The disadvantages of globalisation
The disadvantages of
globalisation
There are also several potential disadvantages of
globalisation, including the following:
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The over-standardisation of products
through global branding is a common criticism of globalisation. For
example, the majority of the world’s computers use Microsoft’s
Windows operating system. Clearly, standardising of computer
operating systems and platforms creates considerable benefits, but critics argue that this leads to a lack of
product diversity, as well as presenting barriers to entry to
small, local, producers.
-
Large multinational companies can also suffer from
diseconomies of scale, such as
difficulties associated with coordinating the activities of
subsidiaries based in
several countries.
-
The increased power and influence of multinationals
is also seen by many as a considerable disadvantage of
globalisation. For example, large multinational companies can
switch their investments between territories in
search of the most favourable
regulatory regimes.
MNCs can operate as local
monopsonies of labour, and push wages lower than the
free market equilibrium.
-
Critics of globalisation also highlight the
potential loss of jobs in domestic markets caused by
increased, and in some cases,
unfair, free trade.
-
Globalisation can also increase the pace of
deindustrialisation, which is the slow erosion of an economy's
manufacturing base.
-
Jobs may be lost because of the structural changes
arising from globalisation. Structural changes may lead to
structural unemployment
and may also widen the gap between rich and
poor within a country.
-
One of the most significant criticisms of
globalisation is the increased risk associated with the
interdependence of economies. As countries are increasingly
dependent on each other, a negative economic shock
in one country can quickly spread to other countries. For example, a
downturn in car sales in the UK affects the rest of Europe as most
cars bought in the UK are imported from the EU. The Far East crisis
of the 1990s was triggered by the collapse of just a few Japanese
banks.
Most recently, the collapse of the
US sub-prime
housing
market triggered a global crisis in the banking
system as banks around the world suffered a fall in the value of
their assets and reduced their lending to each other. This created a
liquidity crisis and helped
fuel a severe downturn in the global economy.
Over-specialisation, such as being
over-reliant on producing a limited range of goods for the global
market, is a further risk associated with globalisation. A sudden downturn in
world demand for one of these products can plunge an economy into a
recession. Many developing countries suffer by over-specialising in
a limited range of products, such as
agriculture
and tourism.
- Globalisation generates winners and
losers, and for this reason it is likely to increase
inequality, as richer nations
benefit more than poorer ones.
-
Increased
trade associated with globalisation
has increased pollution and helped contribute to CO2 emissions and
global warming. Trade growth has also accelerated the depletion of
non-renewable resources, such as oil.
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