There have been a lot of great presentations about the challenges of globalization today, and, moving

forward, I‘m going to turn to the economic side of globalization.

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Before starting my presentation, I want to quote Kofi Annan, the Former Secretary General of the
United Nations. He said that „arguing against globalization is like arguing against the laws of
gravity“.
Globalization has impacted nearly every aspect of modern life. Today I am going to talk about
globalization and its impact on economic growth, as the globalization is also the process of increased
integration and co-operation of different national economies and it involves national economies
becoming increasingly inter-related and integrated.

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Although the goal of globalization is to provide organizations a superior competitive position with
lower operating costs, to gain greater numbers of products, services and consumers, involve greater
free trade, increase capital flows and so on, globalization, as a process, has its own advantages and
disadvantages on economic growth.

There are several challenges to the economy which are caused by globalisation. The general
complaint about globalization is that it has made the rich richer while making the non-rich poorer. “It
is wonderful for managers, owners and investors, but hell on workers and nature.” To clarify, free
trade can harm developing economies. Developing countries often struggle to compete with
developed countries, therefore 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. However, developing countries are often harmed by tarriff protection, that
western economies have on agriculture. The developed world have an unhealthy amount of subsidies
on their declining agricultural sectors. The EU, for example, has had massive external tariffs on food
imports. The US also subsidise agriculture more than any other industry. The effect of these tariffs
harms developing countries, especially food exporters.

Furthermore, Globalization tends to move taxation away from corporations, and onto
individual citizens. Multinational companies like Amazon and Google, can set up offices in countries
like Bermuda and Luxembourg with very low rates of corporation tax and then funnel their profits
through these subsidiaries. This means they pay very little tax in the countries where they do most of
their business. This means governments have to increase taxes on VAT and income tax. It is also seen
as unfair competition for domestic firms who don’t use same tax avoidance measures.

Moreover, competition between countries is supposed to drive prices down. In many cases this is not
working because countries manipulate their currency to get a price advantage.

Labour drain is another disadvantage as the 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. Talking about globalization impact on labour, there is also an increasing
unemployment rate among the less skilled workers in some countries and changes in wages. What
explains the differences in wages and employment across countries is their labor market structures.
In countries with relatively flexible wages set in decentralized labor markerts, such as the United
States and the United Kingdom, the decline in relative demand for less-skilled labor has translated
into lower relative wages for these workers. In contrast, in countries with relatively rigid wages set
in centralized labor markets, such as France, Germany and Italy, it has meant lower relative
employment.

Besides, it is important to mention that there are environmental costs. As the production is
increasing, another 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, in this way, even more damage to the
environment is being done.

The anti-globalists also claim that globalization is not working for the majority of the world.
“During the most recent period of rapid growth in global trade and investment, 1960 to 1998,
inequality worsened both internationally and within countries. The UN Development Program reports
that the richest 20 percent of the world's population consume 86 percent of the world's resources while
the poorest 80 percent consume just 14 percent. “

Finally, the so called „Domino effect“ is the fear that if one economy falls then others may fall as
well, bringing even more damage.

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So, you may ask yourself now, is there really any advantages of globalization for the economy? Is
there something good about it? The answer is yes. Despite of all the negative aspects, globalization
actually has been a catalyst for positive change as well.

Proponents of globalization believe that it allows developing countries to catch up to industrialized

nations through increased manufacturing, diversification, economic expansion, and improvements
in standards of living. China is a good example of a national economy that has benefited immensely
from globalization. Outsourcing by companies brings jobs and technology to developing countries.
Trade initiatives increase cross-border trading by removing supply-side and trade-related constraints.
The North American Free Trade Agreement (NAFTA), for example, encouraged U.S. car
manufacturers to relocate operations to Mexico where labor costs are lower, and many U.S.
companies have outsourced call centers to India. Talking about improvements in standards of
living, it is important to mention that economic globalization gives governments of developing
nations access to foreign lending. When these funds are used on infrastructure including roads, health
care, education, and social services, the standard of living in the country increases.

Furthermore, globalisation makes markets more efficient. Efficient markets should be what every
economy strives for. Essentially, the sign of an efficient market is where there is an equilibrium
between what buyers are willing to pay for a good or service and what sellers are willing to sell for a
good or service. Even if businesses don’t lower prices, they can make additional profits and then
reallocate that excess profit into doing things like increasing wages, taking on more investments or
even creating more expansion projects.

As well, increased competition means better products and sometimes lower prices, which is always
a good thing for buyers because With more competitors to fight over market share, each company has
to constantly look to improve their goods or services or create more value for their customers and to
expand their companies worldwide. In addition to this, production is increasingly specialised.
Globalization enables goods to be produced in different parts of the world. This greater specialisation
enables lower average costs and lower prices for consumers.
Over and above, globalization has given an opportunity to invest in the emerging markets and tap
the talent which is available there. In developing countries, there is often a lack of capital which
hinders the growth of domestic companies and hence, employment. In such cases, due to global nature
of the businesses, people of developing countries too can obtain gainful employment opportunities.
But the developed countries have lost jobs on account of this shift of jobs to the developing world.
Lastly, in a weird sort of way, globalization helped heighten world security because when your
economy depends largely on another country’s economy, it is hard to imagine either one of the
countries attacking the other.

All in all, we can discuss a lot about globalization and its impact on the economy and other areas of
life, business, politics and so on, we can argue, if it does more damage or helps to develop, but as the
member of the U.S. House of Representatives John B. Larson once said, „Globalization is not a
monolithic force but an evolving set of consequences - some good, some bad and some unintended. It
is the new reality.”