Globalization

Corporations gain a competitive advantage on multiple fronts through globalization. They can reduce operating costs by manufacturing abroad, buy raw materials more cheaply because of the reduction or removal of tariffs, and most of all, they gain access to millions of new consumers.

Globalization's motives are idealistic, as well as opportunistic, but the development of a global free market has benefited large corporations based in the Western world. Its impact remains mixed for workers, cultures, and small businesses around the globe, in both developed and emerging nations.

Globalization is not a new concept. Traders travelled vast distances in ancient times to buy commodities that were rare and expensive for sale in their homelands. The Industrial Revolution brought advances in transportation and communication in the 19th century that eased trade across borders.

The think tank, Peterson Institute for International Economics (PIIE), states globalization stalled after World War I, and nations' moved toward protectionism as they launched import taxes to more closely guard their industries in the aftermath of the conflict. This trend continued through the Great Depression and World War II until the U.S. took on an instrumental role in reviving international trade.

1. Globalization has sped up at an unprecedented pace, with public policy changes and communications technology innovations cited as the two main driving factors. One of the critical steps in the path to globalization came with the North American Free Trade Agreement (NAFTA), signed in 1993.

2. One of NAFTA's many effects was to give American auto manufacturers the incentive to relocate a portion of their manufacturing to Mexico where they could save on the costs of labour.

3. NAFTA was replaced in 2020 by the United States-Mexico-Canada Agreement (USMC).

4. Governments worldwide have integrated a free market economic system through fiscal policies and trade agreements over the last 20 years. The core of most trade agreements is the removal or reduction of tariffs.

This evolution of economic systems has increased industrialization and financial opportunities in many nations. Governments now focus on removing barriers to trade and promoting international commerce.

In essence, globalization is about the world becoming increasingly interconnected. Countries today are more connected than ever before, due to factors such as air travel, containerized sea shipping, international trade agreements and legal treaties, and the Internet. In the world of business, globalization is associated with trends such as outsourcing, free trade, and international supply chains. Globalization is important as it increases the size of the global market, and allows more and different goods to be produced and sold for cheaper prices.

Globalization is also important because it is one of the most powerful forces affecting the modern world, so much so that it can be difficult to make sense of the world without understanding globalization. For example, many of the largest and most successful corporations in the world are in effect truly multinational organizations, with offices and supply chains stretched right across the world. These companies would not be able to exist if not for the complex network of trade routes, international legal agreements, and telecommunications infrastructure that were made possible through globalization. Important political developments, such as the ongoing trade conflict between the United States and China, are also directly related to globalization.

Is Globalization Good or Bad?

It depends. Proponents of globalization will point to the dramatic decline in poverty that has taken place throughout the world over the past several decades, which many economists attribute in part to increased trade and investment between nations. Similarly, they will argue that globalization has allowed products and services such as cell phones, airplanes, and information technology to be spread far more widely throughout the world. On the other hand, critics of globalization will point to the negative impact it has had on specific nations’ industries, which might face increased competition from international firms. Globalization can also have negative environmental impacts due to economic development, industrialization, and international travel.

How Does Globalization Impact Society?

Globalization has had a large impact on societies around the world, leading to massive migrations from rural to industrial or urban areas, leading to the rapid growth of cities and trade hubs. While this has led to an overall increase in incomes and a higher standard of living in general, it has also led to problems of urbanization including crime, domestic violence, homelessness, and poverty. Concepts of national identity, culture, and consumption patterns also change as goods from around the world become increasingly available and at low prices. The competitiveness of global capitalism may also lead to more individualistic ideals that contradict the cultural orientations of certain, more collectivist societies.