The Pros and Cons of Globalization

Our video on the pros and cons of globalization just hit 100,000 views! Time to take a closer look where the argument stands today.

Love It or Hate It!

Brussels sprouts, rap music, Star Wars – There are things in life you either love or hate; where there is no middle ground; which force you to take a side and draw a line in the sand. For many people, globalization is a natural entry to this list. Some vociferously sing the gospel of free trade. Others emphatically denounce it as an epitome of evil. Just take a close look at the Youtube comment section of our video and you can get a glimpse at both sides – with the con camp being arguably (and as usual) more outspoken.

Not Your Usual Dish.

Of course, it is not fair to compare globalization to a dish, or some sort of artistry. It is not just a matter of taste and subjectivity. Instead, it is about fundamental values and scientific evidence. At the GED team, we operate from a normative perspective that embraces international exchange as enriching. However, we carefully study where this premise might not hold true or what factors contribute to it not holding true. Therefore, we have researched some of the most salient trends in economic globalization, i.e. the process toward a growing integration of national economies.

Pros and Cons of Globalization: The Cake Gets Bigger…

We have strong evidence that globalization has had a positive impact on the GDP of advanced and emerging economies. All of the 42 countries surveyed in our 2018 Globalization report have reaped dividends from their growing integration in the world economy since 1990. The logic is straightforward: On the one hand, global markets allow countries to export what they do best or what they have in ample supply. On the other, they can import what they lack. This specialization increases profits for companies, wages for employees and drives down prices for consumers.

… But Not Everybody Gets a Bigger Share.

However, the gains from globalization are not evenly dispersed. AMONG nations, advanced economies have profited most from globalization. As home to the headquarters of the world’s most competitive industries, they have been able to benefit more from bigger international market access than emerging or developed economies. WITHIN nations, the winners from more economic integration are people employed in the transnational value chains of those very competitive industries and with skills or resources which are in high international demand.

Do Not Swallow the Wrong Way!

There is a strong current the obscure the positive effects of globalization and exploit the negative ones. The most prominent, but by far not only example, are the rhetoric and policies of the U.S. administration. Against all evidence, it depicts globalization as a zero-sum game, which the United States have been losing for too long. Its own protectionist measures provide a textbook example of the negative and self-defeating effects of rolling back globalization via tariffs. New research shows that by the end of 2018, U.S. consumers had lost a total of $ 1.4 billion per month because of the trade war with China.

Keeping an Eye on the Entire Menu.

Of course, globalization is not only about economics. It also has a political, social, or cultural dimension. The political one, for instance, refers to increasing global governance via international institutions or growing alignment of national policies. It involves both benefits (such as coordinated crisis strategies) and costs (such as less national self-determination), too. By and large, these are even harder to measure and evaluate than purely economic ones. That, however, is no reason to leave them out of the equation. Instead, it is motivation to look for new measures and tools to assess them.

Depends on How You Cook It.

The most important lesson we draw from these considerations: Globalization is not so much about loving or hating. It is about understand and shaping. Given its enormous potential for economic gains, it would be a waste to categorically turn our backs on it – be it for political, social, or cultural reasons. Instead, we must become better at understanding its effects and the interplay of its economics with other issue areas. Moreover, we must derive policies which are better at making the most of its benefits for as many people as possible. Looks like there is still a lot to do for the GED team!