What is it?
- It is the increasing integration of countries’ individual economies.
- It is the global movement towards trade, financial and communications integration through the development of free trade, free flow of capital, and the freedom to tap into cheaper foreign factor markets. (Official definition)
- Most efficient form of production:
- Because firms will choose to produce where costs are lowest.
- Stimulates the economy, particularly that of LEDCs, by drawing in more foreign direct investment.
- Employment opportunities
- Opening jobs.
- Introduces skills and technology to nations through a company’s implementations of such:
- This increases the productivity of a nation’s workforce, etc.
- Opening new industries in LEDCs such as the white phosphorus mining industry in Yemen.
- Increases competition:
- Lowers prices
- Less inflation.
- Better quality goods.
- Better efficiency.
- Environmental damage.
- Because the company is so powerful that it can afford to operate inefficiently for conveniences sake.
- Creates uncertainty:
- Foreign firms own most of the market share in a country, not domestic firms.
- May choose to source their resources from abroad and not from locally:
- Thus local resource producers will go out of business.
- Human rights abuses.
- Infringements on indigenous rights.
- Investments in nations facing political sanctions as a result of their wrong-doings.
- Leaching from government funds:
- Large MNCs may be too important for a government to allow to go bankrupt thus whenever said MNC is facing troubles they will be given aid by their government.
- Price manipulation.
- Labour abuse:
- Child labour.
- Bad working conditions.
- Poor healthcare.
- Sweat shops.
- Bad wages.
- Restrictions to resting hours.
- Anti-Labour-Union policies.
- Using tactics detrimental to competition:
- Predatory pricing.
- Monopoly power.
- Tax evasion:
- Through transfer pricing.
- Using illegal methods and materials to produce goods and services.
- Or to force people to buy their goods or services:
- Great American Streetcar scandal.
- Blocking of technologies:
- Blocking battery technology for hybrid cars so one can sell more oil.
- Concealment of imports.
- Causing trade deficit:
- Wal-Mart is accused of being one of the largest sources of the trade deficit in the USA.
Third world debt.
- Debt in the developing, less developed or least developed third world countries in Africa, Asia, Latin America and the Middle East.
- Globalization is leaching resources from these countries and the revenue generated from this leaching is not fed back into these countries. Furthermore, with population growth causing the needs and wants of these countries to also grow, these countries are falling into debt in order to pay for these needs and wants.
- Animal rights.
- Child labour.