The International Monetary Fund (IMF) defines economic globalization as “a historical process, the result of human innovation and technological progress. (Related: The Global Economy (And the Economic Globalization))
It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders” (Benczes, 2014).
Professor Emeritus at the Corvinus University of Budapest Tamás Szentes expounds economic globalization by explaining that in economic terms, “globalisation is nothing but a process making the world economy an “organic system” by extending transnational economic processes and economic relations to more and more countries and by deepening the economic interdependencies among them” (Benczes, 2014).
Among other things, this explanation asserts that economic activities and processes in economic globalization, such as production, can be interpreted only in a global context, that is, in an integrated world economy or globalization economy.
Contemporary sociologists mention some potential benefits as well as costs of economic integration. Some of the advantages usually mentioned are the following:
1. As regards trade benefits, global economic integration characteristically leads to a decrease in the cost of trade, better availability and a broader selection of goods and services, and efficiency gains that cause greater purchasing power.
2. In employment, opportunities tend to increase because trade liberalization causes market expansion, technology sharing, and cross-border investment flows.
3. Because of tighter economic ties, political cooperation among nations can improve, which can help resolve clashes peaceably and thus lead to greater stability.
4. Global economic integration upholds free trade which promotes global economic growth, generates jobs, makes companies more competitive, and lowers prices for consumers. Economic integration prompts transnational companies to invest and install plants in other countries, thereby providing employment for the people in those nations usually getting them out of poverty.
5. There are more inflow of information among two countries and cultural intermingling where each nation learns more about other cultures. Socially, people have become more open and tolerant towards each other as those who live in the other parts of the globe are not considered aliens.
6. Many consider swift travel, mass communications, and speedy dissemination of information, such as through the Internet, as benefits of economic integration and globalization.
In spite of the advantages, economic integration has also assumed costs like the following:
1. Economic integration results in the erosion of national sovereignty. Members of economic unions are normally mandated to adhere to rules on trade, monetary policy, and fiscal policy, which are developed by an unelected external policymaking body.
2. Big multi-national corporations can exploit tax havens in other nations to avoid paying taxes. They are also accused of social injustice, unfair working conditions (including slave labor wages, child labor, and prisoners used to work), as well as lack of concern for environment (such as, mishandling of natural resources and ecological damage).
3. Transnational companies and multinational corporations are progressively influencing political decisions. There is thus a threat of these corporations ruling the globe as they gain more and more power due to economic integration and globalization.
4. Some claim that economic integration and globalization lead to the infiltration of communicable diseases. Fatal diseases like HIV/AIDS are disseminated by tourists even to the remotest corners of the world. Increase in human trafficking is also attributed to globalization.
5. Globalization and economic integration are said to have made the rich richer and the non-rich poorer. Global economic integration may be wonderful for managers, owners, and investors, but ‘hell’ on poor laborers. Although competition among countries is supposed to drive prices down, in many cases this is not happening as countries manipulate their currency to get a price advantage.
6. For developed countries, jobs are lost and moved to lower cost countries. Laborers in developed countries face pay-cut demands from establishments who threaten to export jobs. This produces a culture of fear for many middle class workers who have slight leverage in this global game. (© 2014 by Jensen DG. Mañebog)
Generally speaking, is global economic integration advantageous or disadvantageous? Why?
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