Impact of Globalisation

Question: Critically analyse the impact of Globalisation on wellbeing in developed economies? Answer: Introduction: The movement of investment funds and businesses across national markets around the globe is globalization. Globalization increases the connectivity of different markets. But the concept and definition of globalization is complex in nature. The evolution of globalization took place in the primitive times. Previously people settled in different parts of the world but their requirements might not be fulfilled within the territories. So for international dynamism, for technological advancement, to increase efficiency and scale of production, countries situated on the five continents must be interconnected, associated and engaged in all economic activities. We know that globalization has a crucial impact on the developing nations but for the essay we require to know the impact of globalization on the well being of the developed nations. Important questions that need to be answered is what exactly is globalization and how it occurs? What is well being and its indicator? And most importantl y who are developed countries. (Kolodko, n.d.) (Haugen Mach, 2010) Key issues: Evolution of Globalization: As said earlier that globalization is a primitive concept. Globalization occurred when people from different region used to allocate to other regions for the purpose of business, better living, earn profits etc. Even now this tradition continues but in a more systematic way. Globalization is a dynamic process to distribute business globally, and bringing in technological advancements and economic development. The objective of the globalization is to establish connection among nations with a view to provide disdainful competitive position with low operating costs, in order to obtain greater number of products, services and consumers. A competitive scenario is created by the diversification of raw materials and resources. (Akram Ch, Faheem, Bin Dost Abdullah, 2011) Components of globalisation: For understanding the impact of globalization on the well being of the developed economies, we need to know the elements of globalization. The constituents include GDP which is the measure of the economys total output, industrialization and the Human Development Index (HDI). The transformation of a country to a modernized economy is done by technological changes, social changes and economic development. This is the process of Industrialization. Lastly, HDI is more like an indicator comprising of life expectancy, education indicator measured by adult literacy and the per capita income. (Khan, 2012) Developed Nations: Countries depicting a remarkable economic development and are able to achieve a good status in terms of GDP, industrialization and HDI is defined as a Developed Country or Nation. Based on this definition, some of the developed or industrialized countries are: United States, United Kingdom, Norway, Denmark, France, Germany, France, Japan, Sweden, Switzerland etc. Well being and its indicators: Well being is defined as the process of how people feel and how they function either personally or socially and people tend to evaluate their lives. To understand the economic well being at the national level, it is important to understand the basic indicators of the economic well being. These indicators are: Real Gross Domestic Product per capita, Real NNDI per capita, Household Income per head, Unemployment rate, Inflation rate, Human Development Index. All these indicators must display a positive instinct to show that globalization had positive on them. (Krueger, 2009) Impact of globalization on well being of developed economies: With the advent of globalization, countries now can compete on a worldwide basis. The production restructing, international trade and the financial market assimilation is brought about by globalization. With the better connectivity between countries, the developing countries need technologies to improve their economys growth. The developed nations have the infrastructure and resources to innovate, invent and introduce advanced technology with which they can export to other developing nation. This leads to capital inflow in the developed nations. Generation of FDI, providing a better opportunity of capital inflows is one of the positive points of globalization. Various economists have tried to evaluate the impact of globalization based on several factors which include trade, capital flows, GDP per capita, FDI etc. Countries having comparative advantage participate in trade and this result in growth in the respective economy. It also builds up a correlation between the trade flows open ness and the economic performance and growth. We cite a developed country, the United States and consider its FDI (net inflows), Trade percentage of GDP and percentage of GDP per capita growth within the year 2010-2013. The data reveals that under globalization FDI has increased, trade percentage has improved and so there is also consistent growth in the United States. (TvaronaviÄ ienÄ—, GrybaitÄ— TunÄ ikienÄ—, 2013) Data of United States during the year 2010-2013 Years Foreign direct investment, net inflows (BoP, current US$) 2010 2.59344E+11 2011 2.5741E+11 2012 2.17778E+11 2013 2.94971E+11 Years Trade (% of GDP) 2010 28 2011 31 2012 31 2013 31 Years GDP per capita growth (annual %) 2010 1.7 2011 0.9 2012 1.6 2013 1.5 Data Source: (Data.worldbank.org, 2013) Some of these factors define the economic well being indicator. With the possibility of increased labour force participation due to globalization the global unemployment rate decreases. The advancement of the world based on GDP from 2010 to 2013 is $65.21 trillion to $75.59 trillion. This indicates that the NNDI per capita is augmented which leads to a better standard of living across the nations. Opening up of trade also improves trade relations among countries. With the transfer of technology and other activities the health sector, education sector is improved, making the developed nations rank high in terms of HDI. This again indicates the well being of the developed nations. The current life expectancy at birth is 71 years (2012). (Breznitz Zysman, 2013) (McDonald, 2013) But globalization may not always yield positive results. The openness and free nature of trade also hikes the risk of failure in small companies who are unable to compete globally. Another negative impact is that the domestic industries in some countries are hampered and becomes endangered. (TvaronaviÄ ienÄ—, GrybaitÄ— TunÄ ikienÄ—, 2013) Conclusion: The bottom line of the impact of globalization on the well being in developed nations is to provide an arena to reduce macroeconomic volatility on output and consumption with the help of diversification of peril. The globalization may be seemed as a positive concept only benefitting the world as a whole but the negative aspects of the globalization cannot be ignored. The deprivation of the domestic producers can lead to the extinction certain products, it can also lead to a potential situation of unemployment which will eventually hamper the well being of the economy. (Ritzer, 2011) References Akram Ch, M., Faheem, M., Bin Dost, M. and Abdullah, I. (2011).Globalization and its Impacts on the World Economic Development. [online] https://ijbssnet.com/. Available at: https://ijbssnet.com/journals/Vol_2_No_23_Special_Issue_December_2011/36.pdf [Accessed 11 Feb. 2015]. Breznitz, D. and Zysman, J. (2013).The third globalization. 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