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Globalization Description Purpose Impact And Benefits Economics Essay

Globalization is a multi dimensional term. It may be defined as a process interconnectedness of the economies driven by investment and capital flows, change in technology and trade liberization.

Globalization is the interconnectedness of the world economies through different rules set by the international institutions i-e, WTO, EEC, NATO etc. It is one of the major issues faced by many developing international organizations. It is important for organizations to collaborate internationally in the context of globalization of the economies as to reduce the incongruity of multinational businesses.

With the increased demand for globalization, many universities are now incorporating globalization related studies as a part of education as to increase intercultural understanding through processes of organizational change and innovations. (wikipdeia, accesed on 2nd july, 2010)

Critics view globalization as a worldwide drive towards globalized economy with dominated by banking institutions etc not accountable to democratic processes, a capitalist (book)

Globalization is the new jargon that has come to dominate the world since the 90’s. Now the process has reached its height. With the increased dependency on the market economy and renewed faith in private capital and resources, resulted in many international organizations operating in the developing countries. Till the 90’s the Indians were facing problems due to barriers to trade but the scenario had changed due to the increased investment and financial flows which resulted in boosting globalization.


Globalization has become a necessity in today’s world due to its impact on the developing/developed countries. There is much access to developed countries resulting in easy technology transfer resulting in higher productivity and has raised the living standards of people. It provides greater opportunities for those who have to access larger markets around the world. Cheap imports, more technology is available and increased capital flows are experienced by the countries involved in the global markets. They need to cope with certain policies created by the international policy makers like WTO, EEC etc.


Positive Impact: Globalization is the new catchphrase in the world economy, dominating the globe since the 90’s of the last century. With the increased reliance of the people on the private capital and resources, international organizations are playing an important role in the development of developing countries. Globalization has brought up many opportunities resulting in increased productivity and increased flow of capital within the economy. It has also resulted in increased investment providing greater job opportunities which has improved standards of living for the people.

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Negative Impact: Globalization has also thrown open varied challenges such as inequality of purchasing across and within different nations resulting in a widening gap between rich and poor, exploitation of labor in the name of cheap labor, environmental deregulation, lack of democratic accountability and environmental deregulation has spurt open worsening in the economic situation. Another negative aspect of globalization was that a majority of third world countries stayed away from the entire limelight.


The gains from globalization can be cited in the context of economic globalization:

Trade in Goods and Services – International trade ensures the allocation of resources resulting in increased productivity. As the matter of fact, the trade barriers in developing economies only hinder growth. The developing economies can benefit if all the resources are utilized efficiently. This is where the importance of reducing the tariff and non-tariff barriers crop up.

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Movement of Capital – production of the developing economy is increased due to flow of capital across the countries. The Foreign Direct Investment (FDI) plays an important role in the development of an economy. With increased FDI, there would be more investment and more saving of the people of developing country receiving FDI resulting in over all benefit of the society in the form of enhanced standards of living and high productivity.

Financial Flows – The capital market development is one of the major features of the process of globalization. The flow of capital ensures technology transfer, production of locations receiving a comparative advantage and by large the global foreign exchange markets are improved. The flow of capital and proper allocation of resources across countries increases financial stability across the world.

Other Benefits- Globalization is advantageous for the developing/developed nations. Due to globalization business markets boundaries in the world have ended; one can make his product available in any corner of the world. Countries opt for globalization because of the reason which include increased competition, comparative advantage, economies of scale and access to a greater range of products and services (kilgour, 2000). globalization results in lower inflation rate which is favorable because with the increase in competition”, the prices fall. Another possible benefit is faster technological and, productivity growth because increased international competition has obliged business generally to innovate more rapidly since the ’70s.(kilgour, 2000)


In today’s world, no country can survive without globalization especially the developing countries. Organizations need to operate globally due to increased competition. Without international operations, the organizations cannot sustain in the market for a longer time. In the developing countries, globalization is an important process due to the immense benefits provided. It helps in the over all economic growth of the country by the foreign investment triggering saving within the country which could be used in the other investment. Other benefits are also a part of globalization which vitalizes it role even more. So, globalization is a step for developing countries in the run to become developed.


• Greater investment in education, health and public infrastructure is a guaranteed win-win.

• Restarting the truly multilateral liberalization of the global trading system, which should address the key issues of the critics, including food trade, labor agreements and the environment (kilgour, 2000)

• The creating a good investing climate based on rule framework which will increase job opportunites and reduce poverty.It involves more than simply a crave for high levels of external investment. It is about promoting an environment to discover the entrepreneurial potential of the domestic private sector, especially small and medium scale enterprises. It is about broadening national poverty reduction strategies to enable trade and investment and stimulate the private sector, and to create employment on which the poor depend.


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