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Effects of Globalization and Liberalization; Positive and Negative Effects

Updated on July 31, 2017
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IRSHAD CV has been a student in Economics. Now he is doing Masters in Economics. He completed B.A. Economics from the University of Calicut.

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Globalization generates employment opportunitiesGlobalization enriches the industrial sectorInvestment flows will be higher due to liberalizationEconomic Integration is the base of Globalization and Liberalization
Globalization generates employment opportunities
Globalization generates employment opportunities | Source
Globalization enriches the industrial sector
Globalization enriches the industrial sector | Source
Investment flows will be higher due to liberalization
Investment flows will be higher due to liberalization | Source
Economic Integration is the base of Globalization and Liberalization
Economic Integration is the base of Globalization and Liberalization | Source

Introduction

Human beings are marching from its one stage of progress to another stage with making lot of changes. Now, we are living in a highly developed world. When we conduct a look to the past experiences, the history of economic thought it discloses many things. Whatever the society it may be, every system is profoundly depends on two things. That is wants and scarcity. There is no human being without wants for their survival since a reasonable wants are essential to build a meaningful life, culture and even a civilization. So, to satisfy human wants everyone depend each other. On the other side the supply of commodities to satisfy these wants are scarce. But, a reasonable satisfaction of the utility of resources and good management of resources will help us to balance the wants and supply. This same thing is the base for any society. Now, the globalization through liberalization policies opened a great chance to develop a better world without borders and barriers.

Here this essay is aimed to explain about globalization and liberalization, its opportunities, its challenges, its scope etc.

Globalization and Liberalization

Globalization and liberalization is the two product of 20th century. This 21st century welcomed the phenomenon with new expectations. Now, almost all the corner of the world witnessed the same phenomenon. It removed borders between countries and opened a way for the making of friendly contacts among them. Here also the main reason of globalization is the same mentioned in introduction part. That is mutual depends of countries to satisfying their own wants.

Meaning: Simply globalization is the phenomenon of integration of all economies through opening the economies. That is open economies are those economies, where there is no restrictions or barriers to make economic transactions. This is actively done through more international trade. So, the world become as a small village.

On the other side, liberalization is an essential action which supports globalization. Liberalization simply refers to the process of deregulating the barriers and obstacles to make trade. This may be done through amending laws and rules relating to international affairs. Any way both globalization and liberalization envisaged all over the world irrespective of underdeveloped or developing or developed countries.

In short, globalization and liberalization built a new bridge in the human life which opens many opportunities as well as challenges. Generally developed countries are enjoying more from globalization and liberalization. On the contrary, there are many opportunities as a part of this phenomenon for underdeveloped countries to make great progress. Because everyone can interact with other economy without barriers for the purpose of trade, exchanges etc.

Common Effects of Globalization and Liberalization

As mentioned above globalization and liberalization creates many opportunities and threats it may affect on an economy with positive and negative effects. Generally the reaction of globalization and liberalization depends on the nature of the economy. That is developed countries are experiencing many things which are entirely different from the experiences of under developed countries. Any way following section briefly explained the common effects that may experience all over the world.

i) Opening of economic system

Till the raising of globalization and liberalization, there were so many closed economies over the world. They were characterized with complete regulations and restrictions for interacting with external sector. Such economies are concentrated on it’s own internal matters. After the phenomenon of globalization the world entirely changed. Then every country began to open its economy. For that every country altered their rules and laws to activate more trade. The final result was the raising of opened economies all over the world. Even then, the government of each country claims a partial controlling power over its economy. Further, now governments act as an agency to build a healthy and friendly relationship between countries.

ii) Building of world as a single economy or village

As a part of globalization, every country are began to interact with each other. This increased the amount of inflow and outflow of economic variables like lending, investment, borrowings etc. So, the world become like a single and small village. Any product produced in any corner of the world can be reached to the rest of the world very easily. Similarly the flow of human capital is also increased. In short, even the people are living under different labels or countries there is an interaction which is possible because of globalization and liberalization.

iii) More international trade

Increasing of economic activities especially trade will be the main effects of globalization and liberalization. Since, regulations like higher import/export duty are written off, more trade is possible.

iv) Increasing of efficiency

Liberalization and globalization will ensure the investment, which creates stiff competition among business firms. So, every industrialist will try to sell commodities with good quality. So, the higher level competition will ensure the efficiency of the economy.

Similarly, flow of deposits, investment, remittances, expenses etc are also increased due to globalization.

Positive and Negative sides of globalization and liberalization

Globalization reasoned for many impacts which may either positive or make challenges to the economy. Following are the list of major positive and negative sides of globalization and liberalization.

Positive Points
Negative Points
It provides more opportunities
Chances for exploitations
It provodes more job opportunities
Developed countries may gain more
It ensure the mutual relationship between countries
Chances for collapsing of local values
It increases the competition level and by the quality
Ignoring of the tradition
Increase the flow of investment
Ignoring the local needs
It reduce the obstacles and barriers
Every country may not deregulate its economy in a same way

Conclusion

Globalization and liberalization are two trends emerged as a product of 20th century. As a part of this, the world witnessed so many changes. It reduced complexities across the globe for making a better international relationship. Trade became a big factor of globalization. In this system more autonomy is enjoying by investors, consumers, trades etc. competition is another feature which ensures the enjoyment of satisfaction since those who are able to compete with others can enjoy the benefits of globalization.

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