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The Pros and Cons of Globalization

Some praise globalization while others protest the phenomenon and blame it for job loss and other ills. Even if you’re investing in emerging market funds or buying items made abroad, you may not have given much thought to the arguments for and against globalization. Is one side correct or is globalization more of a mixed bag? Let’s take a look at some of the pros and cons of globalization.

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Pro 1: Globalization broadens access to goods and services.

It’s hard to argue with the point that globalization makes more goods and services available to more people, often at lower prices. If you have disposable income and you’re buying a product that comes from abroad, you’re benefiting from globalization to some extent. Business owners also benefit by having access to a bigger market for their goods and services.

Pro 2: Globalization can lift people out of poverty.

The argument that globalization has lifted people in developing countries out of poverty is somewhat controversial because opinions differ as to the quantity – and quality – of the jobs created by globalization. But the general wisdom is that globalization has increased job opportunities in capital-scarce, labor-rich countries, i.e. developing countries.

Pro 3: Globalization increases cultural awareness.

The Pros and Cons of Globalization

Globalization’s defenders say it has increased cross-cultural understanding and sharing. A globalized society boosts the rate at which people are exposed to the culture, attitudes and values of people in other countries. That exposure can inspire artists, strengthen ties between nations and dampen xenophobia.

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Pro 4: Information and technology spread more easily with globalization.

Art and culture aren’t the only things that spread more easily in a globalized society. The same goes for information and technology. As examples, see the rise of mobile banking in Kenya or the practice of microlending. Civil society groups can look to other countries for inspiration and good ideas can spread more easily.

Con 1: Workers in developed countries may lose out to workers in countries with cheaper labor.

This first argument against globalization is the one that surfaces most frequently in U.S. political discussions about NAFTA and other trade deals. When the U.S. competes with less-developed countries, its big advantage is its access to capital, whereas less-developed countries’ big advantage is their cheap labor.

Generally speaking, globalization increases the returns to capital in rich countries like the U.S. and decreases the returns to labor in those same countries. That’s a fancy way of saying that low-skill jobs in the U.S. can disappear as a result of globalization (though technology plays a big role in this change, too). The result may be a decrease in the inequality between countries but an increase in the inequality within countries.

Related Article: The Pros and Cons of NAFTA

Con 2: Globalization has failed to deliver desired gains in labor rights, human rights and environmental protection.

In theory, globalization be an opportunity to spread values and practices like environmentalism and labor rights throughout the world. In practice, that spread has been slow and imperfect. For example, rather than exporting the labor protections it abides by in the U.S., a company might follow lower standards in, say, Bangladesh.

Some argue that globalization has caused a “race to the bottom” in which companies actively seek the countries with the weakest labor and environmental protections and the lowest wages. And while globalization has increased the flow of goods, services and capital, there are still plenty of tax havens, meaning that much of the value added by globalization is not captured and redistributed by governments.

Con 3: Globalization may contribute to cultural homogeneity.

The Pros and Cons of Globalization

Globalization might lead to more cultural homogeneity if people’s tastes converge. If everyone wears jeans, learns English and watches Hollywood movies we may lose precious cultural practices and languages. Some critics of globalization worry that it’s creating a monoculture.

Con 4: Globalization puts more power in the hands of multinational corporations.

Another criticism leveled at globalization is that it has empowered multinational corporations at the expense of governments and citizens. This reduces state sovereignty and citizens’ ability to hold their leaders accountable for conditions in their countries. It’s another reason that labor and environmental protections are harder to enforce than many critics of globalization would like. Multinational corporations may also lobby for favorable provisions in trade agreements (this was an argument invoked against the TPP).

Bottom Line

Supporters and opponents of globalization generally agree that the phenomenon has created winners and losers. Supporters argue that the benefits outweigh the drawbacks, while critics want to either improve the conditions of global trade or, in some cases, roll back globalization.

Update: If you have financial questions beyond globalization, SmartAsset can help. So many people reached out to us looking for tax and long-term financial planning help, we started our own matching service to help you find a financial advisor. The SmartAdvisor matching tool can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and your goals. Then the program will narrow down your options to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

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Amelia Josephson Amelia Josephson is a writer passionate about covering financial literacy topics. Her areas of expertise include retirement and home buying. Amelia's work has appeared across the web, including on AOL, CBS News and The Simple Dollar. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.
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