Globalization
Globalization
Globalization is defined as the integration of national economy into the international economies through trade, foreign direct investment, capital flows, migration and the spread of technology. In other words, globalization is also a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.
Benefits of globalization
The benefits of globalization are as follows:
1. Free trade:
Free trade is a way for countries to exchange goods and resources. This means countries can specialize in producing in producing goods where they have a comparative advantage (this means they can produce goods at a lower opportunity cost). When countries specialize, there will be several gains from trade:
c. Bigger export markets for domestic manufacturers
d. Economies of scale through being able to specialize in certain goods
2. Free movement of labour: Increased labour migration gives advantages to both workers and recipient countries. If a country experiences high unemployment, there are increased opportunities to look for work elsewhere. This process of labour migration helps to reduce poverty and geographical inequality and it also helps countries with labour shortages fill important posts.
3. Increased economies of scale:
Production is increasingly specialized. Globalization enables goods to be produced in different parts of the world. This greater specialization enables lower average costa and lower process for consumers.
4. Promotion of economic growth: The developing countries like China, Thailand, and India are getting large international market for export due to globalization. Increasing export means increase in output and income leading to higher economic growth. Higher economic growth helps to reduce poverty and improve living standard of people.
Globalization has also enabled increased levels of investment. It has made it easier for countries to attract short term and long term investment. Investment by multinational companies can play a big role in improving the economies of developing countries.