The Effects of Globalization - Essay Example

Globalization reorganizes the national, subnational, and international levels. It particularly reorganizes international trade, financial market integration, and production. This has an impact on capitalist social and economic relations through microeconomic and multilateralism phenomena like the competitiveness of businesses globally. The consequential change in production systems has an impact on the labor process, class structure, technological application, and capital organization and structure. Globalization marginalizes workers that are less educated and less skilled. As a result of globalization, the expansion of business does not automatically result in increased employment. The higher mobility in comparison to labor can cause high capital remuneration. Power in the global economy is a company’s ability to command tangible as well as intangible assets that result in increased loyalty of the customers irrespective of location. A company can tap into global networks no matter what is its geographic location or size. Globalization has had mixed effects on the world economy with the increase in trade and foreign direct investment, on one hand, increased labor and production costs, and income inequality on the other hand.

Globalization has mixed effects on currency as a result of which, certain countries become stronger economically while other countries lose economic strength. The acceleration of globalization has caused market conditions to change. This has affected the volatility and value of national currencies all over the world. For example, the euro EUR in the European Union has replaced several local currencies. The Renminbi RMB has challenged the power of the US dollar. Many other currencies are linked with the euro and dollar to deter harmful volatilities and fluctuations. Countries like Germany and China have taken advantage of the power of global currencies’ unification to sustain their growth. On the other hand, countries like Spain and Greece have gathered huge national debts while other countries have become poorer. A range of factors is causing the fluctuation of currencies. Globalization has generally been affected by the demand-to-supply side of economies rather than the other way around like it used to be before, forces of the deflationary market rather than the inflationary market, and the prospects for stable development of the market. Globalization also affects the inflation of average annual consumer prices. “Estimates obtained at the OECD, employing an accounting framework suggest that the more direct effect of globalization (captured by measures of economic openness) on average annual consumer price inflation is within the range of 0.0 to 0.3 percentage points over the period 2000 – 2005” (Papademos). Read More