Causes & Consequences of Globalization

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Globalization has changed the world economy forever. The growth of international trade has led to a reduction in poverty rates and has fueled technological progress. Small and large businesses alike can now sell their products across borders and reach a global audience. The removal of barriers among nations encourages the flow of goods, labor and capital, resulting in lower prices for customers and increased competition among companies. However, globalization remains a controversial topic.

Causes of Globalization

Thousands of years ago, traders traveled long distances to exchange gold for food, clothing and other goods. As technology evolved, so did transportation and international trade. Today, companies worldwide can exchange goods and services, employ remote teams and communicate over the internet. Customers have access to more products than ever before and can choose from thousands of brands.

Modern technology is one of the primary factors leading to globalization. The advancements in this area led to major changes in the way people communicate, work and travel. Internet and phone services allow businesses and individuals alike to share information on the go. Countries and economies around the world are now interconnected. Digitalization has impacted the way companies work, deliver their products and interact with customers.

The developments in transportation play a major role too. Companies can deliver goods and services to customers worldwide within days. Other causes of globalization include the growth of global media, the reduction in tariff barriers and the increased mobility of labor. Additionally, the rapid growth of multinational corporations, such as IBM and Apple, is both a cause and consequence of globalization. These organizations create new jobs, foster innovation and drive economic growth.

Economic Benefits of Globalization

Today, customers have access to both local and international brands at competitive prices. Domestic companies are competing with foreign firms, which leads to better products at lower rates for the end consumer. Small businesses can now expand their operations across the globe due to the advancements in technology.

Furthermore, companies can secure funding from abroad and take their operations to foreign markets. Multinational corporations have offices and branches worldwide, which allows them to reach a larger audience and stimulate economic growth in developing countries. These things would not have been possible without globalization.

Starting and running a business is no longer as challenging as it used to be. Manufacturers, for example, can supply raw materials from foreign countries to keep the costs low. An American company can hire employees remotely for less and target customers across the world. Small- and medium-sized firms can compete with industry leaders by leveraging the power of technology.

Globalization also encourages innovation and creativity. Companies are being pressured to develop better products and services to remain competitive. Modern technologies such as machine learning, video conferencing tools and cloud computing are now easily accessible. This makes processes more efficient and has a positive impact on the economy.

Critical Perspectives on Globalization

The factors leading to globalization have improved living standards, businesses and economies worldwide while bringing new challenges, such as economic inequality.

According to the 2018 World Inequality Report, there has been a significant rise in wealth inequality in the U.S., China and Canada between 1980 and 2016. Other sources say that the 62 richest people hold as much wealth as half of the world's population. The gap between social classes has been growing at a fast pace over the past decades.

Additionally, many firms exploit workers in developing countries. Domestic companies, on the other hand, find it difficult to attract and retain top talent. Millions of employees leave their home countries for higher-paying jobs abroad. Tax competition and tax avoidance are major problems as well.

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About the Author

Andra Picincu is a digital marketing consultant with over 10 years of experience. She works closely with small businesses and large organizations alike to help them grow and increase brand awareness. She holds a BA in Marketing and International Business and a BA in Psychology. Over the past decade, she has turned her passion for marketing and writing into a successful business with an international audience. Current and former clients include The HOTH, Bisnode Sverige, Nutracelle, CLICK - The Coffee Lover's Protein Drink, InstaCuppa, Marketgoo, GoHarvey, Internet Brands, and more. In her daily life, Ms. Picincu provides digital marketing consulting and copywriting services. Her goal is to help businesses understand and reach their target audience in new, creative ways.