The economic progress over the last few decades has been impressive by any measure and globalization has played a major role in it. Many countries that used to be perceived as poor and struggling economies are now envy of the world and poised to become the leading economies in the coming decades such as India, China, and Brazil. But it is also an unfortunate reality that the benefits of globalization have not equally accrued to everyone and while statistical figures such as per capita GDP may paint an encouraging picture, stats do not always give the whole story. But despite its shortcomings, the benefits of globalization greatly exceed the potential costs.
One of the reasons why globalization leads to greater economic prosperity is due to more efficient allocation of resources. More efficient allocation of resources results in higher profits for organizations while lower prices for consumers. It is difficult to imagine low cost of living in America if “Made in China” goods disappear from superstore shelves in the U.S. Globalization is also responsible for lifting hundreds of millions if not billions of people out of poverty and it might not have happened if previously closed economies had not embraced globalization. After joining WTO, China reduced its tariff to about 13 percent and also significantly cut down the list of protected goods (Kotsch).
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Globalization has also been reducing the technological gap among economies due to quicker dispersion of technologies as compared to the past. This is not only true at commercial level but even at individual level as well. In 1991, the number of cell phone users was almost zero but now at least a third of global population owns cell phone (Fisher). Similarly, just as there are social costs of globalization such as growing environmental pollution, there are social benefits as well. First of all, economic relations lead to improved political relations which increase the prospects of peace. Similarly, globalization has increased cross-cultural exchange among countries which help promote greater understanding and goodwill.
Globalization may have improved economic wellbeing of countries overall, the benefits have not flowed equally to different economic and social classes and one of the major outcomes has been growing income inequality. In China and India, per capita incomes among urban households were 2.2 times higher than rural households in 1990 but had risen to 2.8 times by 2000. Similarly, increased economic activity has also been imposed greater social costs on the societies in the form of higher levels of environmental and noise pollution (Kotsch). Social factors such as clean air may be difficult to quantify but they, nonetheless, influence the overall wellbeing of the society and have become even more important due to rising concerns about global warming. Another cost of globalization is that while it may create jobs in certain economies, it leads to job losses in other economies, especially low-skilled which explains negative sentiments towards globalization in developed countries like the U.S.
Progress rarely comes without costs and same is true for globalization, too. While critics may argue that the benefits of globalization have now flowed to different parties equally, they, nonetheless, cannot deny the fact that globalization has indeed lifted a significant proportion of global population out of poverty and has raised the average living standards in developing countries. In addition, it has reduced the competitive gap between developed and developing countries through quicker dispersion of commercial and consumer technologies which explains the popular global trend of outsourcing of manufacturing activities to emerging economies.
