The Effect of Globalisation
Globalisation is the cause and effect of increased international trade. While economists worldwide are applauding the globalisation movement, with skills, consumer goods and services being shared and sold internationally, the effects of globalisation aren’t all so positive.
There’s no denying the massive, beneficial impact that globalisation has had on the world and the international economy. Currencies, technology, international travel and migration opportunities, skills, services, consumer goods and even ideas and information are all being transferred around the globe. The generated competition reduces monopoly profits forcing companies to sell their products in more efficient, cost effective and innovative ways. There is economic growth and higher per capita incomes, and an overall increase in employment as transnational companies provide new jobs, skills and greater wealth to local economies as they buy local products, resources and skills. Awareness has been another striking benefit of globalisation, with knowledge of natural disasters such as the 2004 Tsunami able to be immediately spread around the world so that aid can be rapidly sent in response. Issues such as poverty and global warming and the need for sustainable development are also much more in the spotlight, and many countries around the world are now making a conscious effort to abet these problems.
But, globalisation ultimately seems to favour countries that are considered more economically developed. It has been linked to rising inequalities in income and wealth, shown by the rural-urban divides in China, Brazil and India, as well as the sluggish (almost inconsequential) annual growth rates of Latin American and sub-Saharan Africa. Many of these countries have also faced an unwelcome rise in the Gini-coefficient. Yet, the income inequality isn’t just limited to LEDCs. In fact, Western countries have found greater disparity since service and technology industries will pay top wages to the most highly skilled, with little use for semi or unskilled workers. Unemployment is also unsteady: poorer countries have had to cut down on labour costs while manufacturing jobs are leaving richer countries for lower-cost labour in countries such as China and India. Although awareness of issues such as global warming and sustainability is increasing, globalisation itself is at the heart of the increase of things such as deforestation. While globalisation is also providing opportunities to share culture, there are arguments that it is also destroying cultural diversity. Yet, without the opportunity to share culture, how can we be truly culturally diverse?
So, what does this mean for business? Generally, globalisation has been creating higher standards; worldwide consumers are more informed with higher incomes on the most part. Businesses also have more freedom and choice with regards to location. Cheaper and more efficient locations are available, and with the opportunity for foreign businesses to buy into domestic markets, target markets can be widened and closer to your business. Competition encourages innovation with opportunities for large economies of sale. Although a multi-cultural workplace can be more difficult to manage, it can be brimming with benefits. By making the most of the opportunities of globalisation, a business can soar in the international market. And what’s to stop you from using those profits to aid environmental and human issues? Give back what you take.