Globalisation's Impact: Inequality, Trade, and Economic Analysis

This essay examines the multifaceted relationship between globalization, world trade, and income inequality, drawing on a case study from The Guardian and economic theories. The analysis explores how globalization, characterized by increased international trade and interconnectedness, impacts income distribution across various nations. The essay investigates the arguments that globalization fuels inequality, referencing economic indicators like GDP and trade performance and providing examples from countries like the US, China, and India. It delves into the complexities of this relationship, considering factors like education, technological advancements, and governmental policies. The discussion covers the Heckscher-Ohlin-Stolper-Samuelson model, the roles of skilled and unskilled workers, and the challenges faced by developing nations. The essay concludes by emphasizing that while globalization can present challenges, it is not solely to blame for inequality, and that effective policies are crucial to mitigating its negative effects and promoting economic development.

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Globalisation – a prejudiced growth

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Introduction
Businesses particularly large and medium organizations find the elevated basis of the
commercial platform beyond home territories. This can be largely attributed to the motivating
factor of business globalization that has been happening continuously in a bid to espouse the
global perspective in business operations. Commercially viable business operations
commensurate with strategic fit can get the desired outcome for the business enterprises
(Cantwell, Dunning, and Lundan, 2010). Globalization is a much talked about topic which
creates opportunities for many firms however, the complexities and challenges inherent in
such a course cannot be totally negated. Businesses, influenced by globalization experience
varied implications which are either bad or good and these implications have been
highlighted in this essay.
Discussion
Globalization is a term which relates to a process of business operation on an international
scale. This is also known as the adoption of a broad outlook in business for transferring of
goods by means of sales across international borders. In the present times, more often than
not, globalization acts as an important factor for businesses to increase sales since business is
facilitated to move products and services across more than one country. Firms often consider
the aspect of globalization helpful to expedite sales based on an easy as well as efficient
process. But in several occasions outcomes in the form of inequality often overrides helpful
facets of international exposure, exploration of innovation and technological expertise, talent,
and skill nurturing among the workforce and better economy of home and host country (Hill
and Hernández-Requejo, 2008).
Since the advent of globalization, besides fruitful commercial outcomes from a business
perspective, industry and political arenas are concerned about the unexpected implications
that arise out of the process. Inequality is largely feared from the commercial perspective
because of the involvement of several stakeholders at various levels. From the point-of-view
of a country the involvement of GDP and trade performance as indicators of individual
economic well-being can throw substantial light on the issue of inequality. In developed
economies of US, France, Germany, and the UK, inequality has emerged as a seemingly
political concern. GDP and trade are always considered important pointers of globalization
and their dependence on each other reflects the volume of globalization-backed business

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performances (Hill, 2008). From the year 1980, this metric has been on the rise but
interrelation among inequality and trade cannot be properly inferred from this relationship
between GDP and trade. The trade and GDP relationship remains a conundrum for many in
the industry. Since the time when globalization was on its high and was not positively
anticipated, the percentage of trade to GDP ratio slipped to 56 percent in the year 2016 after
reaching its peak on 2008 which was recorded at 61 percent.
The year 1980 was the starting period of inequality from when it glided upwards till the turn
of the century. Economic growth of a country supports the requirement of per capita income
which becomes adequately full or to some extent supportive in raising the stature of equality
in the Global map in consideration of the individual economic position (Cuervo‐Cazurra,
2011). China and India are developing nations and with their success in improving per capita
income, inequality was shackled and diminished while not every other country could ensure
an inequality free outcome on the basis of trade and globalization (Trompenaars and
Hampden-Turner, 2011). This situation is pointed out by Xavier Sala-i-Martin of Columbia.
If empirical information is relied upon in respect of inequality then World Inequality Report
2018 confers a picture that shows the extent of inequality even in a country like the US. Top
one percent of the population in the country claimed an increase in income to the extent of 20
percent in 2014 from only 11 percent in 1980. This stands in contrast when it comes to
income of 13 percent of the bottom half of the population in the country. Income of people in
this segment rose to only 14 percent. Countries such as Germany, UK, and France have the
almost same or less highlighted trend (Popescu, 2013). However, inequality is avoidable and
it is possible on the basis of the facility of education, and high savings, that factors in as a
resistance and the improved performance of India and China was possible depending on these
factors. The remarkable performance of the country in terms of economic success depends on
trade and GDP which remain vital determinants and assist the per capita income to stay
bloated. Therefore, if seen geographically then the success of the Asian economy has made
others aware about the significance of per capita income with due consideration that
individual earnings will help to control inequality in a social and commercial context. This
acts as a point of convergence between developed and developing countries, still, differences
regarding the volume of inequality are comprehensive.
Most importantly developed economies consider trade as GDP booster if the inequality
volume is considered while countries like China and India take a view of income and GDP
driver based on consideration about the trade. The effort of trade and GDP improving the
performance achieve a justifiable basis when a reduction in inequality is possible irrespective

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of the country’s status as a developing or a developed nation. If the success of Asia is
believed to be catalyzed by the contribution of US then the mercantilist theory is better
understood which prevailed three centuries ago. The dependence of Asia if is perceived to be
dependent on the contribution of US then the zero-sum game as the important feature of the
mentioned theory becomes perceptible (Thomas, 2008). However, comparative advantage is
the important ground that was proclaimed by David Ricardo and Adam Smith for the benefits
achievable from trade if it exists in the countries of business operation. If this view is taken
into consideration then the existence of inequality in different countries of a developed and
developed economy is perceptible in the presence of an enhanced awareness pertaining to
focus on developing per capita income for removing inequalities in developed nations in
contrast to developing countries. Statistical inference based on World Inequality Report 2018
highlights the presence of inequality in the countries having a developed economic situation.
Contrasted views based on the citizen and country wise concept split into national GDP and
per capita income that often creates confusion about overall inequality and individual
perspective towards equality assurance (Morrison, 2011).
Theory framed by Smith-Ricardo is unable to spot difference among citizens of a country
when it comes to earnings distribution. Thus perplexity in relation to income distribution is
still unaddressed by the framed hypothesis supported by them. But this does not alter the
income inequalities in the countries setting aside the concept of individual and country wise
income and per capita earnings. Trades are initiated by employers or owners of financial
resources and human capital and in this context individual income is the result of improved
GDP that influences income and expenditure capacity among the individuals (Ferraro and
Briody, 2013). This notion is upheld by Heckscher-Ohlin-Stolper-Samuelson model and this
asserts that workers and owners are different in terms of different positions. In developed
countries, global trade benefits the several factors of production. Employees or workers
always are able to achieve high compensation if organizations are competent to achieve the
production target. Concepts of increasing returns to scale and imperfect competition were
introduced by Paul Krugman and Elhanan Helpman however when this situation is put under
control, market monopoly gives rise to inequality since trade influences the account of
business people with the power to control. Shifting of resources from low productivity to
high productivity firms are meant for better use of resources for achieving operational
excellence (Unit, 2009). This is theoretically influenced by Marc Melitz and with the
intervention of this concept inequality is expected to remain under control. These new

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theories of economics have been embraced by several critics who are opponents of
globalization.
Free-trade situations in developed countries were believed to remain detrimental to the
interest of common people who are economically subservient. Another reason for this was a
perception which makes people believe that inequality is somewhat connected to free market
conditions in several countries. The emergence of trade and commerce with low
consideration of workers in rich countries leads to inequality. The Heckscher-Ohlin-Stolper-
Samuelson trade theory’s prediction which states about low-income potential for low skill
people can be felt (Hough and Neuland, 2008). The increase in income inequality in the
developed countries denotes the rationale of the prediction based on the theory. This theory
also stands as an exception to a better-controlled inequality in some countries which are
comparatively less developed and have many unskilled workers. These countries are in a
better position in terms of controlling inequality. From the given case study it is clear that
China and India are both developing nations and have relatively controlled inequality in
comparison to the US and other developed nations such as Germany, France and United
Kingdom (Colfax, Rivera and Perez, 2010). The reasons for this are several such as high
demands of services by the unskilled workers in the internationally shaped business sector
and industry including many organizations that are active participants in trade and commerce.
Income inequalities are present in many developing countries and as workers are low-skilled
with high volume of inequality in income they are worse affected (Savrul, Incekara, and
Sener, 2014).
Observation of BrankoMilanović and Lyn Squire asserts that income inequalities are also
caused by a reduction in tariffs in many poor nations where workers are skilled but are not
paid justifiably and also in countries where workers suffer from low levels of skills and
education. Pinelopi Goldberg and Nina Pavcnik reported in 2007 that expectation soared high
due to the high demand of unskilled workers in an integrated market in global platform where
trade is likely to reduce inequalities (Gecevska et al, 2010). BRICS countries have not
achieved significant development in terms of achievement of equality. Conditions like
inequality somewhat worsened even after ten years in emerging countries under BRICS
(Louhiala-Salminen and Kankaanranta, 2011). Several developing countries which have
better performed earlier could not resist inequality. In Brazil, the top one percent consists of
25 percent of national income. In Russia income of the top one percent surged to 20 percent
in 2015 as compared to 4 percent in the year 1980. In a country like India, this figure
increased to 22 percent in 2013 in comparison to 6 percent in the year 1980. In China, this

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increased up to 14 percent in 2015 in comparison of 8 percent in 1978. The trend in South
Africa was almost similar and it increased to 19 percent in 2012 from 9 percent in 1987
(Peng, 2016). Technological progress has created demands of technological implementation
in many countries no matter how developed and underdeveloped they are. Accordingly,
demand for skilled workers becomes high and unskilled workers find less opportunity of
achieving better compensation.
In the event of inadequacy of supply of skilled workers to meet the knowledge and skill
requirements to support technology-based jobs, the situation of inequality becomes more
prevalent with less focus on low skilled or unskilled workers (Tarique and Schuler, 2010).
This situation in many countries aggravates with an increased level of outcomes in favor of
advantaged individuals from business and political intervention. In a country such as US
redistribution via tax is not adequate and accordingly does not suffice to improve the
situation. More specifically, the prevalence of inequality cannot be negated in comparison to
the other countries in Europe. The crisis of inequality as has been highlighted in the course of
this discussion can be effectively addressed by governmental interventions as well as through
the cooperation of international traders. Globalization cannot be blamed fully since policy
inadequacy is the cause of ineffective practices in globalized platform resulting from
globalization. Therefore, globalization cannot be possibly resisted ever since furtherance of
economic development is dependent on it (Okoro, 2012). The only needed approach is policy
framing and harmonized practices of government and business firms to establish the practice
of equality for the benefit of working people as well as individual citizens of the country.
Conclusion
Inequality as an issue merits attention from the government through initiatives along with
consideration from industry level. Globalization has become an important concept of business
performances in the global arena which often takes a complex form. Inequality has become a
problem largely comprehensible from the situation in US, UK, Germany, and France. Even
conditions in developing countries and countries under BRICS are unimpressive with regard
to the issue. Technological demand, demand and supply of skilled and unskilled workers are
also an important determinant. In this essay, several theories have been presented for better
understanding of the implication of globalization. Moreover, the examples of inequalities
from the given case study depict inequality as an effect of globalization.

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