexico–Canada Agreement.
Andean Community- The Andean Community (Spanish: Comunidad Andina, CAN) is a
customs union comprising the South American countries of Bolivia, Colombia, Ecuador, and
Peru. The trade bloc was called the Andean Pact until 1996 and came into existence when the
Cartagena Agreement was signed in 1969. Its headquarters are in Lima, Peru.
The Andean Community has 98 million inhabitants living in an area of 4,700,000 square
kilometers, whose Gross Domestic Product amounted to US$745.3 billion in 2005, including
Venezuela, who was a member at that time. Its estimated GDP PPP for 2011 amounts to
US$902.86 billion, excluding Venezuela.
Common Market of the South (Mercosur)- Mercosur, officially Southern Common Market
(Portuguese: Mercado Comum do Sul or Mercosul; Guarani: Ñemby Ñemuha) is a South
American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in
1994. Its full members are Argentina, Brazil, Paraguay and Uruguay. Venezuela is a full member
but has been suspended since December 1, 2016. Associate countries are Bolivia, Chile,
Colombia, Ecuador, Guyana, Peru and Suriname. Observer countries are New Zealand and
Mexico.
Mercosur's purpose is to promote free trade and the fluid movement of goods, people, and
currency. It currently confines itself to a customs union, in which there is free intra-zone trade
and a common trade policy between member countries. The official languages are Spanish,
Portuguese, and Guarani. Since its foundation, Mercosur's functions have been updated,
amended, and changed many times: it is now a full customs union and a trading bloc. Mercosur
and the Andean Community of Nations are customs unions that are components of a continuing
process of South American integration connected to the Union of South American Nations
(USAN).
Europe
The European Union- The European Union has established a single market across the territory
of all its members representing 512 million citizens. In 2017, the EU had a combined GDP of
$21 trillion international dollars, a 17% share of global gross domestic product by purchasing
power parity (PPP). As a political entity the European Union is represented in the World Trade
Organization (WTO). EU member states own the estimated second largest after the United States
(US$93.6 trillion) net wealth in the world, equal to 25% (US$70.8 trillion) of the $280 trillion
global wealth.
Middle East
The Gulf Cooperation Council- A common market was launched on 1 January 2008 with plans
to realise a fully integrated single market. It eased the movement of goods and services.
However, implementation lagged behind after the 2009 financial crisis. The creation of a
customs union began in 2003 and was completed and fully operational on 1 January 2015. In
January 2015, the common market was also further integrated, allowing full equality among
GCC citizens to work in the government and private sectors, social insurance and retirement
coverage, real estate ownership, capital movement, access to education, health and other social
services in all member states. However, some barriers remained in the free movement of goods
and services. The coordination of taxation systems, accounting standards and civil legislation is
currently in progress. The interoperability of professional qualifications, insurance certificates
and identity documents is also underway.
Africa
Economic Community of West African States- The union was established on 28 May 1975,
with the signing of the Treaty of Lagos, with its stated mission to promote economic integration
across the region. A revised version of the treaty was agreed and signed on 24 July 1993 in
Cotonou. Considered one of the pillar regional blocs of the continent-wide African Economic
Community (AEC), the state’s goal of ECOWAS is to achieve "collective self-sufficiency" for
its member states by creating a single large trade bloc by building a full economic and trading
union.
South African Development Community (SADC)- The SADC Free Trade Area was
established in August 2008, after the implementation of the SADC Protocol on Trade in 2000
laid the foundation for its formation. Its original members were Botswana, Lesotho, Madagascar,
Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe,
with Malawi and Seychelles joining later. Of the 15 SADC member states, only Angola and the
Democratic Republic of Congo are not yet participating. The SADC-Customs Union, scheduled
to be established by 2010 according to SADC's Regional Indicative Strategic Development Plan
(RISDP), is unlikely to become reality in the near future. This is because the European Union's
Economic Partnership Agreements (EPA) with their inherent extra-regional free trade regimes
provided for several SADC members more benefits than deeper regional market integration
within the framework of a SADC-Customs Union. Since these SADC countries formed four
different groupings to negotiate and implement different Economic Partnership Agreements with
European Union, the chance to establish a SADC-wide common external tariff as prerequisite for
a regional customs union is missed.
Efficiency- Ray Kroc, the marketing genius behind McDonald’s set out with one goal: to serve a
hamburger, French fries, and milkshake to a customer in 50 seconds or less. In the restaurant,
most customers bus their own trays, or better still, drive away from pick-up window taking
whatever mess they make with them. Efficiency is a value virtually without criticism in our
society. We tend to think that anything done quickly is, for that reason alone, good.
Calculability- The first McDonald’s operating manual declared the weight of a regular raw
hamburger to be 1.6 ounces, its size to be 3.875 inches across and its fat content to 19%. A slice
of cheese weighs exactly half an ounce, and French fries are cut precisely 9/32 of an inch thick.
Think about how many objects around the home, the workplace, or on the campus are designed
and mass-produced uniformly according to a standard plan. Not just our environment but our life
experiences-from traveling the nation’s interests to sitting at home viewing television-are now
more deliberately planned than ever before.
Uniformity and predictability- An individual can walk into a McDonalds’s restaurant almost
anywhere and buy the same sandwiches, drinks, and desserts prepared in precisely the same way.
Uniformity results from a highly rational system that specifies every action and leaves nothing to
chance.
Control Through automation- The most unreliable element in the McDonald’s system is
human beings. People, after all, have good and bad days, sometimes let their minds wander, or
decide to try something a different way. To minimize the unpredictable human element,
McDonald’s has automated their equipment to cook food at a fixed temperature for a set length
of time. Even the cash register at a McDonald’s is keyed to picture of the items, so that ringing
up a customer’s orders is as simple as possible.