Essay Writing -Descriptive English For Bank Exam IBPS And SBIPO MAIN BANK EXAM

Write a short notes on Benefits of Globalisation for Developing and Developed Countries

Globalisation – the process of increased integration and co-operation of different national economies. It involves national economies becoming increasingly inter-related and integrated.

Reasons for growth of globalisation

1. National Economies are becoming more closely integrated with each other. For example the Common Market in the EU, harmonization of Monetary Policy. But also closer integration in  America and Africa
2. Increase in World Trade, Tariffs and other impediments to world trade have gradually been reduced leading to an increase in world trade.
3. The  WTO has been instrumental in bringing about a more integrated and interdependent global economy
4. Economies tend to move in trade cycles together. A slow down in US growth has an impact on the whole world economy, because of the importance of trade.
5. Monetary Policy is linked between the economies, if US cuts its interest rate, this is likely to lead other countries to cut theirs

The benefits of globalisation
1. Consumers will have a wider choice of goods, and prices are likely to be lower. Globalisation has been an important factor in the falling price of manufactured goods.

2.Globalisation gives an opportunity for domestic firms to export a wider market. Export led growth has been an important factor in increasing economic welfare in Asian countries.

3. Globalisation enables increased specialisation of production. This specialisation enables firms to benefit from economies of scale. This leads to lower average costs and increased efficiency.

4. Globalisation causes increased competition between different firms and countries. This puts pressure on firms to be increasingly efficient and offer better products for consumers.

5. Increased Inward Investment. The process of globalisation has encouraged firms to invest in other countries. For example, many firms are relocating call centres to countries like India, where wage costs are lower. This inward investment benefits developing countries because it creates employment, growth and foreign exchange. Some foreign companies are criticised for exploiting cheap labour. But often the wages are higher than otherwise.

Problems of Globalisation

1. Developing Countries May Struggle to compete.

If a developing country wishes to develop a new manufacturing industry, it may face higher costs than advanced industries in the west, who will benefit from years of experience and economies of scale. To develop an industry it may be necessary to have protection from cheap imports; this gives the firm chance to develop and gain economies of scale.

2. Globalisation keeps Developing countries producing primary products. Developing countries may have a comparative advantage in primary products, however, this offers little scope for economic growth. Primary products have a low income elasticity of demand. Therefore, with economic growth demand for products increases only slowly. Primary products often have volatile prices, this can cause the economy to be subject to fluctuations in income

3. Multi national Companies may be able to force out local retailers, leading to less choice for consumers and less cultural diversity.

4. Movement of Labour. globalisation enables workers to move easily around. however, this may cause the highest skilled workers of developing countries to leave for better paid jobs in developed countries.