Costs And Benefits Of Globalization And Localization

1299 words - 5 pages

The debate over globalization and localization has long been fought as whether or not to pursue an international or isolationist foreign policy. Essentially, the term globalization means an integrationist approach to policy, whereas localization refers to a fragmentational approach to foreign policy. There are many issues in this debate, but none as complex and important as that of the costs and benefits of the economy. Other issues consequential to the topic are the political and social implications to these policies.

Economics runs all countries, whether or not they have a global or local approach to policy. Globalization, like all things, has both costs and benefits. Economically, the downfalls to globalization include the possibility that "the combination of increasing returns to scale and high transport costs may cause economic activity to concentrate somewhat accidentally in some areas at the expense of others"(Sachs 101). Simply, the costs of global trading will not balance among all states. Some states with many natural harbors and warm water ports will benefit from the increase in global trade more than countries that have few or no ports. Another problem certain countries may face is that if you have a wealth of a natural resource you may be forced to devote your economic strength on that one scarce resource instead of building an industry, which may prevent the development of your state (102). A third pitfall in economic globalization comes when "underrregulated and undercapitalzed banks" gamble with depositor funds (104). So banks without anyone to oversee their dealings and a small amount of money deposited within them have a tendency to recklessly invest the funds of their clients. In turn they lose most if not all of their funds and go bankrupt causing a large disturbance in the market.

The globalized economy, however, has many benefits. One such benefit is the "expansion of production, trade, and investments" (Rosenau 17). This expansion can also travel across national boundaries extremely fast (16). In addition, "both sides of the great income divide stand to benefit from globalization: the developed countries by reaching a larger market for new innovation, and the developing economies by enjoying the fruits of those innovations while sharing in global production via multinational enterprises"(Sachs 101). The industry will also benefit from the opening of countries with cheap low-skill labor while not taking away jobs from countries such as the United States that does not have an industry of low-skill jobs (107). The emergence of low cost labor in the openness of globalization allows for the increase of higher skill jobs in developed states and the introduction of industry in lesser developed states, while bringing the cost to the consumer down for the product. The global economy creates a free market where most businesses and industries can flourish.

The other form of foreign policy, localization, has its own costs and...

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