1.2.5 The pros and cons of globalisation
We do not have a choice: globalisation is a fact of 21 st century life and it is proper for us to be aware of its benefits - and its downside. Let's begin with a summary of the benefits, which arise from declining barriers to trade and investment. These are:
- stimulation of economic growth (a corollary of which is improved production efficiency and thus lower prices for goods and services) which in turn
- creates new jobs and consequently
- raises income levels.
The potential downside of globalisation includes
- job losses in developed countries as MNEs seek low-labour cost countries for their production facilities. There are fears of a 'race to the bottom' as MNEs continue to search for cheaper production facilities, usually in less-developed countries
- MNEs 'playing off' national governments one against the other when choosing the location of production facilities
- shifting bases of political and governmental power.
As national governments are 'held to ransom' by MNEs, the economic power of MNEs is increasingly likely to be controlled by supra-national bodies such as the United Nations and the World Trade Organisation. These organisations are staffed by unelected bureaucrats who are able to 'impose policies on the democratically elected governments of nation-states, thereby undermining the sovereignty of those states and limiting the nation-state's ability to control its own destiny' (Hill 2005, p. 29).
On balance, it is likely that globalisation is good for the world, but it may disadvantage some people in some places at some time. Work through the following readings to help develop your own views on globalisation.
Reading 1.2
James, D. 2001, 'The messy new world disorder', Business Review Weekly , 25-31 October, pp. 34-36 and 39.
Reading 1.3
James, D. 2000, 'The world is going global - what will it look like?', Business Review Weekly , 4 August, pp. 130-134.
Activity 1.3
Prepare a table which lists the benefits and disadvantages of globalisation from the perspectives of:
- developing countries
- developed countries.
It may be useful to add to this table as you progress through this subject to help gain a more complete understanding of globalisation.
Previous Page