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22 Pros and Cons of Globalization

John Spacey, May 20, 2021

Globalization is the process whereby nations become increasingly interconnected. This includes elements such as cooperation, trade, infrastructure, communication, knowledge transfer, culture, education, travel and migration whereby nations move from being isolated to a state of high engagement and interaction with the rest of the world. Globalization is a long running process that is a persistent feature of history. However, it has accelerated in recent centuries due to technologies such as the telegraph, steamship, radio, motion picture, telephone, airplane, television, jet aircraft and computer network. The following are potential pros and cons of globalization.

Pros

Allows countries to focus on the production of goods for which they enjoy a comparative advantage. This means that countries produce goods where they have a lower opportunity cost. For example, if Mexico can produce corn for $8 and rice for $16 and Vietnam can produce corn for $16 and rice for $8, it makes sense for Mexico to produce corn and Vietnam to produce rice. To oversimplify, both countries will benefit from trade by allowing them to focus on producing what they are good at producing.

Nations that economically integrate have incentives not to engage in conflict or war. This is captured by the theory of Thomas L. Friedman known as the Golden Arches Theory of Conflict Prevention that states "No two countries that both had McDonald's had fought a war against each other since each got its McDonald's." This isn't completely accurate and is intended to be tongue-in-cheek but communicates an important idea.

Globalization allows for international agreements that may prevent the destruction of common resources. With modern technology, a single nation could theoretically destroy the Earth's natural environment. Diplomacy and engagement are a potential model for limiting the production of economic bads. For example, a global agreement that prevents the extinction of a species of fish with caps on fishing.

The ability to travel or experience living in another country adds richness and possibility to the human experience.

Communication, knowledge transfer and education opportunities between nations allow for assumptions to be challenged such that all nations may end up being more vital. This can be described as creative tension whereby globalization challenges the status quo of each nation. This occurs at many levels such as politics, industry, society and culture.

The pizza effect whereby cultures copy each other. Each copy is slightly imperfect resulting in new culture. This is a primary way that culture is created that has occurred with the earliest interactions between different tribes, peoples and nations.

Creates intensive competition that benefits consumers whereby competition decreases price and increases quality. For example, consumers in Australia who can choose between a Japanese, American, Korean or German automobile. This would be likely to vastly increase value as compared to being restricted to local manufacturers.

Allows for economies of scale at the global level that pushes down costs. For example, a few countries that produce solar panels at significant scale such that unit cost is low as compared to having every country manufacture their own panels.

Allows knowledge and know-how to quickly spread such that it benefits all of humanity.

Allows for peer review on a global basis. For example, an Australian scientist who finds a flaw in a Swiss research paper.

The possibility of cooperation and interaction at a global level. For example, international cooperation that cures a disease.

Cons

Global trade agreements may be used by firms to impose their agenda on an international basis by restricting the ability of governments to regulate them.

Global organizations may be used by an elite to cement and extend their position. In other words, globalization is potentially undemocratic.

A race to the bottom can occur whereby countries compete to be the lowest cost by creating human misery and pollution. For example, lax labor laws that allow a nation to outcompete in a particular industry.

Elites may play countries off each other in order to gain advantages such as tax avoidance.

Global trade tends to produce economic growth that may create economic bads.

Globalization may speed culture change. Culture always changes. However, culture also acts as a stabilizing force that provides common understanding across groups. Where culture changes quickly people may feel a sense of anomie.

Globalization may restrict the ability of locals to govern their own lives in a way that is consistent with their values, traditions, sensibilities and culture. For example, global trade agreements that restrict traditional farming practices.

May allow the cultures of large countries to dominate at a global level. For example, the argument that Americanization has decreased the diversity of culture across the globe.

Reduces resilience where locals don't produce their own food, medicine, technology and so forth such that they are vulnerable to supply disruptions due to shortages, conflict, instability and supply chain issues on a global basis.

Globalization tends to commoditize the human experience. For example, an international chain of theme parks that serve the human need for epic meaning where this was once served by unique or local experiences.

Produces economic disruptions as countries shift to their comparative advantages. For example, the shift of manufacturing jobs from one nation to another. It is fair to say that globalization creates "winners and losers" whereby it causes disruption to the lives of many people even if it benefits the average person.

Notes

The history of the human civilization is characterized by increasing cooperation and interaction between larger and larger groups. In this context, it is difficult to imagine that nations would be isolated as technologies in areas such as communication and transportation advance.

Many of the potential demerits of globalization related to how it is implemented and who controls this implementation.

Arguments for globalization tend to oversimplify. Arguments against globalization often contain flaws such as whataboutisms or proof by example.

The list above isn't exhaustive nor does it represent a broad view. Globalization is a complex topic that benefits from diverse perspectives.