How Globalization Is Impacting the World Economy

Introduction 

Globalization is defined as the process by which people, governments, and companies of diverse nations integrate and interact through investments, international trade, and information technology. Globalization helps in breaking down geographical boundaries between different regions and transforms the world into a small village. Primarily, the term globalization is used to define the aspect of the economic integration of global markets as well as the social-cultural integration between countries. Globalization affects global economies in some ways, including increasing cultural exchange and internal trade. Further, the process of globalization affects such elements as economic development and prosperity, environment, culture, political systems, and the human well-being in the global societies. Globalization's primary goal involves providing organizations with competitive advantages by lowering their operating costs as well as enabling them to access more consumers, products, and services. Globalization achieves its objective through opening up new markets, the diversification of resources, and allowing for the access new raw materials. Globalization has achieved its objective to a great extent, and it has successfully connected global markets, allowing multinational organizations to buy, manufacture, and sell products across the globe. This paper examines the concept of globalization and its impact on the economy. 

Components of Globalization 

Globalization comprises of such elements as industrialization, then Gross Domestic Product (GDP), and the Human Development Index (HDI) (Barfield, Heiduk & Welfens, 2003). GDP s a measure of economic output that refers to the total market value of the entire services and finished products that are produced within the borders of an economy in a year. Industrialization, on the other hand, refers to the process that enhances economic development and social change, which is driven by technological advancements in the transformation of economies into modernized industrial nations. Finally, HDI comprises of a nation’s education and knowledge which are measured by the level of adult literacy, the life expectancy of the population, and the level of income. The extent to which an economy is globalized depends on the strategies that the economy utilizes to pursue investment opportunities and higher levels of economic development. 

Factors that facilitate the growth of Globalization 

The key factors that drive globalization in the modern world are technology and public policy. Over the last twenty years, governments across the world have incorporated free market economic systems into monetary policies, fiscal policies, and trade agreements, thus increasing cross-border investments, trade, and migration (Barfield, Heiduk & Welfens, 2003) . Further, the evolution of the free market economic systems has played a crucial role in stimulating the potential of domestic production as well as opening countries to the broad financial opportunities in the foreign markets. Presently, global governments are focusing on minimizing the barriers to trade and promoting international commerce regarding goods, services, and investments. Thus, corporations are increasingly taking advantage of the new foreign market opportunities, and they have constructed foreign factories and set up marketing and production arrangements with their foreign partners. Hence, an international business and industrial structure have become crucial to facilitate efficient management and operations of organizations operating in the global markets. 

On the other hand, technological advancements, which has facilitated efficient flow of information throughout the world has enabled people to gain more information regarding available investment opportunities and economic trends ( Collier & Dollar, 2002) . Further, technology has made the transfer of financial assets and investments in foreign markets easier, mainly due to the advancements in communication technologies, which play a significant role in enhancing collaborations with foreign partners. 

The Globalization Controversy 

The concept of globalization remains exceptionally controversial due to its positive and negative impacts on the global economies. Proponents of globalization postulate that the concept enables developing countries as well as their populations to realize economic development, which helps in boosting their living standards ( Collier & Dollar, 2002) . However, the opponents of the concept posit that creating international free markets only benefits the multinational organizations in the developed world at the expense of ordinary people, local enterprises, and local cultures. Hence, there is a significant resistance to globalization as governments and people strive to efficiently manage the flow of labor, capital, ideas, and goods, which comprise the present wave of globalization. 

The Impact of Globalization on the Economy 

Negative Impacts 

Although globalization is associated with numerous benefits, the concept has been criticized for some reasons. First, economists have observed that whenever the economies of different countries are interconnected, an economic recession in one of the countries is likely to cross borders and negatively impact on the economies of the other countries ( Collier & Dollar, 2002) . Thus, opponents of globalization maintain that such economic interdependency threatens to weaken some economies and countries via a domino effect whenever a problem emerges. An ideal case that elaborates the argument is the case of Greece, whereby when its debt crisis, which threatened to collapse the economy in 2009-2010, was experienced all over Europe, and economies such as Europe had to implement quick measures to prevent their economies from being affected ( Taylor, 2011) . 

Secondly, critics hold that globalization promotes wealth disparity between the Western world and the developing countries. The critics argue that free trade translates to higher risks of failure for small, family or privately owned companies, which cannot compete in global markets. The wealth disparity emanates from the aspect of the digital divide, where some regions have greater internet access and computer technology than others, leading to the concentration information, as well as power in the hands of a few. As a result, specific groups acquire resources and power that goes beyond that of a single nation, allowing the groups to present new threats to human rights from an international perspective. The wealth disparities also pose a threat of conflict and violence between the wealthy and poor regions. 

Thirdly, critics argue that although the global living standards have raised with the increased industrialization of the third world countries, the standards of living have significantly declined in the developed nations. For instance, the United States, the middle class is declining following globalization, which is primarily associated with the aspect of outsourcing for labor ( Lutz & Lutz, 2016) . As a result, workers in the United States are exposed to compete for jobs internationally, which makes it more difficult for them to access jobs due to the availability of cheaper labor from the developing nations. Moreover, globalization is associated with promoting climate change and global warming following the increased emission of greenhouse gases. 

Further, the increased competition in the international market has led to the abuse and overuse of natural resources, as well as other undesirable consequences of the increased demand for goods and services. Finally, critics argue that globalization has made societies and economies more homogenized, citing the example of America, where the American culture and products have spread to other global economies more than the extent to which foreign cultures and products have spread into America ( Lutz & Lutz, 2016) . Such a scenario is detrimental to the indigenous smaller outfits and brands, which cannot efficiently compete with global giants. 

Positive Impacts 

Globalization presents numerous net benefits to individual economies across the globe by increasing competition, enhancing the efficiency of markets, distributing wealth equally globally, and increasing competition. Some of the benefits that globalization presents include foreign direct investment, which tends to increase at a higher rate than the world trade growth, therefore, helping to boost technology transfer, the growth of global companies, and industrial restructuring (Lutz & Lutz, 2016). Further, globalization helps to encourage new technological developments, especially in the growth of FDI, which is essential in improving economic output by enhancing the efficiency of processes. Moreover, globalization provides companies with opportunities to benefit from economies of scale, which minimizes prices and costs and further enhances economic growth, although the concept can be harmful to smaller organizations that focus on competing domestically. 

Also, globalization has contributed to the growth of the industrial and financial sectors, an aspect that has facilitated the creation of new opportunities for developing as well as industrialized countries. Developing nations have benefitted most from globalization since they have gained access to foreign capital and investors. Further, developing economies have benefitted from the shift of wealth from the developed nations to the less developed nations (Stallings, 2001). Globalization helps to shift wealth through such measures as a foreign direct investment and granting employment opportunities to local populations through multinational firms that set up industries in developing nations with the aim of lowering their cost of production. The shift in wealth has further helped to improve the standards of living for the people in developing nations. Following the increased access to foreign lending, developing nations can improve their infrastructure, including health care, roads, social services, and education, thus raising the living standards of the nations. 

Moreover, globalization allows developing nations to access new markets through the free trade markets. Thus globalization helps to eliminate trade barriers and gain access to a broader global market. Such opportunities enable local companies to grow and develop new technologies, which are essential in producing new services and goods to enable them to compete effectively in the highly competitive global markets. Hence, globalization plays a crucial role in enabling developing nations to catch up with their industrialized counterparts much faster by creating jobs and expanding and diversifying their economies (Stallings, 2001). Further, globalization helps to bring technology and jobs to developing nations through the practice of outsourcing, which is crucial for multinational organizations to lower their production and labor costs. 

Further, globalization broadens the idea of social justice from both an international and national perspective, including such aspects as human rights, equality, and the dignity of people across the globe. Proponents of globalization argue that the concept has promoted human rights globally. On the other hand, the spread of pop culture, which is mostly influenced by globalization, is regarded as a beneficial aspect in promoting cultural globalization since the exchange of art, ideas, music, and language enhances understanding between the diverse global cultures (Barfield, Heiduk & Welfens, 2003). Additionally, the increased competition that companies experiences with the expansion of globalization challenge companies to offer better quality goods and services so that they can remain relevant in the global markets. Moreover, companies seek to create more value for their customers by offering high-quality products at lower prices in comparison with companies. As a result, consumers benefit from improved products that are accessible at lower prices. 

Also, globalization facilitates global stability and peace. Globalization creates an environment where diverse economies largely depend on each other, a factor that eliminates the risk of countries fighting each other. Although aspects between nations are still experienced, globalization helps to promote peace since war threatens the financial health of nations that depend on each other. Further, by promoting global peace, globalization plays a critical role in promoting global economic growth and development by creating a conducive environment for investment and smooth running of business activities. As a result, the world benefits from greater wealth equality, mainly by enabling the expansion of global firms into developing countries and offering employment opportunities to the local citizens in the developing region (Stallings, 2001). The reduction of unemployment levels in the developing regions translates to increased household incomes, which are further saved and re-invested. The increased investments are essential in promoting economic growth in the developing nations through setting up firms that offer employment to the local populations as well as contributing towards the development of infrastructure. 

Finally, globalization promotes economic reorganization at the national, international, and sub-national levels regarding the integration of financial markets, international trade, and production. Such reorganization affects the capitalist social and economic relations through such concepts as microeconomic events, including competitiveness, and multilateralism at the global level (Barfield, Heiduk & Welfens, 2003). The transformations that emerge from globalization affect the application of technology, the labor process, class structure, and the manner in which capital is organized. Globalization helps firms to lower their operating costs since with globalization; the expansion of businesses does not necessarily translate to higher labor costs since business can outsource labor from regions where it is relatively cheaper. 

Conclusion 

The concept of globalization affects almost all aspects of life in the modern world, and it is expected to continue expanding as more economies are implementing policies to support global trade and other elements of globalization. The concept of globalization presents several demerits to global economies, including increasing wealth disparities, which emanates from the idea that developed nations accumulate more wealth than the developing countries due to their ability to raise more capital, which helps them to overcome the barriers and risks associated with foreign markets. Further, although globalization helps in improving the living standards of individuals in developing countries, the concepts threatens to lower the standards of living in developed nations since citizens compete for employment opportunities internationally. However, despite the negative impacts that globalization poses, economists maintain that globalization is an essential force in driving global economic growth. Moreover, the benefits of globalization surpass the negative consequences, which make it crucial for global economies to embrace the concept. Some of the benefits of globalization include the redistribution of wealth between the developed and developing nations, creation of employment opportunities in poor countries, which helps to grow such economies; and access to higher quality products following the high global competition, which forces firms to offer value to customer in order to remain successful in the global market among other benefits. 

References 

Barfield, C., Heiduk, G. & Welfens, P. (2003).  Internet, Economic Growth, and Globalization: Perspectives on the New Economy in Europe, Japan and the USA . Berlin, Heidelberg: Springer Berlin Heidelberg. 

Collier, P. & Dollar, D. (2002).  Globalization, growth, and poverty: building an inclusive world economy . Washington, DC New York, N.Y: World Bank Oxford University Press. 

Lutz, B. & Lutz, J. (2016).  Globalization and the economic consequences of terrorism . London: Palgrave Macmillan. 

Stallings, B. (2001).  Globalization and liberalization: the impact on developing countries . Santiago, Chile: United Nations, ECLAC. 

Taylor, S. (2011). Financial Crisis in the European Union: The Cases of Greece and Ireland.