How Does Globalization Affect the World Economy?

by Sam Grover; Updated September 26, 2017
Globalization creates new jobs and markets in developing countries.

Globalization is a term that describes how people are becoming more and more connected. While globalization has always existed to some extent, it has become more pronounced in the 21st Century. This is because transportation and communication have both become cheaper and faster. Since trade is such a major way people interact with one another, it follows that globalization has some key effects on the economy.

Transportation

Globalizaiton has allowed manufacturers to export products all around the world. It is not uncommon for goods made in China to be shipped to the United States. The fact that goods need to travel so far, however, has reduced shipping costs. Additionally, increased demand for shipping has spurred innovation, such as containerization, that has further reduced shipping costs.

Up-Scaling

Globalization has reduced demand and halted growth for small-scale manufacturing. For example, many American farmers now grow food for large "megafarms" owned by corporations, rather than small family-owned farms. This consolidation of capital means that there are more workers and fewer small businessmen as that level of large, infrastructural investment is needed to ship products around the world.

Increased Jobs

Globalization has made it possible for a company in the United States or Canada to outsource its production and services to developing countries like China or India. This provides new jobs in developing countries. India, for instance, has not developed an internal need for an abundance of call centers. However, the United States has a high demand, and therefore outsources call center jobs to India.

Intellectual Property

Globalization has reduced the value of intellectual property. In the 1960s, there was little demand for American movies in China. Even if there was, it would be difficult to get pirated movies across the Pacific. In 2011, on the other hand, pirated movies are rife in developing nations. This increases the supply of intellectual property, which in turn reduces demand, and with it the value of that property.

About the Author

Sam Grover began writing in 2005, also having worked as a behavior therapist and teacher. His work has appeared in New Zealand publications "Critic" and "Logic," where he covered political and educational issues. Grover graduated from the University of Otago with a Bachelor of Arts in history.

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