Living in an open, interdependent globe, the population of today’s world has seen globalisation in several aspects of their lives. In the field of medicine, we see medications that were available only in some countries but are becoming available in others thanks to globalisation. Some vaccines and antibiotics used across the globe to eliminate the spread of some diseases and fatal infections are developed in specific countries and can be seen used on a wide scale across the entire globe, for example.
Political and cultural globalisation are no exception, as the exchange of cultural ideas, meanings, and values around the world creates richness in the cultures of various countries of the world, although some critics would argue that globalisation harms the diversity of cultures, as dominating countries may affect the cultures of smaller ones. The arguments surrounding globalisation clearly show that it has some pros and cons, and certainly leaves an impact, whether positive or negative, especially on a very important aspect: economic growth across the globe.
Economic globalisation is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, services, technology, and capital, according to Oxford University Press.
Exploring the impact of globalisation on economic growth and development, Our World in Data said that globalisation has certainly been a key driver of unprecedented economic growth, leading to a world with much less poverty.
The importance of foreign trade was rather modest until the beginning of the 19th century, as total global exports and imports never exceeded 10% of global output before year 1800. However, near 1820, the “first wave of globalisation” came into the picture, followed by the second wave, which continues until this very day. “About 60% of all goods and services produced in the world are shipped across country borders,” Our World in Data said. “Regarding extreme poverty, the available evidence shows that up until 1800, the vast majority of people around the world lived in extreme deprivation, with only a tiny elite enjoying higher standards of living. In the 19th century, we began making progress and the share of people living in extreme poverty started to slowly decline. This trend is shown in the chart below. As we can see today, two hundred years later, the share of people living in extreme poverty is less than 10%. This is an achievement that would have been unthinkable to our ancestors,” it added.
According to The Balance, globalisation greatly benefits world economies. Some of the benefits globalisation creates for economies include the increase in foreign direct investments (FDI), helping boost technology transfer, industrial restructuring, and the growth of global companies. Additionally, the increased competition resulting from globalisation helps push new technological development, especially with the growth in FDI, which eventually helps improve economic output.
“Globalisation of the financial sector has become the most rapidly developing and most influential aspect of economic globalisation. International finance came into being to serve the needs of international trade and investment activities. However, along with the development of economic globalisation, it has become more and more independent. Compared with commodity and labour markets, the financial market is the only one that has realised globalisation in the true sense of ‘globalisation’. Since the 1970s, cross-border flow of capital has been rapidly expanding. In 1980, the total volume of cross-border transactions of stocks and bonds of major developed countries was still less than 10% of their GDP. However, this figure had far surpassed 100% in 1995,” said a UN report on economic and social affairs, titled Economic Globalisation: Trends, Risks, and Risk Prevention.
Addressing the cons of globalisation and its potential negative impacts on economies, the report said that economic globalisation puts developing countries at risk of being constantly susceptible to trembling under unfavourable external factors. “Under open economic conditions, the conflict between the realisation of external economic equilibrium and that of internal economic equilibrium is a great constraint on the macroeconomic policies of developing countries, weakening their capacity of macroeconomic control and regulation,” the report said.
The risks of globalisation on the economy also include the interdependence-causing regional instabilities if local economic fluctuations affect a large number of countries that rely on them. Moreover, multinational or global companies may be seen as a threat to sovereignty, which could result in some world leaders becoming nationalistic or xenophobic. Globalisation may also cause greater inequality among nations, leading to possible conflict nationally and internationally.
Globalisation has certainly affected several aspects of the modern world. It has both its drawbacks and positive aspects. The one thing there is no argument about is that globalisation remains fairly unstoppable. Beneficial or not, globalisation will continue to inevitably change the world in both the short and long run.