Globalization brings us positive and negative effects of globalization. The first threat of globalization due to the fact that its benefits that people understood, will, however, be distributed unevenly. In the short term, it is known that changes in the manufacturing industry, the service sector because the sector benefiting from foreign trade, and industries related to the export experience more capital inflows and skilled labor. At the same time, the number of industries significantly lose from globalization processes, losing its competitive advantages due to increased market openness.
Such industries have to make extra efforts to adapt to the changed not in their favor economic conditions. This means the possibility of an outflow of capital and manpower of these industries, which will serve as the main reason for the adoption of adaptation measures with very high costs. Adaptation means for people with loss of employment, need to find another workplace, retraining, resulting in not only family problems, but also requires large-scale social spending, and in a short time. Eventually there will be a redistribution of the labor force, but at first, the social costs are very high. This applies not only to industry, which in Europe has been considerably transformed in the last thirty years.
Positive effects of globalization
It should be recognized that such changes pose a serious threat to the existing economic structure, and governments need to take on the heavy burden of social costs associated with the payment of compensation, retraining, payment of unemployment benefits, support to low-income families.
A second threat many believe the deindustrialization of the economy, since global openness is associated with a decrease of employment in processing branches both in Europe and in the United States.
In fact, however, this process is not a consequence of globalization, though, and runs parallel with it.
In connection with a reduction of employment in the manufacturing sector in comparison with the scope of services performance will depend primarily on this sector, which traditionally differs in its lower level. This means that if a country wants to increase its GDP, it should use all opportunities to raise productivity in the service sector.
The difficulty is that this area always been focus on workforce. So if the country really intends to use all opportunities to increase productivity in the service sector will require deregulation and development of competition, including the banking and financial sector.
Currently, this process has already started and it concerns not only changes in the policy of employment in the coal mining, steel and shipbuilding industries. Today, it is clear how the rapidly changing technologies lead to a very moving changes in the practice of contractual services in the financial sector.
Negative impacts of globalization
However, if we talk about foreign direct investment, against them said above is not quite true. The money invested strongly tied to local agriculture, their liquidity is negligible, they are difficult to withdraw and return to the home country. With regard to securities, it would be more free, the mobile form of capital, but the holders of the securities in any country, whether the Czech Republic or Malaysia, in principle, do not want their capital was completely free.
They want to make the full investment for a relatively long period to obtain a guaranteed profit. Capital in the form of securities cannot be considered completely free. Therefore, references to the fact that as a result of globalization there is a threat to macroeconomic policy due to the presence of large masses of “free” capital, it is hardly wealthy. That’s making this the most important among globalization negative effects.
It should, however, recognize that large-scale capital flows require States to observe to a certain extent macro-financial discipline. This means that if the Finance Ministers and political leaders of any country know what their policy is, for example, is too risky or insufficiently flexible, threatens the stability of the currency or the economy as a whole, they must realize that be punished for it by the international capital market (which, for example, will deprive them of necessary funding). Such steps can be regarded as a form of critical attitude of foreign investors to the country’s politics, expressed in the refusal to provide her with the necessary funds.
In general, it should be recognized that global capital flows are, in a sense, a great advantage of globalization, though countries impose a certain discipline and rules of the game.
This is because the competition from labor intensive goods, released in countries with low wages and low skills workers, entails a reduction of the price of similar products of European companies and reduce their profits. In such circumstances European companies to discontinue unprofitable products, and transferred to the production of goods requiring highly skilled personnel. As a result, workers with lower skills are not in demand, their incomes fall.
At first glance it may seem that this question is emotional, however, the IMF always gave him a rather empirical: do the prices of labor intensive imports produced in countries with unskilled labor, are lower in comparison with the prices of labor-intensive goods produced with the use of more qualified personnel?
Practical data hardly confirm it. The prices of industrial goods in the industrial countries hardly changed so much under the influence of imported products. Changes in wages and unemployment are caused not primarily by the impact of trade, and are the result of shifts in the structure of domestic consumption and technological changes in the sphere of production and sphere of services.
Therefore, the danger of globalization, is apparently only prospective in nature and is by no means inevitable.
The fifth threat note translation firms in countries with high labor cost of their production capacity to countries with low wages. The export of jobs might be undesirable for the economy of several States. However, this threat is not too dangerous.
Workers of foreign affiliates and the workers of the parent company are not serious competitors, rather, they complement each other. If the company opens a branch in another country, it does not mean that it only does it at his own expense and bear the irreparable loss. Often the parent company is able to increase output due to the capacity of your branch, and use its other advantages. These relationships are an important element in relations with new partners. Therefore, the relocation facilities in other countries can only be considered as a potential danger.
So, that are positive and negative aspects of globalization. In conclusion, we see that globalization is a good idea, but there are a lot of obstacles such as national governments and traditions. This and other globalization negative effects make process very controversial.