CHAPTER 9

The Pros And Cons Of Globalization

A story in the Washington Post said “20 years ago globalization was pitched as a
strategy that would raise all boats in poor and rich countries alike. In the U.S. and
Europe consumers would have their pick of inexpensive items made by people
thousands of miles away whose pay was much lower than theirs. And in time trade
barriers would drop to support even more multinationals expansion and economic gains
while geo political cooperation would flourish.”

There is no question that globalization has been a good thing for many developing
countries who now have access to our markets and can export cheap goods.
Globalization has also been good for Multi-national corporations and Wall Street. But
globalization has not been good for working people (blue or white collar) and has led
to the continuing deindustrialization of America. Globalization is a complicated issue.
It is necessary to evaluate the pros and cons before drawing any conclusions.

Pros
Supporters of globalization argue that it has the potential to make this world a better
place to live in and solve some of the deep-seated problems like unemployment and
poverty.

1. Free trade is supposed to reduce barriers such as tariffs, value added taxes, subsidies,
and other barriers between nations. This is not true. There are still many barriers to free
trade. The Washington Post story says “the problem is that the big G20 countries added
more than 1,200 restrictive export and import measures since 2008

2. The proponents say globalization represents free trade which promotes global
economic growth; creates jobs, makes companies more competitive, and lowers prices
for consumers.

3. Competition between countries is supposed to drive prices down. In many cases this
is not working because countries manipulate their currency to get a price advantage.

4. It also provides poor countries, through infusions of foreign capital and technology,
with the chance to develop economically and by spreading prosperity, creates the
conditions in which democracy and respect for human rights may flourish. This is an
ethereal goal which hasn’t been achieved in most countries
5. According to its supporters, globalization and democracy should go hand in hand. It
should be pure business with no colonialist designs.

6. There is now a worldwide market for companies and consumers who have access to
products of different countries.

7. Gradually there is a world power that is being created instead of compartmentalized

power sectors. Politics is merging and decisions that are being taken are actually
beneficial for people all over the world. This is simply a romanticized view of what is
actually happening.

8. There is more influx of information between two countries, which do not have
anything in common between them. True

9. There is cultural intermingling and each country is learning more about other
cultures.

10. Since we share financial interests, corporations and governments are trying to sort
out ecological problems for each other. – True, they are talking more than trying.

11. Socially we have become more open and tolerant towards each other and people
who live in the other part of the world are not considered aliens. True in many cases.

12. Most people see speedy travel, mass communications and quick dissemination of
information through the Internet as benefits of globalization. True

13. Labor can move from country to country to market their skills. True, but this can
cause problems with the existing labor and downward pressure on wages.

14. Sharing technology with developing nations will help them progress. True for small
countries but stealing our technologies and IP have become a big problem with our
larger competitors like China.

15. Transnational companies investing in installing plants in other countries provide

employment for the people in those countries often getting them out of poverty.

16. Globalization has given countries the ability to agree to free trade agreements like
NAFTA, South Korea Korus, and The TPP. True but these agreements have cost the
U.S. many jobs and always increase our trade deficit

Cons
• The general complaint about globalization is that it has made the rich richer while
making the non-rich poorer. “It is wonderful for managers, owners and investors, but
hell on workers, poor countries and nature.”

• Smaller Countries Suffer the Most

While there are a variety of benefits, countries have struggled with certain globalization
concepts. Certain nations benefit greatly from the current landscape, as others suffer.
Smaller, less developed countries do not typically benefit from the level playing field
that globalization provides.

• Negative Impact on Environment

The environment impact of globalization is considered to be negative by most

experienced observers. The increased consumption of a wide variety of products leads
to increased production which causes an uptick in pollution. Simply put, the
environment is under added strain, which can have devastating long term effects on the
planet’s environmental stability.

• Loss of Cultural Identity

Greater cultural hegemony is benefit, but countries are beginning to lose their identities
due to immigration that is taking place on a progressively larger scale. As globalization
becomes the new way of the world, more and more countries are at risk of losing their
cultural identity

• Leaving Developing Countries Behind

Economists have argued that developing countries are at increased risk of being left
behind. Globalization encourages free trade, which does not provide a developing
nation with the protection that they need in order to grow. The anti-globalists also claim
that globalization is not working for the majority of the world. “During the most recent
period of rapid growth in global trade and investment, 1960 to 1998, inequality
worsened both internationally and within countries. The UN Development Program
reports that the richest 20 percent of the world's population consume 86 percent of the
world's resources while the poorest 80 percent consume just 14 percent.

Inability to Recoup Investment

For countries that rely on public funding for their secondary educational system, this
can be disastrous. Residents of the country utilize publicly funded colleges to bolster
their skills for the job market, then take their talents to other countries. This leaves their
home country with very little recourse to recoup their considerable investment.

Companies Seeking Personal Gain

Larger companies have learned how to leverage globalization for their own personal
gain. Companies now have the ability to trade with countries that they are not based in.
This allows them to exploit certain tax loopholes and hide money in places like Ireland
and Hong Kong. When this happens, the countries that they are based in lose out on
billions of tax dollars. The consumer is then squeezed by increased taxes on their goods,
services and property. A nation typically has zero control over larger corporations
registering in other countries to avoid taxation. Large multi-national corporations have
the ability to exploit tax havens in other countries to avoid paying taxes. They are
accused of social injustice, unfair working conditions (including slave labor wages,
living and working conditions), as well as lack of concern for environment,
mismanagement of natural resources, and ecological damage.

Other reasons

• Globalization is supposed to be about free trade where all barriers are eliminated but
there are still many barriers. For instance161 countries have value added taxes (VATs)
on imports which are as high as 21.6% in Europe. The U.S. does not have VAT.

• The biggest problem for developed countries is that jobs are lost and transferred to
lower cost countries.” According to conservative estimates by Robert Scott of the
Economic Policy Institute, granting China most favored nation status drained away 3.2
million jobs, including 2.4 million manufacturing jobs. He pegs the net losses due to
our trade deficit with Japan ($78.3 billion in 2013) at 896,000 jobs, as well as an
additional 682,900 jobs from the Mexico –U.S. trade-deficit run-up from 1994 through
2010.”

• Workers in developed countries like the US face pay-cut demands from employers
who threaten to export jobs. This has created a culture of fear for many middle class
workers who have little leverage in this global game

• Multinational corporations, which were previously restricted to commercial activities,

are increasingly influencing political decisions. Many think there is a threat of
corporations ruling the world because they are gaining power, due to globalization.
• Building products overseas in countries like China puts our technologies at risk of
being copied or stolen, which is in fact happening rapidly

• Some experts think that globalization is also leading to the incursion of communicable
diseases. Deadly diseases like HIV/AIDS are being spread by travelers to the remotest
corners of the globe.

• Globalization has led to exploitation of labor. Prisoners and child workers are used to
work in inhumane conditions. Safety standards are ignored to produce cheap goods.
There is also an increase in human trafficking.

• Social welfare schemes or “safety nets” are under great pressure in developed
countries because of deficits, job losses, and other economic ramifications of
globalization.

Globalization is an economic tsunami that is sweeping the planet. We can’t stop it but
there are many things we can do to slow it down and make it more equitable.

What is missing?

Leadership – We need politicians who are willing to confront the cheaters. One of the
biggest problems is that 7 of some trading partners manipulate their currencies to gain
unfair price advantage which increases their exports and decreases their imports. This
is illegal under WTO rules so there is a sound legal basis to put some kind of tax on
their exports until they quit cheating.

Balanced Trade – Most of trading partners can balance their trade budgets and even run
a surplus. America has not made any effort to balance its trade budget and has run a
deficit for more than 30 years resulting in an $11 trillion deficit. The trade deficit is the
single biggest job killer in American economy, particularly manufacturing jobs. We
need the government to develop a plan to begin to balance our trade deficit even though
this is not a political priority in either party.

Trade Agreements – Both the NAFTA and the South Korean Korus trade agreements
might have been good for Wall Street and the multi-national corporations but they
eliminated jobs in America and expanded our trade deficit. The upcoming Trans Pacific
Trade Agreement will do the same thing and Congress should not fast track this bad
agreement for a dozen reasons.

Enforcing the rules – China ignores trade rules and WTO laws with reckless abandon.
Besides currency manipulation they subsidize their state owned companies to target our
markets, and provide funding to their state owned companies that dump their products
in America. They also steal our technologies, sell counterfeit versions of our products,
and impose tariffs and other barriers anytime they want - as we do nothing to stop them.
China does not deserve to be on our most favored nation list and we need to tax their
exports to us until they stop these illegal activities.

What is good for third world countries, like Kenya, or countries with tremendous
growth, like China, has not been good for American workers. Globalization is
deindustrializing America as we continue to outsource both manufacturing blue collar
and white collar jobs. Supporters of globalization have made the case that it is good
because it has brought low priced imported goods, but they have not matched the
decline of wages in the middle class and will not offset the loss of many family wage
jobs

Globalization is like being overwhelmed by a snow avalanche. You can’t stop it – you
can only swim in the snow and hope to stay on top. I would like to make the argument
that the US should try a lot harder to swim in the snow and stay on top. We can’t stop
globalization but there are many policies and strategies we can use to make it more
equitable. We can enforce the trade laws, force the competition to play by the same
rules, and stop giving our competitors the tools (technology and R& D) to ultimately
win the global war.

Adapted from Mike Collins Article on the Net. https://www.forbes.com/sites/mikecollins/2015/05/06/the-

pros-and-cons-of-globalization/#7223c7abccce