Globalisation's Economic Benefits

Pro globalisation
International trade and investment have been the engines of world growth over the past 50 years. The tonnes of goods traded around the world have grown by 16 times since 1950, reflecting the lowering of tariff barriers. The growth of trade in services is even greater.

The benefits of that growth have been shared. The countries that are getting poorer are those that are not open to world trade, notably many nations in Africa. China’s opening to world trade has brought it growth in income from $1460 a head in 1980 to $4120 by 1999. In 1980, American’s earned 12.5 times as much as the Chinese, per capita. By 1999, they were only earning 7.4 times as much. The gap between rich and poor is also shrinking with most nations in Asia and Latin America.

Many people believe that exports create jobs, and imports cost jobs and that it therefore makes sense to have barriers against imports. This thinking led to the Great Depression in 1930, because so many countries had erected barriers against imports that global trade fell with catastrophic consequences.

Most exports also use some imports. To take a simple example, a country might export packaged sugar, but import the packets. Lowering import barriers makes export industries even more efficient and competitive in world markets. Countries that lower trade barriers concentrate their national energies in industries they are good at, where they have an international advantage. Import barriers encourage countries to focus efforts in industries where they do not have any advantage. It leads to wasteful and lazy investment. There is evidence that developing countries that erect barriers to imports have slower growth in incomes than those that are open to trade.

Companies of all sizes are involved in world trade – the benefits do not just flow to large multi-nationals. In most trading nations, raging from Thailand to France, small firms employing less than 200 people account for between 10 and 25% of exports.

http://www.globalisationguide.org/04.html

My Comments

This article talks about the creation of jobs in the 'poor' countries through globalisation. The fact that the gap between 'poor' countries and the richer ones was increasing is something that cannot be denied. However, due to globalisation, it seems that the gap is decreasing at an increasing rate.

This is very interesting, as globalisation's advantages are at show here. Firstly, the point of protectionism is brought up here. Protectionism was a policy where the country tended to protect its own goods by imposing high taxes on outside goods. This was seen as the most profitable way to earn money by a country, as their local goods earn a lot for their economy. No money is being pumped back into any other country's economy. This theory is also shown as being a bit flawed here.

Globalisation has allowed for poor countries to close the gap between them and the bigger and richer countries. This is through the easier means of setting up a business in other countries. Smaller countries are opening up their trade, making businesses choose the logical choice in setting up their businesses at a cheaper place. Such an idea would have been preposterous in the past, however, it is very possible today due to the positive impacts of globalisation. As the saying goes, 'It's a small world after all'. With the world shrinking due to the impacts of globalisation, its becoming more and more easier to communicate with people from the other side of the world.

On the other hand, globalisation is not all about the good parts. As this link shows, China's currency, the yuan, had actually depreciated in the early days of their reform. China's progress was slow, but still substantial. China's economic growth has greatly influenced the whole world, with many trying to play catch up. The American stranglehold on international trade is being threatened to a certain extent, and this is also a major concern for the Americans. This compunds their fears that they are losing out to the Asians in many aspects of life, from their jobs to their culture.

M.Balaji