Causes and effects of Globalization

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 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 generall 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 accompied 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 labor.

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.

The next picture shows different areas influenced by globalization:

sources: htt




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5 thoughts on “Causes and effects of Globalization

  1. With advancing globalization, the living conditions (especially when they are measured by broader indicators of well-being) have improved significantly in almost all countries. The biggest gains have been made by the advanced countries, with only a few developing countries have to take part.

    The fact that the income gap between high income and low-income countries has increased, is cause for concern. Moreover the number of people worldwide who live in abject poverty is deeply troubling. It would be wrong to conclude that globalization has caused the divergence, or that nothing can be done to improve the situation. Far from it: The low-income countries could not easily integrate into the global economy as others, partly because of their chosen policies and partly because of factors beyond their control. No country, least of all the poorest, can afford to remain isolated from the world economy. Each country should try to reduce poverty. The international community should endeavor to provide the poorest countries – by strengthening the international financial system, through trade and aid – to integrate into the global economy to grow faster and reduce poverty. This is the way to take care that all people in all countries have access to the benefits of globalization.

  2. In my opinion the globalisation has, as you said too, a lot of positive effects for the worldwide economy and society. For example there is a global market for companies to trade their products and a wider range of options for people, to choose from among the products of different nations. Furthermore communication among the countries is on the rise, which allows for better understanding and broader vision. When communication increases amongst two countries, there is interchange of cultures as well. We get to know more about the other’s cultural preferences and probably can learn from the economic of other nations.
    But as you said there are also some disadvantages, which have to be mentioned when you talk about globalization. But I can’t agree with your statement, that for example in China the unemployment grows as a indirect result of globalisation.
    In my opinion Globalization is causing a movement of jobs from European to asian countries. This is a result of lower costs of labour in the Asian countries compared to other countries. The high rate of profit for the companies, in Asia, has resulted in a pressure on the employed Europeans, who are always under the threat of the business being outsourced.
    To summarize I would say, that globalization leads to advantages for one participant, but often to disadvantages for another participant too.

  3. Having read this article especially factors that favour and disfavour Globalisation it has made me realise that the young breeds should be advised to read professional courses to remain relevant in labour market. More so, developing countries should equally brace up to the present technological advancement to make them competitive.


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