To what extent do the costs of globalization outweigh the benefits?
Globalization has both benefits and costs
World trade as proportion to GDP has increased Trade liberalization and reduced transport costs, world output, standard living
Countries benefit from comparative advantage
One country produces at lower opportunity cost, efficient allocation, output However transport costs can outweigh
Producers have lower costs, offshoring and cheap labor,
economies of scale Consumers benefit, increase cons. surplus and welfare However whether they pass onto the consumers
Consumer more choices, not locally produce,
More access and competition for firms
Is it sustainable Increased transport and external costs, becoming more industrialized Global warming depletion of natural resources Arguably they will invest in green ways of producing
Increase exploitation and inequality
Takes advantage of low wage economies which is unlikely to rise, maintain international competitiveness
Unstable economy, more closely integrated
2008, started in US dragged UK main exporting partner Begun protectionist measures
Increased inequality, LEDC has no access to infrastructure to
setup telcom Yet TNC setup companies mean economy will grow