Globalization promotes the flow of goods, services, people, and ideas. This phenomenon has existed for thousands of years as people have been moving around the world trading goods, ideas, and technology with one another. However, technological improvements over the last century have significantly accelerated these exchanges. As such, change is occurring faster and people are questioning whether these changes are good or bad. A major argument in favor of globalization is that globalization’s interconnected factors of increased trade, communication, foreign investment, and technological improvements deliver net economic benefits to society. Meanwhile, a major opposing argument maintains that globalization creates unacceptable levels of inequality. As with many issues facing society, both proponents and opponents of globalization make valid claims. Thus, while globalization economically benefits society as a whole, the unequal distribution of those benefits leads to fierce criticisms and important ethical implications.
The increase in living standards and reduction of poverty confirms that globalization creates net economic benefits for society. Firstly, globalization improves living standards through specialization and increased efficiencies. To start, less restrictive trade policies allow goods, services, ideas, and technology to flow more freely around the world. This creates an opportunity for specialization to occur on a global scale so that different aspects of production occur where the highest operational efficiency and lowest cost of production exists. For instance, China imports unprocessed wood from other countries (like Canada) because it is more accessible and overall cheaper than producing it domestically (Kozak & Canby, 2007, p.2). These cost-savings make goods more affordable for consumers, which increases people’s real income and living standards because people can now afford more with the same amount of money. Additionally, the improved flow of technological innovations increases product affordability because technological improvements increase production capacity or reduce the amount of labor needed to meet the demand. The resulting cost-savings for consumers from specialization and technological improvements increase their real income and by extension, living standards.
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Secondly, the reduction in poverty also illustrates the net benefits of globalization. Critics of globalization often claim that it actually increases poverty. However, empirical evidence shows a significant reduction in poverty during the most recent period of globalization (Segerstrom, 2010, p.6), both in absolute and relative terms. One study that confirms this trend reported that between 1981 and 2007, the number of people living on less than $1 per day decreased by 351 million people, while another study added that the number of people living on less than $2 per day decreased by another 200 million between 1980 and 1998 (Kocowicz, 2013, p.7). In relative terms, because of the simultaneous increase in the world’s population, these studies indicate that “while in 1970 about 40 percent of the world’s population was living in absolute poverty, that percentage diminished to just 24 percent in 1998” (Kacowicz, 2013, p.7). Studies such as this highlight the beneficial aspects of globalization. Nonetheless, the increasing living standards and decreasing levels of poverty show only a general trend. They do not reflect the uneven distribution of these gains.
In shifting perspective from analyzing society’s net economic benefits to examining who benefits most from globalization, we begin to see the extent of the unequal distribution of benefits—one of the major criticisms from anti-globalists. The criticisms of the inequality created and perpetuated by globalization pertain to the individual, national, and international levels, causing social unrest and political instability. On an individual level, people “tend to gain from globalization in proportion to the amount of wealth they already had” (Aisbett, 2003, p.31). This means that in relative terms, everyone is gaining similarly, but in absolute terms, the richest are gaining more than the poor. To illustrate this discrepancy, Milanovik (2016) graphically contrasts relative and absolute gains in real income (p. 11,25). The relative results suggest that people around the middle of the global income level (mostly the “emerging middle class” of developing nations) gained most, but were closely followed by the richest 1% (Milanovik, 2016, p.11). Meanwhile, the biggest losers experienced no gain in relative terms—a group that largely consists of the “lower middle class of the rich world” (Milanovik, 2016, p.11). In contrast, this same information presented as absolute gains shows that the richest 5% of people in the world received 44% of the total global income gain, while 80% of the world’s lowest earners shared 26% of total gains. Of that 26%, similar percentages of the lower middle class and the emerging middle class received 3% and 2% respectively (Milanovik, 2016, p.25). The sense of injustice arising from the stark contrast of absolute gains is further compounded by people’s tendency to place greater importance on absolute inequality than relative inequality (Aisbett, 2003, p.27). Thus, as globalization perpetuates absolute inequality, it generates more criticism and drives social unrest such as the Occupy Wall Street movement.
When comparing the benefits received across countries, a clear trend of uneven distribution persists. The winners in this case are the countries that participate. Since the countries that grow quickest are the ones that are “more open to international influences and provide a favorable investment climate” (Grennes, 2003, p.547), it follows then that the losers are countries that do not take part in globalization due to political, infrastructure, corruption, or other reasons (Kacowicz, 2013, p.6). Take China, for example. One thousand years ago, it was considered a very advanced and wealthy country by Western standards. After shutting the rest of the world out and implementing protectionist policies during periods of increasing globalization, however, it became one of the poorest nations. Then, starting from the 1970s, China began opening up to international influences and has since seen unprecedented economic growth (Grennes, 2003, p.554). This example helps illustrate how a country’s level of openness influences its economic success. However, it also suggests that inequality between countries should decrease as other countries open their borders in search of economic success. Admittedly, while a few nations have made impressive progress, many, such as Somalia, have grown very slowly. Consequently, “these poor nations are thus becoming increasingly marginalized” (Intriligator, 2003, p.9), which could lead to international conflicts. The uneven distribution of wealth poses a real threat to global peace and economic stability because of the tension it creates between and within countries.
In addition to pragmatic concerns about inequality caused by globalization, the ethical issue at hand is that certain people, groups, and nations continue to benefit while others do not. Major ethical implications arising from this situation include utilitarian, distributive justice, and individual rights principles. On the one hand, since, “[b]y definition of economic growth, the value of gains to some people exceeds the value of losses to other people” (Grennes, 2003, p.556), utilitarianism considers globalization good and ethical. On the other hand, the creation of winners and losers violates the distributive justice ethic. The creation of losers, in particular, violates the individual rights ethic since certain people are actually harmed by the events of globalization, like the manufacturing job layoffs in the United States. This creates inequality of opportunity and gives rise to discrimination when determining who should benefit and who should not. Ethical principles aside, extreme absolute inequality also fails to pass many ethical tests, such as the best-self, gag, and golden rule. The resulting moral dilemma from these evaluations is crucial to explore due to the serious practical consequences associated with it, such as “the implications it has for peace and security” (Aisbett, 2003, p.28).
In conclusion, strong empirical evidence depicts that economically, society is better off in a globalized world. Yet, those same forces of globalization threaten to destabilize society due to the inequality that results from the current distributive system. These threats make scrutinizing the practical and ethical implications more important than ever in order to identify opportunities to redistribute the gains more evenly among individuals, groups, and nations to ensure that every stakeholder benefits moving forward.
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