Globalization Impact

One of the most important changes we have experienced through globalization is the reduction of trading barriers (such as tariffs) between countries that limit trade. Whether or not it is a good or bad experience remains to be argued.

Free trade creates jobs, lowers the cost of production and increases demand of products. Without tariffs in place certain geographic locations have advantages to producing goods for consumption in other geographic areas. This creates a profit if the good is produced and therefore creates jobs. Because the certain geographic areas have a lower standard of wage the cost of production is cheaper and the consumer benefits through lower product cost. Lower product cost increases quantity demanded. Free trade also allows the US to trade our goods to other countries and through our various technology innovations the US is generally able to produce most goods more efficiently than other countries.

Free trade has a downside as well. The first aspect is the exploitation of workers. Stiglitz stated that in a perfect free market there would be consistency of wages for unskilled labor. This is not the case in today’s capitalism. Worker in economically poor countries still have lower wages that US employees. In contradiction to an earlier mentioned ‘pro’ of globalization being the creation of jobs this lower wage decreases jobs in the US because increased wages would lead to increased production cost and an increase in market price. A consumer is driven to acquire the best product at the cheapest price. Another negative of free trade is the cause of political complications with the country’s interests. Is it better to produce good that increase GDP and pollution or reduce pollution and promote goods that reduce the dependency on other country imports?

From either side of the argument it is noted that reduced trading barriers increases the influence of technology and culture from other parts of the world that would not be possible with trade barriers in place. The economic benefits can be argued.