Thanks to several centuries of technological process improvements, advances in cooperation throughout the international community, and improvements to communication infrastructures, our planet is more connected today than ever before. The rise of globalization has helped companies to become bigger than they were during the early days of the Industrial Revolution. It has also caused a growing interdependence in the developed world that links our economies, populations, and cultures.
The international agreements that have led to our current state of globalization were formed during the early 1990s after the Cold War between the United States and the Soviet Union dissipated. Now there are more trade opportunities and investment flows in the world’s most advanced economies that are beneficial, complex, and sometimes politically charged.
Before we can examine the pros and cons of globalization, we must understand the relative costs and benefits that exist which could help or hurt the average consumer. Americans are especially vulnerable to this process because they rely on global production, imports, and export opportunities to maintain a living wage. Without this coordination, the U.S. economy would not exist as it does.
List of the Pros of Globalization
1. Globalization brings the advanced economies of the world together.
Globalization provides an opportunity for the most significant economies and countries in the world today to work together to accomplish big things. Whether we are building space stations that orbit our planet, sending missions to the moon, or developing ways to counter hunger that every family can afford, this process frequently tries to make the world become a better place. The price on these massive efforts are often too high for one country to manage by itself. Through the spirit of cooperation, humanity can use its strength of diversity to tackle any problem.
Did you know that more than $1 trillion is spent each year by the nations of the world to defend themselves against attack? The United Nations estimates that it would take just $30 billion per year to solve the infrastructure problems that encourage hunger. Imagine what else we could do with those funds.
2. It stabilizes the politics of the world.
Even though there is a wave of populism and elitism growing around the world in 2019, the processes of globalization still encourage more cooperation than isolation. Economies do not grow as efficiently when they are isolated from one another as they do when they work together. That means there is always a certain level of import-export opportunities that are available because there is no other way to maintain the quality of life.
The best example of this advantage right now is to compare the growth of South Korea compared to what North Korea experiences. The isolation of the north creates fewer opportunities to develop, which means only the elite are able to find success.
3. Globalization gives more power to the people.
Before we had tools like the Internet available to us that provide access to e-commerce platforms, governments worked to consolidate power into a small group of people or a single individual because it was the best way to negotiate on a nation-to-nation basis. That worked fine if there were structures in place to protect the general population, but it also caused significant harm to many communities – especially people of Jewish descent.
By moving toward a greater spirit of cooperation with open communication, there is less of a need to consolidate ruling powers. We can use systems of checks and balances to ensure that the power stays with the people, reducing the problems that come when someone holds absolute power.
4. It improves the flow of cash around the world.
When countries maintain their borders more than they focus on the spirit of globalization, then money is the next highest priority after power. That led to the creation of tax havens in certain countries where businesses and wealthy individuals could avoid their payment responsibilities to their local government. That is no longer possible when nations begin working together under a specific set of rules, reducing cross-border differences that help one state over another.
Even with the effort to globalize today, Gabriel Zucman of the University of California-Berkeley estimates that about $8.7 trillion is currently stuck in tax havens around the world. That means the world governments are losing $170 billion in tax revenues, with over $30 billion per year owed to the United States.
5. Globalization reduces the issues of currency manipulation.
When the Eurozone was created to support the progress of the European Union and build a cooperative market, one of the reasons behind this effort was to reduce the influence of currency manipulation in the import-export market. Instead of competing with one another for the cheapest prices, sometimes even devaluing the value of the economy to create a better contract, working together creates mutually beneficial results because all of the governments can take advantage of an economy of scale.
That means consumers can receive more value for their wages with a consistent expectation of worth. Although political changes, like those that occurred in Venezuela, can counter this unique benefit of globalization, it does give individuals and organizations more confidence in what to expect with each transaction.
6. It creates more consistency with our communication networks.
There will always be differences of opinion when you look at the bulk of humanity. We all have unique experiences, perspectives, and opinions that guide us toward what we think the best path forward should be. Some of these conversations are passionate, but our access to communication tools keeps us all focused on words during a disagreement instead of taking an alternative action.
When we have access to transparent tools that allow us all to see each side of a conversation, it is much easier to find some common ground. Globalization provides us with more consistency in our communications access because more of us can share how we think and feel in any given situation. With more voices, there is a higher level of diversity. That structure eventually brings us to a position of strength.
7. It encourages the advanced economies of the world to develop even faster.
About 75% of the world is still classified as being in “developing” status. The remainder of the countries are in an advanced stage with their economy. Thanks to the efforts at globalization, these upper-level economies can continue pressing forward toward growth, working with each other to meet the mature needs of these markets while helping developing nations continue toward their own advanced status.
A reduction in border restrictions helps to reduce tariffs, create common payment methods, improve agricultural production, and create open markets. There would be more opportunities to establish a new way of life for struggling families, which reduces poverty and food insecurity. This work even improves medical care access.
8. Globalization allows for more free trade opportunities.
When we focus on the national borders that exist in our world, then we create restrictions on the free access to goods or services. Duties and tariffs, even when they exist between allies, limit the number of import opportunities which exist. Even if excessive fees apply to luxury goods only, it creates more of a black market that encourages consumers to avoid the regulations that prevent them from accessing what they want at an affordable price.
There are more than 1,500 different restrictions in place right now that impact global trade. An additional 1,800 tariffs are in place as well. Globalization allows us to spend our resources on what we need instead of trying to enforce specific rules that we create for ourselves.
9. It creates more employment opportunities for the average person.
Over the next generation, the number of freelancers and self-employed individuals is expected to increase to over 50% of the overall labor force. About one-third of workers are already earning an income outside of the traditional employment contract. When we reduce restrictions to access for these entrepreneurs, then it adds another level of value to the overall economy.
Although there could be skill-based shortages in some industries that occur because of globalization, especially with offshoring issues that may occur, this advantage makes it possible for anyone with a good idea, a special talent, or a useful skill to build a life for themselves.
List of the Cons of Globalization
1. The process of globalization reduces the need for labor exploitation.
Human trafficking is a significant problem in the developing world, but it is an issue that impacts consumers in advanced economies as well. The easiest way to keep prices low for consumers in the United States, Canada, Europe, and Japan is to exploit the differences in the standard of living that exist between the developing and developed world. Because labor is the most significant expense that the average customer pays, a globalized company can take advantage of lower minimum wages to produce items for sale.
The federal minimum wage for the United States in 2019 is $7.25 per hour. If you were to provide the same labor in Sierra Leone, then it would be just $0.03 per hour. When you multiply that expense by thousands of workers, globalization encourages a transition of employment from advanced economies to developing ones.
2. Globalization creates more offshoring from the advanced economies.
The advanced economies of the world have the highest labor costs, highest manufacturing costs, and the highest distribution costs unless there are specific government interventions that prevent them from increasing. China is one example of such an economy that keeps costs low by reducing free-market opportunities for consumers.
The threat of offshoring is a threat that enforces specific employment behaviors in the advanced economies that reduce wages and benefits. If we were to reduce borders and improve living conditions around the world, the developing world would see a rise in their standard of living. In the advanced economies, there would be the risk of reducing the financial strength of the average household.
3. It can impact the environment in negative ways.
Pollution is one of the most common causes of death in the world today. Globalization still encourages the advanced economies of the world to exploit the raw materials in developing nations because this structure transfers a small amount of wealth from one to the other. Since there are usually fewer environmental restrictions in this type of transaction, there can be long-term issues of contamination to manage.
Even the advanced economies on our planet struggle with pollution. Over 200,000 Americans die each year as a direct result of this problem. Millions more perish throughout the undeveloped world. Unless more regulations can control this process, globalization is rarely an eco-friendly process.
4. Globalization would change the definition of humanity.
The structure of humanity creates unique identifications that help us to figure out who we are. It is a process that goes back to the very beginning of our recorded history. We identify ourselves based on our family history, where we live, and what we do. When we focus on globalization, then our world becomes a smaller place where there are fewer cultures and ethnicities.
We already see this problem occur when families immigrate from one country to another. Even households that move across a border like one between the U.S. and Canada can experience unique changes that cause a reduction in the emphasis of their culture. All of us being human is arguably a good thing, but it also changes the approach we take to culture.
5. It does not create more access to skill.
Although there are more job opportunities in the developing world because of globalization, it does not change the fact that an advanced economy requires individual workers with a specific skill set that may not be immediately available. Additional educational opportunities can reduce the influence of this disadvantage, but there could be a gap for more than a generation until this infrastructure can be put into place.
An example of this problem involves the developing technologies of artificial intelligence. Although anyone can learn coding, engineering, and design, the advanced economies of the world have more access to these learning tools. You’ll find more opportunities in this field in Europe or the U.S. compared to countries like Sierra Leone or the DRC. That means the wealthy still have more chances to find more money while the poor struggle to find a path out of poverty.
6. Globalization would centralize distribution networks.
Even with an emphasis on infrastructure building in the developing world, we are still several decades away from having some countries match what Europe, North America, or Oceania can provide to consumers already. That means an effort to go borderless must use centralized distribution networks to ensure product access is available to everyone.
The only problem with this structure is that it creates more inefficiencies. We are already losing hundreds of thousands of tons of food every day because of waste that is built into the domestic systems. This issue would only get worse if there are more people to serve using the same processes that we currently use.
7. It would not change problems with over-consumption.
The issue with the advanced economies of our world today is that they consume a vast majority if the world’s resources. The 20 wealthiest countries on our planet use 90% of what is available for consumption every day. Americans consume over 200 billion more calories per day more than is necessary for healthy living. One-quarter of the energy our planet produces is used by the United States, even though only 5% of the population lives in that country.
Unless there are structures in place to equalize this consumption issues, globalization won’t fix this disadvantage. One could even argue that the world will never come together unless people learn to share equal access. Since there are advanced economies which want to keep their status, asking them to sacrifice to help others may not provide the outcome we expect.
8. Globalization would create new political systems to navigate.
When the European Union decided to come closer together in the spirit of cooperation, their treaty created a parliament that works to govern over all member nations. That structure doesn’t eliminate local governing structures, but it does require everyone to follow specific rules if they wish to continue with their participation. The EU leadership can dictate specific quotas and metrics to follow to continue receiving the benefits of this cooperative relationship as well.
Globalization would require a shift in our thinking that takes us away from nationalism. It would mean Americans would need to make the United Nations their top priority instead of their local elections for their overall governing needs. That shift is something which some cultures may be unable to accept.
9. It would reduce the availability of welfare programs and social safety nets.
The advanced economies of the world provide a series of welfare programs that work to help poor families in their economy to have resource availability. Food stamps, cash stipends, housing allowances, and similar benefits would no longer be as available because the resources would shift toward those in the world who have even less. Someone in the United States receiving a standard welfare package still qualifies as being in the top 1% of global income earners.
This disadvantage would also shift how local economies in the developed world would balance their expenses. With fewer government benefits coming through local stores, there is a strong chance that a recession would occur that would be equal to or greater than what the world experienced in 2007.
Verdict on the Pros and Cons of Globalization
Globalization gives us all an opportunity to live, work, and communicate in ways that bring all of us closer together. This structure gives everyone an opportunity to create a world for themselves where any dream becomes possible. It can improve the safety of the workplace, encourage innovation, and give us more access to the goods and services that we need. It is a process that provides more competition than what border enforcement creates.
When we reduce the restrictions that are in place between nations, then we can also create more security issues that require more intelligence and communication to solve. Individuals with ill intent can move with greater freedom in a globalized world.
That’s why the pros and cons of globalization are critical to review. It can put us on a path toward economic freedom, but this structure can also encourage the rich to get wealthier at the expense of the poor.
Keith Miller has over 25 years of experience as a CEO and serial entrepreneur. As an entrepreneur, he has founded several multi-million dollar companies. As a writer, Keith's work has been mentioned in CIO Magazine, Workable, BizTech, and The Charlotte Observer. If you have any questions about the content of this blog post, then please send our content editing team a message here.