One of the concepts that sounds the most for a few years in the economic issue is the so-called economic globalization. This term, which is not too difficult to understand, does include one of the most important knowledge in economics.
But What is economic globalization? What advantages and disadvantages does it have? What is it for?
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What is economic globalization
We can define economic globalization as the "Economic and commercial integration that takes place through several countries, at national, regional or even international level, and whose objective is to take advantage of the goods and services of each country." In other words, we are talking about the ability of countries to combine their goods and services and establish economic and trade policies among those countries that comprise them.
In this way, a highest growth of all countries, but also of many more aspects such as technology, communication, etc.
What characterizes economic globalization
Although the concept already makes it clear what we are referring to with economic globalization, it is true that there are some characteristics to take into account of this term. And it is that:
- See rich based on treaties managed and established between countries that agree to combine their assets and resources, signing and enforcing them. These are free trade documents, or economic blocs, which are in charge of controlling the good work of the countries.
- Se encourages job creation, as well as the economy of the countries that are involved. In this sense, the fact of being able to obtain qualified labor, even if not in the same country, helps further development.
- The goods and services are imported and exported. That is, those products that one country does not have, but another does, may have greater freedom to import them, and at the same time, what they have and are of equal interest to other countries.
- Economic globalization is present in practically the whole world. But always agreed under different treaties (according to the signatory countries).
Advantages and disadvantages of economic globalization
At this point in the article, it is very likely that you have already had an idea of whether it is good or bad that economic globalization exists. And the truth is that, as in everything, it has its good things and its bad things. For this reason, when signing treaties, countries tend to analyze very much whether it is good for the country or not.
Advantages of economic globalization
Among the positive aspects that we can name you about economic globalization, we have:
- Industrial production costs fall. Because there is a connection between countries, product costs tend to be cheaper, allowing industrial production to be less expensive. This also affects the final price of the products, which means that goods and services can be offered at more competitive prices.
- Increase employment. Especially in countries that need labor, but also in those that increase their imports and exports, because they need labor to do the job itself.
- There is competition between companies. This can be treated as a good thing, but also as a bad thing. And it is that competition between companies is always a good thing, because it will increase products, encourage creativity in them and try to offer better goods and services. However, it can also be bad in the sense that with more competition it is more difficult for small businesses to compete with large ones.
- Faster when producing, above all because all technologies and innovations are put at the service of all countries and, with this, it is possible to optimize technology and make everyone advance in the same direction, in addition to promoting global development.
But not everything is good, there are many negative things that economic globalization brings us, such as:
- Economic inequality. Although we have said that countries do their part so that goods and services are commercialized between all, it is clear that the individual economy of each country influences development, in such a way that there are differences between one economy and another.
- The environment is affected. To a greater or lesser extent. This is because, with higher production, there will also be more pollution, and that is why it is so important to establish policies to take care of the environment.
- Higher unemployment. Yes, it is contradictory with respect to what we had said before, that more employment was generated. The problem is that, as there is a greater amount of human resources, companies will tend to find those workers who are more economical, and the same will happen with the workforce. What does this imply? Well, there will be more unemployment in countries with more expensive labor.
- Less development. By reducing business opportunities (from what we told you about business competitiveness) that negatively affects the individual economy of the country.
So is globalization good or bad?
Depending on the country you ask, it will tell you one thing or another. As you have seen, it has its good things and its not so good things, and that affects the country individually, either by making it richer or less.
However so as not to harm it, there are trade agreements. These are signed bilaterally, if they are between two countries; or multilateral if it includes several countries. And they establish what are the guidelines to be followed. Each country must evaluate this document before signing it to be able to know if it is what is convenient for them or, if not, it is best to continue as before.
Another option used is use economic blocks, that is, regulations that are carried out between several countries to establish requirements regarding certain aspects: tariffs, imported products, etc.
Economic globalization can also occur unilaterally, in the same country, for example by regulating tariff rates, the requirements to import or export products, etc. Thus, the country's economy is also influenced.