The Global Economy: Advantages, Expansion & Impact

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  • 0:03 Economic Globalization
  • 2:04 Impact on Jobs & Pricing
  • 3:16 Capital Flight
  • 4:41 Political Impact
  • 5:14 Lesson Summary
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Lesson Transcript
Instructor: Jessica Whittemore

Jessica has taught junior high history and college seminar courses. She has a master's degree in education.

This lesson will explain the concept of economic globalization. We will look at both its positive and negative effects while also highlighting the terms 'import,' 'export,' and 'capital flight.'

Economic Globalization

As I work on this lesson, I'm sitting on a chair that was made in Sweden. As I look out my window, I see my car that carries a Japanese name. As I look down at my keyboard, I see another Asian brand, and if I backed away from my computer for a moment and checked out the label on my sweater, I'm guessing I just might see the words 'Made in China'. Without a doubt, I am surrounded by products that have come to me from across the seas. In other words, my daily life (and I'm guessing yours!) is a living example of today's lesson on the globalization of the world's economy.

To explain, economic globalization is the economic mixing and interdependence of economies across the world through an escalation of cross-cultural movement of goods, services, technologies, and wealth. Stated really simply, it's the world's money being spread around as goods, products, and technology are sent from one country to another country. Economic globalization is the reason I can go to my local superstore and buy products from all over the world, while people in Europe and Asia can also buy American products. It's also the reason someone in China can order a grande mocha latte at the same coffee chain I bought mine from this morning. To play on a very familiar song, it's one of the reasons that 'It's a small world after all!' and, according to many economists, it has reached new heights in the past few years.

With this unprecedented growth in economic globalization some argue its impact on the world has been very positive. However, there are some who are not so sure it's been the best thing for all parts of the world. For the remainder of the lesson, we'll look at these two arguments and you can decide. Looking on the bright side, we'll start with one of the arguments in its favor.

Impact on Jobs & Pricing

For starters, the proponents for the expansion of economic globalization argue that it creates jobs and lowers the prices of goods. For instance, when an American-born manufacturing company sets up shop in an impoverished country, it creates jobs for the people there. On the other hand, when China exports, or sends goods to another country, to places like the U.S., it forces American manufacturers to offer their goods at cheaper prices as well. Although it wouldn't be all that empirical, to see this phenomenon in action, just go to your local super store (that probably has the word 'mart' in its name) and check out the prices and how many times you read the words 'Made in China'!

However, as my mom always says, there are two sides to every argument. While proponents of economic globalization tout its power to create jobs in impoverished nations, many argue that it has allowed for social injustices, such as poor working conditions, wages that are scandalously low, and even the exploitation of children in the form of forced labor. In other words, when a company sets up shop in a nation that doesn't enforce fair labor practices, abuses may abound.

Capital Flight

Adding to this, opponents argue that economic globalization has caused capital flight, the large-scale departure of companies, assets, and wealth from a country due to economic instability or the opportunity for cheaper production. Linking capital flight back to our conversation on jobs, economic globalization has made it possible for large companies to move their businesses to countries where they can pay their employees less. For example, a large computer company knows it can pay a worker overseas 50¢ an hour, as opposed to the United States' minimum wage of over $7. For this reason, why wouldn't it pack up and head across the seas?

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