The pitfalls of globalization

Globalization is not a formula to increase global economic growth since economic growth eventually depends on available recources. With the term recources I do not only refer to the treasures of the soil but also knowledge, know how or interlectual property as well as money or capital.

To make my point clear I'll give you an example. Let's say we have an unlimited amount of money and wont to make profit by producing cars at cheap prices and sell them at high prices. We won't be able to produce cheap cars as long as we don't have the know how to build cars if we lack steal or human recources. We won't be able to sell these cars if theres no market, e.g. nobody has money to afford (lack of monetary recources, capital) the cars we produce.

As you can see an unlimited amound of money will not lead to economic growth if the system fall short in any other limiting recource. The same happens if you have unlimited human recources. It will make labour and thereby production cheaper but to spent less money for labour means also that people will earn less. Less earnings will lead to a drop in demand wich causes prices to decrease and will therby limit the proit you could earn with selling your cars.

Globalization rather leads to a redistribution of recources in the first place. Weather globlaization will increase economic growth or not will depend on the goverments of contries involved in globlaization. Wether they can negotiate a fair rules for regulation of international cash flow and investment. This would eventually lead to the highest possible global economic growth and the heighest possible benefit for the most people in the world. Ignorant and egositic insisting on nationalistic interests on the other hand might eventually lead to a collapse of the disbalanced system and to a decrease of economic growth.

Developping countries and Kapitalists are the beneficiearies of Gobalization and workers of developed countries the loosers.

To benefit from Globalization you have to focus the relvant economic recources in your hand. In the developping countries globalization creates jobs thereby increasing the gross domestric product ultimately increasing wealth and economic growth in these countries. If the gouvenemt of the developping country is smart enough this will also lead to an increase in know-how. This know-how can and will be used by the developing countries to increase their inductrieal production on their own thereby destroing production in the highly developed countries. This is the ulimate cause for the shift of economic growth towards developping countries like China as we can see it today. The only beneficiaries of the highly developped countries are the capitalists and investors who can invest their money in the developping countries thereby participating in economic growth of the developping countries. At the moment the liberal economic foreign-politics mostily favours the provits of the capitalists.

Globalization might eventually lead to the collapse

The force which is driving globalization is the interest of investors to increase their profits. Tough it might well be that this will increas the wealth of some it will be a more difficult task to design globalization in such a way that it increases the wealth and well beeing of the global population.

Since in highly developed countries the price for goods are rather fixed by means of demand and offer one was possible way to increase profit is to reduce production costs. Globalization offers the chance to reduce production costs by buying cheap labor in developing countries and furthermore to benefit from the lower taxes in these countries. Since companies compete for investors by means of profitability managers of companies will seek to increase their profit to the maximum possible value and are not content with beeing profitable alone. The current economic rules dictate to produce in cheap countries and there are no way to escape these rules in a system basically founded on greed.

Though now the productioncosts are decreased you still have to sell your goods and now follows the big drawback of the above mentioned mechanism. Since production moves from highly developed countries to developping countries this means that unemployment will increase and tax raising funds will decrease in the highly industrialized and developed countries. Lower gross domestic product and private income will inevitably reduce investment and demand in those countries. Since the price is a function of demand and offer the prices you will get for goods in these countries will decrease and eventually limit or even reduce the profits. In a vicious circle such a mechanism might lead to a deacrease in global economic growth.

---

technorati tags:
globalization | economic growth

Globalisation is good for the international companies only!

Mostly international companis and very rich people profit from globalisation. The nations and their inhabitants doesen't nessesarily benifit form globalisation.

Basically for a company all that counts is profit. For big companies this is shareholder value. To increas profit and shareholder value it is important to keep costs low. This can be achieved by paying no or as little taxes as possible and cut the wages of the employees. Strange enough lower production costs do not hinder the companies to increase the prizes they want for their goods. All in all the profit of well managed company with international businessplans will increase due to globlaization.

The loosers are in fact the well developped countries with high wages (expensive labour) and hight taxes wich are needed to maintain the infrastructure and social security. Companies will leave these countries in order to cut expenses and to increas profit. This will lead to a higher unemployment rate. Higher unemployment means less taxes and higher expenses for social benefits.

In effect the big companies are making more and more profit and the rich are getting richer and richer and pay less and less taxes. On the other hand the contries and their average inhabitant will become bankrupt.

---

technorati tags
globalization