Economic Effect and sticks leaning on each other. Robin Trehan

Aug. 20, 2008 - PRLog -- The Dangers of Globalization - Robin Trehan

It’s no secret that a General Financial Crisis is taking place in America right now, and one of the reasons is Globalization. It’s fair to say this isn’t anything but a Political disaster, directly stabbing into the foundations of Multi-national banks and mortgage systems which had a 50% rise in related crimes. Leaders are trying to re-establish Economy which is coming a huge cost and running the country into yet more debts

Globalization has been lauded as the best thing to happen to the world economies. There are undoubtedly many benefits to a global economy such as creating an open market, lowering tariffs and increasing competition among nations to produce the best products. However, historical data on the effects of globalization show that there are issues of economic concern that need to be highlighted.

Globalization is defined as the move towards an open, borderless, integrated world economy that has led to greater trade liberalization that began in the first half of the 20th Century. After the disruptions of World War II and the Great Depression, the General Agreement on Tariffs and Trade of 1946, later the World Trade Agreement truly began what is now the global economy.

Since then, it has become apparent that globalization has a ripple effect on the nations that seek it, one way or the other. Rich nations and the so-called “tiger” economies, that essentially had the lion’s share of economic power in the first place, have grown even stronger in the global market. In the meantime, poor countries that were struggling prior to globalization have become even poorer. The haves are in a better position to take on the challenges of competitive markets because they have the resources to improve and update their products and technology, while the have-nots continue to make do with scraps and have no hope of really competing globally.

This divergence in resources is further exacerbated by the ripple effect of globalization based on the interdependence of economies. When one nation experiences an economic crisis locally, trade partners are affected, sometimes disastrously. One example is the Asian Crisis of 1997, which started in Thailand and spread over Southeast Asia and South Korea, even Russia later on. The close intertwining of economies is akin to sticks leaning on each other; if one falls, all the other sticks fall as well. This is a simplistic analogy considering the complexities of economic considerations, yet it is visually apt, and an actual rather than theoretical problem.

This ripple effect is also apparent when the power of market forces threatens the sovereignty of a nation, especially those developing nations. Because of the emphasis on increasing productivity and economic power, a nation’s leaders may find themselves helpless in the tide of commercialism. After all, taxes paid by industry and commerce, combined with foreign direct investment, are the lifeblood of a country’s treasury, and few are willing to maintain opposition if the alternative is incurring debt and budget shortfalls. In some instances, market-driven concessions become necessary and politically advantageous and but at the same time serve to undermine the effectiveness and will of a nation’s electorate, leading to social unrest, rebellion and xenophobia.

In joining the globalization bandwagon, it would be advisable to pause and consider just how far it can actually make the standard of living more equitable among the world’s nations. The point at which the ripple effects of globalization outweighs the benefits needs to be determined if an eventual global crash-and-burn is to be avoided.

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