What are the advantages and disadvantages of globalization?

Globalization essentially means integration of the national economy with the world economy. It implies a free flow of information, ideas, technology, goods and services, capital and even people across different countries and societies. It increases connectivity between different markets in the form of trade, investments and cultural exchanges.

Advantages of Globalization

  1. There is a decline in the number of people living below the poverty line in developing countries due to increased investments, trade and rising employment opportunities.
  2. There is an improvement in various economic indicators of the LDCs (Less Developed Countries) such as employment, life expectancy, literacy rates, per capita consumption etc.
  3. Free flow of capital and technology enables developing countries to speed up the process of industrialization and lay the path for faster economic progress.
  4. Products of superior quality are available in the market due to increased competition, efficiency and productivity of the businesses and this leads to increased consumer satisfaction.
  5. Free flow of finance enable the banking and financial institutions in a country to fulfill financial requirements through internet and electronic transfers easily and help businesses to flourish.
  6. MNCs bring with them foreign capital, technology, know-how, machines, technical and managerial skills which can be used for the development of the host nation.

Disadvantages of Globalisation

  1. Domestic companies are unable to withstand competition from efficient MNCs which have flooded Indian markets since their liberalized entry. It may lead to shut down of operations, pink slips and downsizing. Moreover skilled and efficient labour get absorbed by these MNCs that offer higher pay and incentives leaving unskilled labour for employment in the domestic industries. Thus there may be unemployment and underemployment.
  2. Payment of dividends, royalties and repatriation has in fact led to a rise in the outflow of foreign capital.
  3. With increased dependence on foreign technology, development of indigenous technology has taken a backseat and domestic R and D development has suffered.
  4. Globalization poses certain risks for any country in the form of business cycles, fluctuations in international prices, specialization in few exportables and so on.
  5. It increases the disparities in the incomes of the rich and poor, developed nations and LDCs. It leads commercial imperialism as the richer nations tend to exploit the resources of the poor nations.
  6. Globalization leads to fusion of cultures and inter-mingling of societies to such an extent that there may be a loss of identities and traditional values. It gives rise to mindless aping of western lifestyles and mannerisms however ill-suited they may be.
  7. It leads to overcrowding of cities and puts pressure on the amenities and facilities available in urban areas.

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