The critical objective of globalization to provide a significant amount of benefits to individual economies around the globe by spreading the equal wealth, by restricting military conflicts, by increasing competition, and by making markets more effective.
World economies are provided a significant amount of advantages by globalization. They involve bigger economies of scale, technological innovation, and foreign direct investment. Large organizations realize economies of scale that help in decreasing prices and costs due to globalization. This, in return, promotes economic growth. However, one of its major drawbacks is that it can bring damages to small businesses who may be making efforts to compete domestically.
Next is the benefit of technological innovation. New technology development is stimulated by increased competition from globalization, specifically with the growth in FDI. By making processes more effective, this eventually enhances the economic output. Next is the foreign direct investment (FDI). In contrast to the growth in world trade, an increasing rate is found concerning FDI. It eventually helps in contributing to the growth of global organizations, industrial restructuring, and an increase in technology transfer.
Besides benefits, it is also essential that investors and governments must consider the associated drawbacks with globalization. Some of the significant risks of globalization are the distribution of equity, national sovereignty, and interdependence. Vast economic inequalities can be created as the advantages of globalization may be skewed unfairly towards rick individuals or nations. Further, the growth of international organizations, global or multinational firms, or nation-states may be perceived as one of the biggest threats to sovereignty. Ultimately, some leaders may become xenophobic or nationalistic. Lastly is the risk of interdependence. Global or regional instabilities may be caused by interdependence amongst nations if local economic fluctuations influence a considerable number of countries.