According to Czinkota, M. Ronkainen, I. Moffett, M. Marinova, S. Marinov, M. (2005), Globalization reflects a business orientation based on the belief that the world is becoming more homogeneous and that distinctions between national markets are not only fading but, for some products, will eventually disappear. The tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets.
Globalization has had the effect of markedly increasing not only international trade, but also cultural exchange The advantages and disadvantages of globalization have been heavily scrutinized and debated in recent years. Proponents of globalization say that it helps developing nations “catch up” to industrialized nations much faster through increased employment and technological advances. Critics of globalization say that it weakens national sovereignty and allows rich nations to ship domestic jobs overseas where labour is much cheaper.
Causes and effects of Globalization According to Alexander, C. , & Warwick, K. (2007), First of all Globalization is a positive thing and it benefits a country who, for example, specializes in a certain product and then exchange that good with other countries. But it does not only have positive aspects. Also the disadvantages have to be noticed I regard to this topic. Economic integration and free trade conditions have produced an unstoppable movement towards economic globalization.
Most economists applaud the trend, pointing to the modernization and growing wealth that have resulted. But many countries have been forgotten or have even been harmed by globalization. So what have been the positive and negative effects of this globalization trend? First of all the principal cause and effect of globalization is international trade, which has expanded substantially. A growing trade has often been followed by higher economic growth, although not in all cases.
For example: Annual growth rates of GDP in East and Southeast Asia were 6-8 and in Latin America and Sub-Saharan Africa they averaged less than half a percent per year. On the other hand there is the unemployment effect. While growing trade has general created more jobs, the parallel growth in competition has forced many companies to fire their workers in order to cut costs, boost efficiency and increase profits. Especially some less-developed countries had to deal with this negative effect.
China, which has experienced a strong economic growth in the last years, has begun to struggle with unemployment, particularly in urban areas. So it becomes obvious that globalization is also accompanied by negative aspects. Another point which should be considered when talking about globalization is the income distribution. Experts suggest that the increased trade between North and South has reduced income inequality among skilled and semi-skilled workers in the South. On the other hand it has increased the inequality among such workers in the North.
This is because manufactured exports from the South raise demand and wages for workers with only limited skills and education. But the effect in the North is the opposite. There the service and technology industries pay top wages to highly skilled workers but have little use for semi-skilled labour. There are a lot of other fields where it becomes clear that globalization is followed by a lot of advantages, but also disadvantages. Overall it can be said that globalization appears to have deepened inequalities in the international distribution of income.