Costs and Benefits of Globalisation

Readers Question
1.What are “gain from trade ” ?
2.To what extent is “globalisation” a cost and a benefit ?

Free Trade is a way for countries to exchange goods and resources. This means countries can specialise in producing goods where they have a comparative advantage (this means they can produce goods at a lower opportunity cost). When countries specialise there will be several gains from trade:

1. Lower prices for consumers
2. Greater choice of Goods
3. Bigger export markets for domestic manufacturers
4. Economies of scale through being able to specialise in certain goods
5. Greater competition

See: Benefits of Free Trade

Costs Of Globalisation

Developing Countries often struggle to compete with developed Countries. It is argued free trade benefits developed countries more. There is an infant industry argument which says industries in developing countries need protection from free trade to be able to develop.

Environmental Costs

One problem of globalisation is that it has increased the use of non renewable resources. It has also contributed to increased pollution and global warming. Firms can also outsource production to where environmental standards are less strict.

Labour Drain

Globalisation enables workers to move more freely. Therefore, some countries find it difficult to hold onto their best skilled workers, who are attracted by higher wages elsewhere.

Less Cultural Diversity

Globalisation has led to increased economic and cultural hegemony. There is arguably less cultural diversity

 Benefits of Globalisation

The benefits of globalisation are fairly similar to the benefits from free trade mentioned above. Globalisation enables greater trade and competition between different economies, leading to lower prices, greater efficiency and higher economic growth.

Increased investment.

Globalisation has also enabled increased levels of investment. It has made it easier for people to attract short term and long term investment. Investment by multinational companies can play a big role in improving the economies of developing countries.

See also:

• The effects of globalisation for developed and developing countries
  
• What is globalisation?
• What is globalisation? at Guardian