Social and Economic Impacts of Globalization - Term Paper Example

Impact of Globalization on Economic and Social Inequality Abstract In the past, most nations carried out their trade and other operations separately and within their boundaries. However, the development of globalization in recent decades has led to more, economic, social and political integration between nations. Globalization has brought with it various benefits to individual nations and communities in terms of economic growth and social development. However, it is evident that globalization has also caused various negative effects especially to developing nations for instance social and economic inequality. This paper will analyze the social, political and economic effects of globalization. It will argue that though globalization is beneficial, it has led to greater economic and social inequality. Introduction Globalization refers to the free movement or transportation of goods, capital and people whereas liberalization is the elimination or reduction of barriers to enhance free movement of these goods and capital. Due to the swift expansion that has occurred in trade and capital movements, globalization has led to both positive and negative impacts (Gaunle, 2011). The main movers of the large increase in global trade and investment, which to most individuals happens to be the chief expression of globalization, have been the global accords to reduce trade restrictions and the instant reduction in the transportation costs, especially the costs of transporting data. These factors have led to the fragmentation or disintegration of industries, a new aspect of globalization (Duncan, 2000). Globalization is a term that integrates a range of economic, cultural, social, technological and political forces and processes that have generated the characteristics conditions of the modern way of life. The most vital among these characteristics is a dense or high extensive network of interconnections and interdependencies that regularly go beyond the national borders. These interconnections appear to unite the geographical distant localities around the world, and the proceedings occurring in one part of the world thereby enabling rapid production or generation of effects in other parts (Yeates, 2007). Social and economic Impacts of globalization Various people have varying explanations concerning the development of globalization. In this case, some assert that globalization is a contemporary emerging phase while others deem that it has occurred for a long time. Other people argue that whether it occurred in the past or lately, the order and speed of global transformation is exceptional and necessitates an active restructuring of the global institutions of governance (Beall, 2002). To all countries that participate, globalization will continue to have great benefits to them. However, globalization creates pressures causing inequalities in some countries and the need for structural changes in all. In addition, globalization has left some nations more susceptible to the upsets that may occur externally. Therefore, globalization brings forth risk management challenges, which remains unaddressed (Duncan, 2000). Most countries lay the blame on globalization for causing a wide range of problems. Some of the adverse effects that have occurred due to globalization on the social welfare include social problems, which range from famine to floods, rural to urban migration leading to overcrowding in urban areas and from pollution to poverty. This means that when two or more countries join together, the social welfare of the two countries will be vulnerable to negative effects leading to decline in the social welfare of the country. For instance, relocation of most industries to the urban areas will cause most rural residents to migrate from the rural areas to the urban leading to overcrowding, pollution and poor disposition of the waste products. However, globalization has brought vital developmental successes. Some examples of these developmental successes include poverty reduction, better services, increasing economic prosperity and enhanced concern with human rights (Yeates, 2007). Globalization has brought about various risks and costs which largely affects the delicate developing economies, and the world’s poor. At times of periodical global financial and economic crises, the negative aspect of globalization becomes clear. The costs of the crises that linked with economic and financial globalization appear to have been borne overwhelmingly by the developing world, and often unduly so by the poor who are the most susceptible. On the other hand, sharing of the benefits got from globalization is unequal among the global communities (Nissanke & Thorbecke, 2005). Growth and poverty mitigation measures have not been sufficient due to the growing polarization among countries accompanied by a surge in disparity among most nations. Explanation of the rising trend in the recent years concerning disparities does not attribute to the traditional causes of inequality. Conversely, the modern globalization effects have led to increased global inequality in recent years. These may include the nature of technological modifications and policy reform measures such as the rise of financial rents following financial liberalization and privatization. In addition, the changes might include frequent application of deflation policy under stabilization-cum-adjustment, trade liberalization, erosion of the redistributive role of the state and changes in labor institutions (Nissanke & Thorbecke, 2005). The globalization process does not include the poor countries at the same level with those countries that are at the middle. This means that globalization process does not take into considerations those countries that do not have stable income but it involves those countries that are not poor or that are overwhelmingly rich. Most poor countries have hardly experienced any expansion in world trade since the globalization process does not permit them to unite with other countries to expand their trade. Although the world population was highest in developing countries from the year 1970 to 1991, their allocation of global trade benefits barely changed (Manning, 1999). The force that controls some economies to put more emphasis to performance related pay have also led to decrease in willingness to impose high marginal tax rates and thus making disposable incomes to be more equal than the pre-tax incomes. Due to this, disposable incomes have become uneven in those countries that earn high incomes. Some countries might be unwilling to inflict high tax marginal rates due to the high global dynamism of capital and skilled labor. This exerts pressure for tax rates to be globally competitive, which is another major consequence of globalization (Duncan, 2000). Contemporary researches reveal that various countries experience more inequality nowadays compared to ten or more years ago. Between the years 1870 and 1990, the gap in per capita income between the developed and the developing nations grew tremendously. Most countries may view this as a welcome aspect but in reality, the increment in globalization has accelerated income inequalities across countries. It is also evident that only a part of the income and wage disparity occurs due to increased foreign trade and investment (Guillen, 2001). Most people have migrated from their home countries to other countries to seek for better paying jobs due too globalization and liberalization. Most economists deem that the arrival of immigrants to a country in search of jobs augments unemployment and discourage wages in the host countries. An insightful political aspect in most developed countries happens to be the effect of immigrants on wages. In addition, globalization causes a great inequality between the wages of more-skilled and less-skilled labor (Gaunle, 2011). Mahler (2004) however argues that globalization accelerates economic growth in both the poor and rich countries as well as in all income groups within a nation. Additionally, global competition offer reduced prices, which benefit the low-income groups I a large way. This is because the low-income groups often utilize a greater part of their income compared to the high income groups. Some economists argue that the development of globalization have successfully prevented the stagnation of national economies, which would otherwise lead to increased inequality. The development of economic globalization has rendered social democratic policies almost unfeasible. In addition, economic globalization has rendered national governments ineffective in relation to international economic cooperation and neoliberal deregulation. This means that globalization had led to increased economic activities to an extent where the self-governing policies were no longer important and the national governments would no longer impose rules and regulations. Moreover, various studies indicate that the development of economic globalization has led to reduction in social democracy and the contemporary nation welfare. In this regard, such researches indicate that most governments have diverted from their primary responsibility of social spending due to international competitive pressures (Beall, 2002). Globalization has positively led to the huge increase in the flow of information and knowledge internationally. However, this increase in information flow has proved to be disadvantageous to low-income countries. In this case, this may cause degradation of social norms of certain communities who might try to copy traditions of a richer community. With increased flow of information to the country, opening up of trade and capital movements will occur and those countries with high insecurity levels will not be able to take the advantage of the opportunities created (Nissanke & Thorbecke, 2005). Increased flow of information might however be beneficial to many countries. Most countries will be more open to trade and investments. This will benefit them since the cost of sending information will be low, and this will reduce the costs of managing and controlling geographically separated parts of a company or industry. To those countries where the production process is cheap, managers will easily locate different parts where this production process will take part. Through this production process, disintegration has permitted the host countries to follow their comparative advantage and thus make the best use of their resources (Duncan, 2000). Due to economic globalization, similar pernicious effects on income got from the public sector have been the same as the income got from the market sector. In this case, most governments have found themselves in grave competition to restrict or reduce the costs of public amenities in an attempt to retain or uphold their positions in exports and capital markets, leading to a competition that has hollowed out long standing systems of social protection. In addition, researchers argue that the growing mobility of capital has made it possible for institutions or to evade paying tax, forcing the burden of supporting the social programs that remain on labor (Mahler, 2004). Beall (2002) adds that policies promoted by the international financial and economic architecture are very important in strengthening international social inequalities since they urged weaker economies to reduce costs through reducing prices and wages, reflected in the aspects of worsening working conditions, reduced social security, extended working periods as well as increased casualness. This increases the already established social problems in developing nations. Consequently, this will lead to overwhelming social inequality between the developed and developing countries. The dependency theory indicates that the infiltration of foreign capital into the tangential economies has led to increased utilization of local human and the natural resources and to the relocation of profit back into the regal nations. This leads to economic and social inequality, injustice and deprivation of the weaker nations. The generation of raw materials in poor nations prevents capability building rendering the economy to remain export-oriented (Manning, 1999). In most cases, globalization demoralizes the state due to its dominant neoliberal principle, which is against the state and not because globalization is directly against the state (Guillen, 2001). During liberalization, income distribution in Eastern Europe and the former Communist bloc became more tilted and poverty increased in most these countries. According to the Human Development Report, high disparity occurs due to entry of large firms in the markets of poor nations. This has been applicable in most Latin American countries. These countries import cheap textiles and electronic products, which often out-competes the Western products from their country leading to a high number of people being jobless (Manning, 1999). Globalization also causes the unfortunate effect of social exclusion. Scholars indicate that social exclusion is an inevitable side effect of economic globalization. This means that with increased economic globalization, social exclusion has to occur. In this case, it is evident that due to economic globalization, most workers formerly protected by trade restrictions in their countries have lost such privileges. This also implies that such people becomes socially excluded rendering their lives and work security vulnerable to global economic changes (Beall, 2002). Another way through which globalization causes social inequality is through causing direct poverty mostly in developing nations. In this case, economists argue that globalization has the potential to cause poverty through the comparative price fluctuations in both factor markets and the goods markets. Consequently, since most developing countries have large portions of unskilled labor, there occurs an income inequality, which further accelerates poverty in these nations (Nissanke & Thorbecke, 2005). Through globalization and liberalization, it has been easier to move capital from one country to another. Some Global institutions such as the World Trade Organization do exist in order make this movement easier by encouraging the member nations to alter the laws that that would cause eradication of barriers to enhance capital flow. However, speedy outflow or inflow of capital can cause negative consequences to national economies. For instance, the instant withdrawal of capital from the East –Asian nations in the late 1990s led to a severe economic crisis in the region (Gaunle, 2011). Globalization creates new opportunities for those countries who take part to enhance growth and development. However, globalization can also pose challenges and inflict restrictions on policy makers in the control of national, regional and international economic systems. The underlying premise is that even though globalization offers various opportunities for development, the poor countries may incur negative effects as well as unfair share of such benefits. Policy makers and economists often ponder whether the shear benefits accrued by the developing nations could avert the negative effects caused by globalization (Nissanke & Thorbecke, 2005). Conclusion It is evident that globalization has helped many nations and communities in the world to improve their economies and enhance their social integration. However, globalization has also led to greater social and economic inequality. In addition, globalization has caused poor and developing countries to remain poor while benefiting the rich countries. The increase of economic globalization has particularly rendered social democracy ineffective and insignificant. This has caused social degradation as well as poverty in developing nations. Generally, globalization has caused more negative consequences in developing nations compared to benefits accrued to these countries. This poses a challenge to policy makers to restructure the rules and specifications of globalization in order to accommodate the developing nations in share of global social, political and economic benefits. Reference Beall, Jo. 2002. “Globalization and social exclusion in cities: framing the debate with lessons from Africa and Asia.” Environment & Urbanization 14(1): 41-51. Duncan, Ron. 2000. “Globalization and Income Inequality: An International Perspective.” http://www.apec.org.au/docs/duncan.PDF (November 1 2011). Gaunle, Kiran. 2011. “Negative Impacts of Globalization and Liberalization.” http://www.ehow.com/info_8486932_negative-impacts-globalization-liberalization.html (November 1 2011). Guillen, Mauro F. 2001. “Is Globalization Civilizing, Destructive Or Feeble?” Annual Review of Sociology 27(1): 235-260. Mahler, Vincent A. 2004. “Economic Globalization, Domestic Politics, and Income Inequality in the Developed Countries: A Cross-National Study.” Comparative Political Studies 37(9): 1025-1053. Manning, Susan. 1999. “Globalization.” Journal of World-Systems Research 5(2): 137-461. Nissanke, Machiko, and Thorbecke, Erik. 2005. “Channels and Policy Debate in the Globalization-Inequality-Poverty, Nexus.” http://www.wider.unu.edu/publications/working-papers/discussion-papers/2005/en_GB/dp2005-08/_files/78091751802078515/default/dp2005-08.pdf (November 1 2011). Yeates, Nicola. 2007. “Globalization and Social Policy.” http://www.lmps.gofor.de/Globalization%20and%20Social%20Policy21.pdf (November 1 2011). Read More