Sample Essay on Economic Effects of Globalization

Economic Effects of Globalization

Globalization is a common issue that cuts across the world. Unknown to many this phenomenon has largely contributed to modern day trends in different phases of our lives. Globalization is a process that encompasses international strategies, which expand business operations worldwide. This stemmed from the advancements in communication, coupled with socio-economical, political and environmental developments. In this paper, we shall discuss the economic effects of globalization in the world today.

The first economic impact of globalization relates to free trade. Free trade denotes how countries exchange their goods and natural resources. This means that a country may venture into producing products, which it has competitive advantage over other economies in the world. In turn, free trade has a range of benefits. Firstly, consumers enjoy lower prices, because of low production cost for most products. Production cost is always low owing to economic operational costs. Another advantage of free trade is wide range of products. Here customers have options to choose from because of diversification of resources that allows production of different goods. Free trade further encourages exporting products to the international market. This means that local manufacturers do not have to struggle looking for ready markets for their products. Above all, free trade promotes competition among different manufacturers as they get similar opportunities to sell products to the entire world.

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The second economic impact of globalization is that it allows free movement of labor. Today, there is free migration of labor from one country to another. This has advantages to those seeking jobs and the host economies. In cases where a country has high rates of unemployment, it may consider encouraging its people to seek employment in other countries globally. Besides creating job opportunities, experts argue that labor movement eliminates cases of geographical inequalities. This has effectively worked in EU, with several workers moving to Western economies. Moreover, it offers solutions to labor shortages in some countries. It is important to note that free labor migration could have harmful effects to different economies. For example, host countries may experience pressure on social amenities like housing in cases of huge migrations. To tame this, the U.S has developed law that limits entry of migrants from other nations around the world.

Thirdly, globalization increases economies of scale. Today, most manufacturing are venturing into specialized production. As a result, goods can be produced in any part of the world without any limitation as experienced before this era. Because of specialized, the average cost of production is low. This allows consumers to acquire products at much lower prices. In addition, globalization eliminates monopoly, which has severe effects to the economy. With the existence of a global village, there are more manufacturers producing similar products. Consequently, players in the industry have no option but to deliver high quality and affordable products. Furthermore, globalization encourages investment. This phenomenon attracts short and long-term investors in different sectors of the economy. When multinationals invest in developing economies, this is likely to promote economic growth in these countries.  Besides these advantages, globalization is blamed for environmental degradation, labor drain, reduced cultural diversity, and tax competition among others.

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