What do you understand by Globalisation? What is the importance of globalisation?

Ques:-  What do you understand by Globalisation?  What is the importance of globalisation?

Ans. Globalisation means the process of integration of national economies through cross-border flows of products, services, capital, technology, manpower and information.

According to IMF, "Globalisation is the growing inter-dependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and also through the more rapid and wide wide-spread diffusion of technology."

The significance of globalisation in world economy is growing day by day.

Globalisation offers the following advantages:

1. Rapid Industrialisation-- Globalisation helps in the free flow of capital and technology from one country to another. It enables global firms to acquire finance at a the lower cost of capital. The increased flows of capital from surplus countries to the neddy countries leads to an increase in global investment. Foreign capital has, for example, increased the pace of economic development in China. The flow of technology from advanced countries helps developing countries in boosting up their industrialisation.

2. Balanced Development -- Globalisation leads to the spread up of manufacturing facilities in different countries. this in turn leads to the balanced development of all the countries.

3. Increase in Production-- Rapid industrialization of world economies leads to an increase in the output of goods and services. There is an increase in per capita consumption in both developed and developing countries.

4. Higher Stand of Living -- When countries produce goods and services in which they have a comparative advantage, productivity increases. Costs of production and prices decline and quality improves. Consumer choice and consumer surplus are enhanced. As a result, living standards increase.

5. Healthy Competition-- Gobalisation increases competition among companies. They become more cost and quality-conscious to face competition. Global competition keeps a check on prices and the pace of innovation increases.

An open world economy spurs innovation through new ideas from aboard. Firms in developing countries get enormous opportunities both in domestic and foreign markets.

6. Increase in Employment-- Due to globalisation, developing countries can attract more foreign direct investment. Moreover, manufacturing facilities are shifted to low wage developing countries. Therefore, job opportunities increase rapidly in these countries. For example, millions are employed in call centers, foreign multinationals, etc. in India.

Ques:- What is the impact of globalisation?

Ans:- Globalisation is a mixed blessing. Along with its benefits, it has disadvantages also. Some adverse effects of globalisation are as follows: 

1. Killing of Domestic Industry -- Globalisation creates opportunities for multinationals of advanced countries to establish manufacturing and marketing facilities in developing countries. Domestic firms in these countries fail to compete with these multinationals. As a result, several domestic countries have to close down. Countries like India and China allow foreign investment even in soft drinks, junk food and such other industries where it is not required. Several Indian firms have been taken over by foreign companies.

2. Outdated Technology -- Foreign companies often bring technology that has become obsolete in advanced nations or technology that is not suited to developing countries. They kill traditional crafts and indigenous industries affecting the lives of people employed in them. Demand for domestic products declined due to the superior quality of foreign products.

3. Exploitation of resources -- Multinationals from advanced countries exploit the labor and natural resources of developing countries. They violate labor and environmental standards due to weak laws.

4. Unemployment -- Killing of domestic businesses and traditional crafts results in a reduction in employment opportunities in developing countries.

5. Economic Inequalities -- Globalisation widens the gap between rich and poor. Well-educated and highly skilled people earn very high incomes while common people fail to earn the minimum. 

6. Threat to National Sovereignty -- Globalisation results in commercial and political colonisation in poor countries. Global corporations exploit the weak bargaining power of governments in these countries. Nexus between multinationals and host governments is not uncommon. Economic power is shifted from independent countries to supernational organisations such as World Trade Organisation. The sovereignty of democratically elected Governments is undetermined because trade policies are often formulated in favor of advanced countries.    

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