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19 Jun Benefits From Globalization


The things that come to many minds when globalization is mentioned are loss of United States’ jobs, NAFTA, CAFTA, APEC, outsourcing, and low-wages. The perception to most people is that if outsourcing is bad, then globalization must be bad. The fact is that globalization is good for the United States of America and the market economy. It promotes prosperity for participating countries. What needs to be done is to educate people on the diversity and multiculturalism in the work place, and the sensitivity in the culture of the participating countries. Listed below are the benefits of Globalization and international trade:

(1) Opportunity cost

(2) Comparative advantage

(3) Cheaper to buy than to produce

(4) The terms of trade

(5) Balance trade

(6) Changes in production and consumption

Role of Trade

The United States represents a major exporter of raw materials and agricultural products, and imports a large volume of services. Market is efficient when trading is concentrated on specialization. By concentration, cost is minimized, profit is maximized, production is increased, and efficiency is maximized. Specialization is achieved when participating countries shift their scarce resources toward producing goods and services in which they have a comparative advantage over other countries, and in turn, increase the consumption of all goods.

To workers, this may not make sense if they are losing their jobs, but organizations are in business to make money, and they understand what it takes and how long it takes to break-even and to start making profits. Businesses do not intentionally try to hurt workers by laying them off. They rather keep the jobs in the United States, and by keeping it here, they will save themselves the hassle of moving and talking to people with different languages and accents all over the world. But organizations operate their businesses like puzzles, and for each puzzle, it requires a lot of the pieces to be put together in order to complete a puzzle. Going global is what it might take for most organizations to compete in order to control costs and produce at an efficient capacity.

Only winners are created in global trading, because selling a product creates an increase in the demand for that product because net demand by foreigners is added to domestic demand. Therefore, with the increase in demand, the price will rise. On the other hand, buying a product will create an increase in the supply of the product because net foreign supply is added to domestic supply. Hence, with the increase in supply, the price falls. No one loses; it is all a win-win situation for all the participating countries.

Market economy is dynamic due to continuous research and development, and the change in technology, and as such individuals will need to keep up with the movement and change by continuously attend seminars and undergo retraining. The old style of static market is over.

The argument has been made concerning exploitation of the poorer people in the developing countries. It also went further to compare their wages to slave wages. The fact is, whenever the people of these developing countries have opportunity to obtain jobs and earn more than they originally earn, it is improvement. Most parents in these countries are illiterate and do not know the importance of education, and because of that they send their children to work at these production plants. They need to be educated on the importance of education in order to begin sending their children to school rather than to the production plants.

For more information on globalization and international trade email to: consulting@iba-pec.com

Sidney Okolo

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