The Pros and Cons of Globalization in Today’s World

Long gone are the days when countries could only hope to trade with neighboring nations. In an increasingly connected world, global trade is the standard, with consumer goods and online services readily traded across borders. We’re talking about globalization. Technically speaking, globalization refers to the exchange of services, goods, and even ideas. If you want your products to resonate with multi-market audiences, you’ll need to invest in localization and, ultimately, globalization. 

While globalization brings many benefits, it also comes with its fair share of downsides. Below, we’ll take a closer look at the pros and cons of globalization. 

What is globalization? 

Globalization refers to the flow of goods and services between countries. It can also refer to sharing investments, technology, and knowledge with international markets. Globalization can provide ready access to investment capital, low-cost labor, and essential resources. In a business case, globalization might involve a product being designed in one country with component parts produced in another, before final assembly takes place in a third country. 

While many companies have made a success of globalization, it’s not always easy to successfully penetrate new markets. Wildly different linguistic, cultural, and political norms complicate matters, with products needing to be heavily adapted to accommodate these preferences. This process is otherwise known as localization, but localization is just one element of globalization. 

Key drivers of globalization 

Before we get stuck into the advantages and disadvantages of globalization, it’s worth first looking at the key factors that drive it. Below, we’ll spotlight some of the most important of these drivers. 

Containerisation and bulk shipping 

Ocean shipping costs have come down considerably in recent years, while bulk shipping solutions provide even more cost-effective ways to move goods from A to B. By bringing down the cost of shipping products, costs are lowered at every level. In an ideal world, this ensures prices are similar in both the country of manufacture and its export markets. 

Transnational corporations 

Another driver of economic growth is the increase in the minimum efficient scale (MES) of certain industries. When the MES rises, it could be seen as a sign that a domestic market is simply too small to fulfill the selling requirements of a particular industry. As such, many developing countries have established transnational corporations to overcome the problem. 

Tax system variations 

In an attempt to draw away labor from developed nations, many developing nations have relaxed their tax systems in order to entice foreign direct investment. Tax competition is particularly fierce between certain countries, with everyone attempting to capitalize on reduced labor and production costs. 

Relaxation of import licensing and foreign exchange controls 

Over the years, foreign exchange controls, important licensing, and other types of non-tariff protection have been done away with. Borders are now more open than ever, while important tariff levels have also decreased. However, import quotas and other forms of non-tariff barriers have increased in recent years, with some countries failing to achieve desired levels of economic growth. 

The pros of globalization 

Ready to get into the positives and negatives of globalization? To kick things off, we’ll first take a closer look at the benefits.  

Economic growth and trade expansion 

One of the many benefits of globalization is that it is a driver for economic growth. One of the key reasons why globalization stimulates economic growth is that it increases access to labor. Developing nations with a labor shortfall can import that missing labor from elsewhere, helping industries get off the ground. In the case of wealthier and more developed nations, low-skilled work may be outsourced to less developed countries where labor costs are generally cheaper. These savings can then be passed on to the consumer. 

Globalization also increases access to jobs, with developing countries securing outsourced job opportunities courtesy of more developed ones. While there are some drawbacks to this, this increased job access is a key driver of local economic growth. 

There’s also the advantage of ready access to resources. One of the main motives behind international trade is that countries get to access resources they can’t source locally. Without international trade, it wouldn’t be possible to manufacture everyday consumer goods like smartphones and computers. Furthermore, globalization allows countries to specialize and capitalize on their economic strengths, with all trading partners enjoying the benefits. 

Cultural exchange 

Globalization exposes different cultures to one another. Along with an increase in cross-cultural understanding, knowledge sharing is also made possible by this cultural exchange. In a truly globalized society, people can become exposed to new cultures, perspectives, and values remarkably quickly. This can help combat things like xenophobia while strengthening bonds between countries. 

Technological advancements

To facilitate international trade and global commerce, companies employ similar technology. This simultaneous use of technology allows for rapid innovation, with advancements readily shared between nations. Developing nations reap the biggest benefits, with shared technology kickstarting progress. 

The cons of globalization 

Globalization might bring many benefits, but it’s not without its drawbacks. Below, we’ll outline the biggest cons involved with globalization. 

Economic disparities 

A significant drawback of globalization is that it creates economic disparity. A regular argument against globalization is that it broadens the gap between rich and poor. Generally speaking, globalization is good news for investors and company owners, but devastating to low-skilled workers. It’s common for jobs in developed countries to be drained away by less developed ones, where labor costs are typically much lower. Manufacturing jobs tend to be particularly hard hit, with workers in developed countries also having to face pay-cut demands in order to combat job exportation. 

Cultural homogenization 

Globalization runs the risk of causing more cultural homogeneity. As international preferences become more similar and centralized, it’s harder for localized products to compete with multinational, and often cheaper ones. In other words, globalization has the potential to create a monoculture, throttling cultural diversity. 

How globalization impacts developing countries

Globalization can yield many benefits for developing countries. When developed countries outsource labor to developing ones, there’s an increase in competitive salaries and job security. However, working conditions can vary considerably, and many workers are forced to work below the poverty line. 

A surge in available jobs is good news for local economies while resulting in a higher standard of living for individuals. In many developing countries, globalization has led to an increase in the price of export commodities, helping many suppliers escape poverty. 

While the benefits seem to far outweigh the negatives, globalization can be something of a double-edged sword for developing countries. Ideally, globalization should spread core values and practices such as labor rights between countries. However, this hasn’t always played out in reality. Some companies actively choose to outsource labor to countries with relatively poor labor protections and low wages. 

Globalization’s impact on employment 

Globalization affects employment in several ways, with many of these impacts being negative. For starters, globalization can result in significant job losses as businesses choose to outsource labor to lower-cost nations. By being able to tap into a global labor pool, globalization also brings with it job insecurity, with even the most highly skilled candidates having to compete for a limited number of roles. 

Generally speaking, globalization has led to an increase in non-standard jobs. This includes contract and temporary work, which is typically less stable than conventional employment. What’s more, unlike regular employment, non-standard jobs rarely come with protections and benefits. Globalization can also lead to wage inequality, along with an increase in migration rates in developing countries, leading to a brain drain. 

However, it’s not all bad news. While it can lead to job losses, globalization also brings with it new opportunities and even entire industries. Furthermore, globalization has the potential to improve employment relations, refining recruitment processes and managerial best practices. Finally, globalization facilitates international labor legislation, leading to legislation that’s fairer and more inclusive. 

Go global with BLEND

Globalization is being driven by various key factors. Lower bulk shipping costs have facilitated affordable international trade, with businesses able to pass these savings onto consumers. Differences in tax systems have also led to increased competition between developing countries, while a relaxation of import licensing has made it easier to trade beyond borders. 

Balancing the benefits and drawbacks of globalization can be challenging. However, the positives do outweigh the negatives. For one, it drives economic growth and encourages trade expansion. The result is an increase in access to jobs and resources, while countries are able to specialize and profit from their unique economic strengths. There’s also the cultural exchange that comes with globalization, not to mention the technological advancements and innovation it fosters. 

That being said, there are drawbacks too. Most notable is economic disparity, with the gulf between rich and poor typically widened. Developed countries also feel the pinch, with low-skilled jobs outsourced to developing nations where labor costs are generally far cheaper. Furthermore, globalization can cause cultural homogeneity, negatively impacting cultural diversity. 

Are you looking to make your brand a global one? At BLEND, we offer a range of localization and globalization solutions to help you become a truly international entity. We offer access to industry-leading tools and technologies, not to mention an extensive network of experienced linguists working in more than 120 languages. Ready to get started? Why not get in touch with the team today?

Corinne Sharabi

Corinne is the Social Media and Content Lead at BLEND. She is dedicated to keeping global business professionals up to date on all things localization, translation, language and culture.

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