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To what extent is a globalised world of economic benefit?

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Introduction

To what extent is a globalised world of economic benefit? The definition of globalisation is that will be used to answer this question will be the classic example used by the European Commission. 'Globalisation can be defined as the process by which markets and production in different countries are becoming increasingly interdependent due to the dynamics of trade in goods and services and flows of capital and technology'. Globalisation can be measured in two ways firstly via the ratio of trade to output over time. The higher the ratio of trade to output will mean the greater the extent of globalisation. The second way is to measure capital flows through FDI (the amount of foreign investment into a country). Hence the higher the rate of FDI the more globalisation exists. It is true to say that globalisation has been occurring throughout the world for many years, and it is also true to say that globalisation has many different effects depending upon each country. For clarity and ease this essay will deal with two main types of economy that could be affected, firstly well established economies such as the UK and the USA, and secondly with poorer less well established economies such as some in Asia and Eastern Europe. ...read more.

Middle

The south are earning huge amounts and the standard of living is higher than the less well paid North, furthermore as capital is mobile there is a great amount of regional unemployment. Comparative advantage will mean that individual economies will develop economies of scale in certain industries; they can therefore keep prices low to the world market and produce more for the world market. As different industries in different countries will be in competition to have corporations invest there, this will cause and increase in efficiency. The extent to which this is beneficial is unclear. Although this increased manufacturing means that developing countries are getting an ever increasing amount of trade and FDI the extent to which this is occurring due to exploitation is debatable. For example we buy a huge amount of Coa-Coa from South America sources, recent studies have shown that although a great amount of money goes to the counties little is seen by the farmers who grow it. They receive what is considered by any standards a sub-standard wage and have to work prolonged hours in awful conditions. Although low prices are in the benefit of the consumer, the producers must be remembered as they often do not receive the same social security benefits that we are used to in the West. ...read more.

Conclusion

Furthermore footloose capital in developing countries can mean that after a firm uses countries resources and exploits its labour, it then moves on to another country which seems better suited and leaves behind a huge number of unemployed who may have relocated in order to do the job in the first place. Globalisation is undoubtedly of benefit to the consumer. Comparative advantage, competition and economies of scale will push prices down to the world market. However the extent to which it is good for the producer and countries as a whole is debatable. Although developing countries may experience increased FDI and output in general, this does not necessarily reflect upon what the producer and workers are receiving and often if not protected people can be exploited. Furthermore a country may experience a huge amount of unemployment if an inefficient industry is opened up to the world market and moves abroad. Globalisation will lead to increased efficiency and if properly regulated will develop third world countries. In general if it happens in a sensible and responsible way and corporations act to not exploit workers, then globalisation is of economic benefit to the world. David Willey ...read more.

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