Globalization's Profound Economic Impacts: Winners and Losers

This essay examines the multifaceted impacts of globalization on both developed and underdeveloped economies. It explores how international trade and technological advancements have reshaped global markets, leading to economic consequences that affect various nations differently. The essay analyzes the economic impacts of globalization, discussing how corporations leverage scale and low costs in developing countries, often resulting in job losses in developed nations. It identifies the winners and losers of globalization, highlighting the challenges faced by both developed and developing countries, including unfair trade practices and social inequities. The trickle-down theory is also analyzed, examining how private investments create employment opportunities. The essay uses external academic sources to support its arguments, providing a comprehensive overview of globalization's complex effects on social and economic structures. The report concludes with a discussion on the long-term implications of globalization, emphasizing the need for further debate and analysis.

Running Head: GLOBALIZATION & ITS IMPACT 1
Globalization AND ITS IMPACTS

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Introduction
The unequal distribution of natural resources has led to some countries having an abundant
supply of resources while the other economy may have a crisis of the same. All the
economies of the world are not self-sufficient to produce all the goods and services by
themselves. Hence trade among economies was facilitated centuries ago. This fostered
globalization in the world helping the poverty-ridden nations to develop. On the other side,
globalization had many adverse effects on the underdeveloped and developing economies as
they were exploited by the developed nations. Thus, this essay examines the impact of
globalization on developing and underdeveloped economies.
Globalization and Its Impacts
Globalizations are defined as a process that aims to expand in international markets
facilitated by developments in global communications, socioeconomic, political,
environmental and technological advancements. Globalizations aims at providing a superior
competitive advantage with low costs of operations. This was achieved through
diversification of resources and development of investment opportunities. Thus, through
foreign direct investments, the developed nations entered many underdeveloped and
developing nations and accessed the local markets for business purposes. The developed
nations had the technical knowledge, expertise, and capital through which they take
advantage of the untapped markets. The impact of globalization can be mainly understood
from evaluating the economic consequences that it generates.

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Economic Impacts
Globalization compelled many organizations in adapting strategies that balanced the
interests of both the individual, society and that of the corporation. Global companies started
setting up their business functional units that provided significant advantages in countries.
While globalizing, corporations majorly viewed the benefits arising from economies of scale
and low costs of operations. This helped the domestic business units to compete worldwide
by accepting the participation of government and workforce in the developing and the
underdeveloped nations. The companies reduced their risk by means of diversification by
involving the financial institutions to partner with domestic and international business. The
foreign company reorganized the national and subnational organizations with production
techniques, international trade, and integration of financial markets. Furthermore,
transformation in the production and manufacturing impacted the microeconomic phenomena
like the class structure, labor skills, technical know-how of the host country, bringing about
substantial economic benefits. Not only globalization impacted at the organizational level,
but it benefitted society as a whole by creating job opportunities and it impacted the
developing or under-developed country's economic structure. It was also possible to
reorganize the capital structure of the economy as a whole (Brenner, 2017 ). For developed
countries, corporations that were internationalizing, there were benefits associated with cost-
cutting, access to resources and also benefitting from economies of scale. For example, Apple
setting up its manufacturing iPhone unit in China. The benefits accrued to China, with the
creation of multiple job opportunities and expansion of its economy, while in the developed
country many people lost their jobs. However, there was tremendous revenue generation for
Apple company. Thus, it could be said that the microeconomic structure in the developing
and underdeveloped nations changed due to deregulation, globalized financial markets, and
advanced technology.

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The technical advancements in telecommunications and information technology provided
the development of distribution channels in remote areas, and also promoting cross border
entry and capital inflows. In this regard, there was deregulation pertaining to the
liberalization of capital account and financial services in the product and geographic locations
(Desai and Rudra, 2019). Globalization helped in the integration of banks by providing
several services, allowing entry of new investors while also increasing the multinational
presence in domestic and cross-border markets. In the era of internationalization, global
companies are capable to use tangible and intangible resources that help in creating customer
loyalty independent of the location. This further uplifts the global standards and the domestic
economy as a whole.
Winners and Losers of Globalization
Many of the scholars and researchers have to establish facts about the losers and winners
of globalization. Desai and Rudra (2019) discussed that majority of developing and
underdeveloped nations opened their borders for the international inflow of goods,
technology, and capital but this made them vulnerable to international shocks. Desai and
Rudra (2019) also discussed that as protectionist barriers were reduced, international trade
has encouraged new business groups and investors to exploit new markets, pushing the
governments to reduce the taxes and public expenditure that further limited the bargaining
abilities of the low earning working class. It was noted that the developed nations exploited
and natural and human resources of underdeveloped and developing nations. They produced
and manufactured low-quality products and earned profits. Increased production and
manufacturing units increased pollution as well as depleted the natural resources of many low
and middle earning countries. Desai and Rudra (2019) argued that developing
underdeveloped regions benefitted in fields of food and agricultural production. Desai and

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Rudra (2019) conducted empirical tests to examine the social spending and protection of
developing regions after the trade reforms were introduced. It was found that in the food and
agricultural sector, the exporters experienced high social protection than that of importers.
Therefore, social policies in many developing regions are partially shaped by agricultural
exporters.
The entry of global companies also helped in increasing socio-economic and political
differences in many nations. Desai and Rudra (2019) stated that developed industries win
largely as the globalization has generated larger GDP per capita gains. This is to say that the
income gap among the developed and developing nations has also increased largely which
could result in the increase of protectionist measures by the emerging nations (Brenner,
2017). Globalization helped the nations to develop in the fields of education, technology,
agriculture, and many more but it had adverse impacts on socio-economic conditions. Thus,
winners and losers cannot be defined adequately using available literature.
Challenges of Globalization for developed and developing countries
Globalization has been criticized for creating unfair trade practices among the richer and
poorer countries. Brenner (2017) argued that critics regarding globalization might have
entirely dependent on the government to survive as well as prosper from globalization.
Brenner (2017) also discussed that income loss and social instability often accompanies
globalization periodically due to economic and financial turmoil in the world economy. It
was noted that progress in wages and poverty was made in developing nations. Desai and
Rudra (2019) also discussed the government of these economies is expanding protection to
protect social and political instability among the poor classes of society. For example,
Addidas was involved in a lawsuit, where the company was criticized for its unfair treatment
and wages related challenges in China. Furthermore, it often criticized that domestic products

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struggle to compete with standards of globalized goods and services. Indigenous products
produced in developing and the underdeveloped world was marginalized and many small
companies closed down, unable to compete with global companies' prices and quality
standards. Thus, agricultural liberalization may impact larger segments of small landholders
who struggle to meet the demands of higher productivity, quality and phytosanitary standards
of importers. The export countries have strong social protection in the form of crop insurance,
cash, and other inputs subsidiaries. Developed nations are raising the national standards of
food and health but they are dependent on unskilled laborers for trade surplus.
Desai and Rudra (2019) discussed that manufacturing units face another set of distinct
challenges. The merchandise exports are less price volatile that further reduces the
consumption- smoothing imperative. Thus, the expansion of the manufacturing industries in
the developing nations has generated employment opportunities in labor-intensive sectors but
these workers are often excluded from the social protection programs. Thus, the government
has the pressure to reduce taxes for attracting external finances to retain competitiveness in
the export sector. This restricts the allocation of fiscal resources towards social protection of
low-income earners.
Trickle-down Theory
In the Trickle-down Theory, the economic propositions imply that corporate taxes on
business and wealth should be reduced for stimulating the short term investments that benefit
the societies in the long term. The theory explains that the progress of the financially strong
business units automatically trickles down for job creation and economic activities that
further redistribute the income and growth among the population. The theory implies that
economic development follows vertical growth through which the richer sections experience
high-income growth. They start spending on business expansion and other opportunities that
benefit socio-economic situations of society. Hence, poor unemployed or skilled unemployed

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get employment opportunities. On the contrary Efrianti et al, (2018) discuss that the weaker
sectors are benefitted in a much smaller portion than the rich ones and thus, unequal
distribution of wealth and resources prevails in the region. This, in turn, deepens the income
gap between two sections.
Efrianti et al (2018) conducted empirical studies on the application of the trickle-down
theory. According to the data revealed, an increase in economic growth by 1% reduces
unemployment by 0.5%. The expenditure by the government is significant only by 10%, thus,
higher spending will lower unemployment creation. Efrianti et al (2018) also discussed that
private investment has negative signs and impacts the employment level only by 5%. Thus, if
private investments are increased by 1%, unemployment in the economy is only reduced by
0.09%. This empirical study was done keeping unemployment as the dependent variable.
Thus, Efrianti et al (2018) argue that economic growth, government expenditure, and private
investments impact the unemployment levels significantly. Thus, to increase larger impacts
of trickle-down theory the local governments of each region should increase spending. The
private investors should also aim at labor-intensive technology in the local or rural areas to
increase social welfare in society.
Conclusion
International trade has fostered globalization among the developed and
underdeveloped/developing nations. The paper has discussed globalization, economic
impacts and challenges on the developing and underdeveloped regions. Globalization has
benefitted the developed nations more than the underdeveloped or developing economies. It
was seen that the real winners of globalization are the developed countries and developing/
underdeveloped countries stand to lose in terms of social equities. Corporations mainly
globalize so that they can take advantage of scale and benefit from low costs in developing/
underdeveloped countries. However, this quickly translates into job losses in developed

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nations and creating social inequities in developing/ underdeveloped ones. Although the exact
winners or losers in this situation cannot be clearly defined as the trading nations have been
benefitted. The report has analyzed the trickle-down theory that implies that private
investments create employment opportunities in the economy. Though the trickle-down
theory aims at diagnosing and creating employment opportunities yet it does not take place
over the short-term period. Long-term implications from globalization remain debatable.

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References
Brenner, N. (2017). Beyond state-centrism? Space, territoriality, and geographical scale in
globalization studies. In Theory and Methods (pp. 313-336). Routledge.
Desai, R. M., & Rudra, N. (2019). Trade, poverty, and social protection in developing
countries. European Journal of Political Economy, 60, 101744.
Efrianti, R., Marwa, T., Tarmizi, N., & Yuliana, S. (2018). Growth, unemployment and its
implication on poverty: Empirical study in districts/cities of South Sumatera
province. Eurasian Journal of Economics and Finance, 6(4), 27-37.