The International Monetary Fund describes globalization as “the growing interconnectedness of the world’s economies facilitated by the movement of technology, commodities, and people.” In the contemporary world, globalization makes us realize that the world extends beyond well-defined boundaries. Distances have been shortened via expansive roadways, shipping, and aviation advancements, reducing transportation time and costs, and aiding globalization. Through undersea cables and broadband, information can be transferred from anywhere in the world at incredibly high speeds. Additionally, one has access to all sources of knowledge with the click of a button on a wireless laptop, enabling free innovation to emerge from both emerging and advanced economies.

The ‘Flat World’ Concept

Thomas L. Friedman referred to this ease of connectivity when he said that “the world is flat.” His book of the same name highlights the benefits of globalization by exploring the idea of a level playing field created by technology. A “flat world” reduces technological gaps across sectors—manufacturing, education, and healthcare—bridging economic divides between underdeveloped, developing, and developed economies.

For example, Khan Academy, a US-based non-profit organization focused on education, collaborated with government departments in Maharashtra to give village students in India access to free digital content in their local language, furthering their education. Such impressive technological exchanges were made possible only through the shrinking of the world under globalization.

‘Flat World’ Boosted Economies

Earlier, geographical distances created impediments to innovation and access to job opportunities. However, globalization changed these perceptions. Collaboration on research and ideas, known as open-sourcing, reached new heights, as one’s location on the map mattered very little. Opinions could come from remote locations, contributing to the growth of underdeveloped economies.

A 2018 IMF study showed that 40 percent of productivity growth in expanding economies during 2004–2014 could be attributed to the increasing use of easily available foreign technology and knowledge. This demonstrates how a ‘flat world’ has boosted emerging economies, making them powerful contenders in the global marketplace.

In another work, The Lexus and the Olive Tree, Friedman argues that countries with strong economic ties are less likely to go to war because they have too much to lose. This makes a strong case for globalization as a unifying force, wherein shared economic interests can act as a deterrent to conflict. He observes that no two countries with McDonald’s franchises have been at war since its establishment. Moreover, economic alliances ensure that help will be available in case of an unexpected attack.

Trade Barriers and Multinational Corporations

Another feature of a globalized world is relaxed trade barriers—an idea increasingly under attack today. Reduced trade barriers enable the free movement of technology, ideas, investments, goods, and services—key aspects of globalization. Coupled with liberalized markets and advancements in transport, this has allowed multinational corporations (MNCs) to establish operations in many struggling economies.

Such investment has resulted in job creation, skill development, and technological advancement, along with increased government revenue and infrastructural growth. MNCs also improve manufacturing efficiency by strategically locating production near markets and raw materials.

A study by the National Bureau of Economic Research by Drusilla K. Brown, Alan V. Deardorff, and Robert M. Stern found that MNCs raise wages. Foreign investments from multinational firms and export-oriented companies in poorer nations pay higher wages than local firms. For example, a 2001 study showed that foreign-owned plants in Indonesia paid blue-collar workers 33 percent more and white-collar workers 70 percent more than locally administered firms.

The ‘Race to the Bottom’ Debate

Despite these benefits, a popular belief persists that MNCs are drawn to countries with poor labour laws—a phenomenon termed the “race to the bottom” by the IMF. Critics argue that corporations seek cheap labour and exploit relaxed regulations to cut costs and boost profits without concern for social welfare.

Faith in this belief is evident in a Pew Research Center analysis showing that MNCs have become less popular in Western nations like Italy, Germany, and Britain since 2002 (Kohut and Wike).

However, besides cheap and available labour, several other variables influence MNCs’ investment decisions: the size of the market, the legal framework, political stability, infrastructure, and overall business environment. Globalization enables multinationals to expand worldwide, creating jobs, raising wages, and contributing to economic growth in developing nations.

Comparative Advantage and Trade

Globalization allows countries to specialize in their production strengths while being assured of trading options in open markets. Nations with strong economic ties can produce goods based on available resources and labour while importing others, leading to mutual gains.

Fernando Leibovici of the Federal Reserve Bank of St. Louis illustrates this through comparative advantage: the US excels in producing certain foods, while France has an advantage in producing wine. Trading between them benefits both. However, excessive specialization can make economies vulnerable.

An example is the sharp decline in Australian wine exports to China after anti-dumping tariffs were imposed in 2020. The resulting surplus caused distress among producers, prompting diversification measures to expand both domestic and international consumer bases.

Nevertheless, such cases are exceptions. In most instances, international trade enhances national competitiveness by incentivizing specialization. Former Mexican President Ernesto Zedillo noted that every poor nation that has overcome poverty has done so by engaging in export production and opening up to foreign goods, investment, and technology.

Globalization and Inequality

While globalization has many advantages, it also leads to an unequal distribution of benefits. IMF’s World Economic Outlook (2007) reported that in 1990s Mexico, trade liberalization raised incomes across all households—but richer households gained 6 percent while poorer ones gained only 2 percent, widening inequality.

Digital technologies have transformed markets and work, increasing demand for high-level skills and reducing opportunities for low-skilled workers. This has deepened the income divide (Qureshi et al.).

Moreover, globalization has environmental costs. Rapid industrialization and infrastructure expansion have caused deforestation, resource depletion, and loss of biodiversity. According to UNEP’s Global Resources Outlook 2024, industrial and transportation growth—both globalization’s by-products—account for 25 percent of global greenhouse gas emissions. A Guardian article noted that high-income nations are responsible for 13 percent of global forest loss outside their borders.

A Balanced Approach

Research shows that globalization boosts economies, improves job opportunities, reduces conflict, and increases trade. However, it also widens income gaps and harms the environment. These challenges can be managed through effective institutions and public policies focused on education, health, and sustainability—not by rejecting globalization.

Adopting the triple bottom line approach—measuring business success by its economic, social, and environmental contributions—can help. Directing Corporate Social Responsibility (CSR) funds toward combating climate change and supporting community initiatives can make globalization more inclusive.

To ensure fairness, the underprivileged must not be excluded from access to modern knowledge and technology. Investment in education, retraining, and digital literacy can help workers adapt to new global realities. The idea of predistribution—making markets more inclusive by reducing technological gaps—can be a key policy focus.

Making Globalization Work for All

As Kofi Annan, former UN Secretary-General, said:

“The main losers in today's very unequal world are not those who are too much exposed to globalization. They are those who have been left out.”

Globalization is inevitable. Its advantages are many, but so are its flaws. To make global interconnectedness beneficial for all, it must be guided by fair rules, inclusive policies, and strong institutions. As Amartya Sen wrote in How to Judge Globalism, “Globalization deserves a reasoned defense, but it also needs reform.”

References

 

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(The writer is a student in grade 11 of Sardar Patel Vidyalaya, New Delhi, India. Views expressed are personal. The writer can be reached at advikag2020@gmail.com )