Advantages and disadvantages of Globalisation

Globalisation has two meanings, 1.a good meaning of increasing free trade and capital flows to the 3rd world so they grow and develop and 2. a less pleasant aspect of unfair Globalisation – all the bad aspects in reality where the west imposes high tariffs keeping ldcs out of its rich markets and farm subsidies wrecking 3rd world farmers and the 3rd world. 

Positive results of globalisation Globalisation is where the world's separate economies become integrated into one as trade grows, capital moves from MDCs to LDCs and labour migrates the opposite way. This comes from the removal of barriers to integration bringing a single world market. The WTO negotiations have brought many trade barriers down, cheaper transport, the internet and telecommunications and the rise of the NICS all are leading to rapid globalisation.

We all gain from increased specialization and CA. The 3rd world gains jobs, exports and allocative efficiency as they concentrate on what they are best at producing. Western capital and technology sharply increases their productivity and living standards. Cheap labour "exploitation" leads to an income, and an end to absolute poverty and then higher wages. The open economies that welcomed foreign investment, that focused on exports and created market friendly environments gained the fastest growth – the NICS and now the emerging economies.

The west gain cheaper imports, competition keeping inflation down and growth up as we reallocate resources to higher value industries. Any return of profits are small compared to these points. Export led growth brings structural change and diversification for LDCS, monoculture leads to stagnation, unstable earnings and 3rd world debt. True Globalisation should bring the advantages of free trade (make sure you know them) – competition, productive and allocative efficiency, comparative advantage and huge gains from specialization, economies of scale and consumer choice. It also should provide the 3rd world with desperately needed Western capital and technology while the West gains the world's poor migrants to meet their labour shortages. 

This simple free market view of globalisation suggest it is always good, apart from short term disruption from declining industries before others grow, and perhaps some social disruption from migration and multinational investments. World markets become more perfect and competitive, and we all gain. The 3rd world gains most from exports to vast western markets. Others follow the path of the NICS out of isolation and poverty through export led industrialization and the competitive efficiency brought by being open economies. Population pressures like unemployment are eased by migration to MDCs and jobs created by MNCs investing in capital starved LDCs. Globalisation fights poverty but only when good LDC governments impose good standards on work conditions, safety, training and the environment. Weak governments could let globalisation produce the protestor's worst nightmaqres.

Negative aspects of globalisation But globalisation has become a dirty word, reflecting a greedy world. The economists Stiglitz (chief economist World bank and Nobel prize winner in 2001) led the attack in his book "globalisation and its discontents" Globalisation in its present reality is often bad because of western power and also weak governments in the 3rd world. In reality western dominated Globalisation imposes barriers against free trade from 3rd world exports protecting western industry, multinationals and farmers. Some uncontrolled MNCs may damage the environment and use child labour as some ldc governments may be weak or corrupt and let them. Also sometimes ldc governments should prevent unstable capital flows.

FDI may be good but short-term hot money can flood out of a country and wreck its exchange rate, destroy confidence and cause a huge deflationary collapse. Globalisation can be good for the 3rd world but we do not let it happen in ways that help the 3rd world escape poverty. Western taxpayers and consumers get a bad deal as well as 3rd world farmers and manufacturers. 

There are 4 main criticisms and areas needing reform. 1.High Western tariffs on manufactured goods, especially textiles and processed food and raw materials – the very products cheap labour LDCs should specialize in under free market (CA) that the West preaches. More real globalisation is needed here – fair free trade. It is wrong that we import raw coffee and cocoa tariff free, but impose tariffs on chocolate and coffee processed into instant and packaged form. We keep the high value manufacturing to ourselves.