How Globalization Is Good for the Economy

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Globalization joins economies, societies and politics around the world. Many lesser-developed countries have removed market restraints, easing the way for economic globalization. The availability of large amounts of resources facilitates global trade and allows nations to maintain an adequate standard of living. To lift the lower classes economically, it is important for countries to allow capital to flow from abroad.

Decreased Global Poverty

  • Globalism helps to remake developing economies. The International Monetary Fund says that the booming economies of India and China have lifted 200 million people out of abject poverty as a result of capitalistic ideas brought about by globalization. In 1978 workers in China earned $16 per year, but in 2007 the average annual income was $2,000. In addition, in Vietnam and Uganda, poverty levels fell by 7% and 6% respectively according to the World Bank. These opportunities to improve livelihoods were not possible 30 years ago.

Labor Mobility

  • Economies progress as productivity improves, and productivity improves as workers are able to move around within and between different economies. Workers have an increased opportunity to find better paying jobs and improve their financial conditions, which has a positive impact on productivity. The Employee Cost Index keeps track of labor costs and productivity, giving companies important information on the need for more or fewer laborers.

Lower Cost Imports

  • Low wages in foreign countries enable retailers to sell clothing, cars and other goods at reduced rates in western nations, allowing companies to increase their profit margins. At the same time shoppers save money when they buy goods. Lower production costs translate into higher productivity; consequently, international trade decreases the overall costs of production worldwide.

    While offshore outsourcing does not directly lower the cost of consumer goods, it lowers the cost of operations for companies. Former Treasury Secretary, John Snow, says outsourcing is an aspect of trade, and "trade makes the economy stronger."

Increased Production

  • Globalization is associated with increased production, according to the New World Encyclopedia. If each country only had domestic resources available, it could only produce a limited number of products. In a global economy each country is involved at different levels in trade to sell what it produces, to acquire what it lacks and to produce more efficiently. Globalization promotes economic efficiency by providing a wider variety of goods, often at lower costs. Nations increase their wealth by specializing in certain economic activities, thereby reducing production costs and increasing productivity and surpluses.

References

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