The Winners and Losers of Globalization

The Winners and Losers of Globalization

Globalization benefits all countries when a country specializes in a product or service and then exchange that good or service with other countries. But these benefits of globalization are never evenly distributed across the whole economy of a given country. There are always winner and losers.

When it comes to winners and losers, it is helpful to distinguish between long term and short term effects of international trade. The short term winners are manufacturers who produce exportable goods and the consumers who buy imported goods. For instance, American manufacturers benefit to the extent that they can expand their market overseas, while American consumers benefit to the extent that they pay less for imported goods than for domestically produced goods.

The short terms losers are the the domestic producers of importable goods whose prices must now compete with imported goods, and the consumers of exportable products who now have to pay more because of the additional international demand. When Chinese textiles are sold in America the losers are American producers of textiles because Chinese imports are cheaper than American products, while consumers in China also lose because they now have to pay more for textiles because of the rise in international demand.

In the long term the picture looks a little different though. Lets say in exchange for the textiles China exports, it begins to import large amount of cheap wheat from America. The short terms winners are the US producers of wheat and the Chinese consumers of wheat. The long term winners and losers will depend on the factors of production - mostly capitol, land and labor.

To understand the long terms effects of a wheat/textile exchange it is necessary to know that the production of wheat requires a lot of land and just a little labor, while the production of textiles requires a lot of labor and only a little land. In this example the long term winners will be American landowners and Chinese workers, while the long term losers will be Chinese land owners and American workers. The reason is as follows: As the demand for wheat increases internationally the demand for land will increase in America which will drive up rent, while the expansion of the textile market in China will increase the demand for labor which in turn will drive up wages. As textile production in America shrinks, the demand for labor will decrease which will lower wages, while the demand for land in China will decrease, resulting in less rent for landowners in China.

The short term winners and losers of globalization are not necessarily the same as the parties that experience long term gains and losses.

Supply and Demand Curve

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Leave Me a Comment About The Winner and Losers of Globalization 9 comments

nick247 profile image

nick247 6 years ago from United Kingdom

All very true. What's particularly interesting at the moment is how dependant we've all become on each internationally, something which has become obvious due to the volcanic ash grounding so many flights. Kenyan flower growers are losing millions per day as they can't get their flowers out to the countries that buy them (for example). Perhaps it might be better to encourage more localised economies again given how fragile the current system is.

Your Knowledge profile image

Your Knowledge 6 years ago Author

Hi Nick, you make an interesting point. I think is very possible that we are becoming too dependent on globalization, and that there should be a better balance between localized economies and global economy. Thanks for the comment!

liber profile image

liber 6 years ago

I think the difference is free trade and globalization (neo-liberalism). Adam Smith argued convincingly that free trade always benefits both parties, since if both parties didn't stand to benefit from the transaction, it wouldn't occur. (So if you trade me your computer for my bicycle all we can say is that I valued your computer more than my bicycle and you valued my bicycle more than my computer, and now we're both better off). There are other advantages like division of labor etc.

Globalization is different. That's where the U.S. dumps highly subsidized corn into Mexico destroying their agricultural base (one of the main reasons for the current influx of immigration).

As Noam Chomsky said of the North American Free Trade Agreement -- it only has three defects, it's not free, it's not about free trade, and it isn't an agreement.

Moo 6 years ago

This is so much information to take in!

Tiago Marcelo 5 years ago

I wonder when we'll have a global currency. As in, the same kind of money for all countries, everywhere. That would make things a lot easier when traveling.

jdog 5 years ago

globalization is very important yes it is avery very delicate balance

cityalice profile image

cityalice 4 years ago

Interesting information on the effects of globalization, makes since to research exported goods of the land to think about how land prices may be valued in the future.

Hassina Sherjan 4 years ago

Perhaps some countries like Afghanistan does not benefit from Globalization and there must be other countries, who do not benefit. What should be done? Dumping, as one of the symptoms, of Globalization, has been damaging the economy and Afghans' appreciation for quality goods.

Geographer 4 years ago

This is good but i wish more was to do with geography and econmics wasn't brought into it

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