The Roles of Globalization in the Development of An Economy
Globalization is the process of increased interconnectedness among countries. The thriving economic development that is gained because of the increased connections between countries usually results in the betterment of society, and an overall enhanced way of life. A country’s success in economic development depends strongly on their ability to globalize. Because international unification of national economies has immeasurable effect, globalization plays a key role in the future of the world. This paper will pursue the roles globalization has played in the world, as well as its overall impact on the economy.
Globalization has different meanings to different people. For instance, a someone may have the idea that offshore sourcing from U.S. soil could deteriorate jobs and incomes. This type of outsourcing occurs when the production of a product in one country leads to the finalization of the product in another country. Since the product is not completed, clearly there needs to be a worker to finish the job. If offshore sourcing was eliminated and production could occur on U.S. soil, there would be many more jobs to offer. Although there may be required resources abroad, there is always a way around it – import the necessary resources so that production can be finalized by an American worker.
There are many components that attribute to globalization, such as GDP (Gross Domestic Product). GDP is the market value of all finished goods and products within a country, and provides a measure of a certain country’s economic stability. Regarding globalization, countries will not want to interact with a country that has a low GDP per capita, unless they require a certain resource. GDP is a dominant factor in globalizing the world, and has a huge impact on economic growth mostly in a positive manner. Research has confirmed that GDP, as well as other variables such as foreign direct investment, has a correlation between the flow of trades and the impact on economic growth. Nicolas Pologeorgis claimed in his article on globalization that, “Foreign Direct Investment’s impact on economic growth has had a positive growth effect in wealthy countries and an increase in trade and FDI, resulting in higher growth rates” (Pologeorgis). Clearly, globalization can result in a positive economic outcome if used correctly.
Statistical evidence has shown that globalization is beneficial, but in some cases, it is not. Many people of the world assume that the costs of globalization will always outweigh benefits. Measures of GDP can indicate that poorer countries may not have the beneficial impact of globalization in comparison to wealthier countries. Competition is a problem for these less wealthy countries. For instance, free trade helps trading internationally, but it can create problems for the smaller countries that cannot compete with these highly-wealthy countries, such as the U.S. It is possible that free trade can increase labor and production costs which thus affects the outsourcing of jobs from countries with higher wages. There is a component of globalization known as comparative advantage – countries compete globally in all perspectives, and some have the higher end of the spectrum due to resources that are in strong demand.
Globalization indicates that there are major benefits, such as providing opportunities for all areas of business. When a country begins opening itself to the world market, globalization can have a positive outlook for enhancing economic opportunity to flourish. Although economists’ statistics show that globalization is mostly profitable, it also can hurt poor countries. In an economical perspective, globalization is absolutely needed. Without certain resources that are used in the production of a product, the world economy could ultimately fail. The U.S. needs aluminum from China. China needs diamonds from Africa. Africa needs food and water from any country. This process continues through all countries, and clearly globalization is needed on a globally economic spectrum.
Arndt, Sven. “Globalization and the Open Economy.” The North American Journal of Economics and Finance. JAI Press Inc., 1997, pp. 71-79.
Pologeorgis, Nicolas. “How Globalization Affects Developed Countries.” Investopedia. Investopedia, LLC, 6 Mar. 2017.
Sheppard, Eric. "Trade, Globalization and Uneven Development: Entanglements of Geographical Political Economy." Progress in Human Geography, vol. 36, no. 1, Feb. 2012, pp. 44-71.
© 2017 Colby Schreiber