Just a few short months ago, globalization looked like an irreversible trend. Developing economies were beginning to thrive, and more of them interacted with the developed countries than at any other time in history. Now with the global economic crisis taking root worldwide, the question of whether globalization is sustainable or not comes to the forefront.

Disadvantages of Globalization

1. For developed economies, globalization means a loss of higher paying jobs as companies seek the cheapest skilled labor at the lowest cost.


2. The threat of jobs being offshored is enough to keep morale low in many industries. People who are walking on pins and needles because of the threat their job will be moved to another country are not the most confident consumers around.


3. The new workers in new counties may not have the same skill levels as the workers they replaced. In that case, product quality suffers.


4. Globalization also represents the transfer of societal ideals to companies who may not be ready for massive changes. In extreme cases, this could result in social instability.


5. A real threat exists that workers in less developed countries might be exploited by foreign companies. These companies are attempting to make the maximum profit and probably won't pay or treat workers as well as they do in their home country.


6. Transportation costs become more expensive as products are shipped to countries from much further than they used to be.


7. Energy consumption in developing markets increases, which puts pressure on domestic supplies and pricing. Energy costs go up for everyone as more people compete for the resources.

Pros of Globalization

1. Workers in less developed countries should see an increase in wages and living benefits. If they do, their rising standard of living should help them consume products from developed nations. A virtuous circle can theoretically be created by a whole new middle class that didn't exist.


2. Peace should be easier to maintain between nations as no country would remain isolated in this new world order. The relationship of China and the United States has changed dramatically as their trade partner status has increased over the years.


3. Globalization can help modernize developing countries faster. Modern ideas can be spread to the workers, who make up the social order.


4. Products can be purchased much cheaper in developing countries, which increases the lifestyle of the people. As we pay less for simple common items, we have more to spend on big ticket items, which fuel higher paid manufacturing jobs in developed countries.

When oil prices hit $150/barrel last year, many of the disadvantages of globalization seemed to come to the forefront. More countries expanding using oil based products means prices went up. Much of this price was speculation, but a large part was from the transportation of goods throughout the world. As oil hit record highs, companies looked for local suppliers in order to defray costs.

Globalization, and the role of the United States, are two of the issues that are most pressing to Barack Obama. Many of his concerns, like job creation, center around our role as a leader of globalization. If he tries to hard at protectionism, or favors certain manufacturing industries against other, chances are the US will be called on it by multiple trading partners. China, for one, has already pointedly visited the US and Europe to ask that efforts aimed at stabilizing the economy didn't involve protectionism.

A "Buy American" clause in the proposed economic stimulus plan has already been struck down for this reason. The next several months promise to be a challenging time for developing and developed economies alike. The decisions that are made in that time-frame are bound to impact all of us for decades.

Courtesy: ShiftWits