The Global Economy: Advantages and Disadvantages

Advantages

There are numerous advantages to the shift to a global economy. A major one being the possibility to increase benefits from economies of scale. The breaking down of global barriers allows companies to benefit from the largest and cheapest workforces, raw materials and technology. For example, “many North American publishers actually write and produce much of their software in countries such as India.�

Other advantages that companies benefit from include: the opportunity for smaller companies to expand globally quicker, having more choices when recruiting a workforce and lastly the opportunity to target a larger customer base (which translates to greater earning potential). A global economy would also help in promoting international cooperation and peace. If countries are dependent upon one another's economic success then armed conflict would be less likely.

For instance, both India and Pakistan possess nuclear capabilities and are oftentimes in dispute over land territory such as Kashmir. It is likely that these two countries will not enter into nuclear combat for the severe negative effects on their economies. Essentially it would be mutually assured destruction (MAD) on a financial level.

Disadvantages

One disadvantage of a global economy is the increased need for transportation due to less local production. Increased transportation leads to increased emissions of greenhouse gases.

Another disadvantage of a shift towards a global economy is the argued loss of domestic jobs. Certain labour-intensive industries (like textile and even parts of the software development industry) tend to shift their production from developed countries to developing countries where wages are lower.

This shift, it is argued, not only increases the unemployment rate in the developed countries, but in some cases leads to exploitation of third world workers, in particular, children. In contrast, many economists believe that the loss of domestic jobs is a temporary state, which will be offset by other industries if the barriers of trade are kept low.

Other disadvantages include: increased instability as was seen during the Asian crisis; the inability to create globally uniform regulations and legislation, which leads to phenomena like tax havens.

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