Globalization policy with respect to developing countries, carries both positive as well as negative aspects. It leads to shortening or contraction of the world market.
The negative effects of globalization are well-discussed in points given below: –
Unequal economic growth
Globalization, however, tends to raise the economic growth for many countries, but that growth is not equal. Rich countries get more and more benefit as compared to developing countries, that ultimately brings in inequality among country’s growth. It operates more towards the interest of richest countries, and continues dominating the world trade at the expense of developing countries. The role of less economically developed countries (LEDC) in world market is to provide North and west with cheaper material labour.
Exploits cheaper labour markets:
It has an effective role to play in exploitation of cheaper labour markets. Businesses are able to raise jobs and economic opportunities in developed countries, where labour cost is quite cheaper. Employer take advantage of cheap workforce in such markets, whereby they dismiss workers on small mistakes as they know skilled workforce will be readily available at low cost. Globalization has added a lot of job insecurity and due to this, there are large number of peoples seeking jobs all over the world.
Causes job displacement:
Globalization results in lot of job displacement in high-cost countries. It does not increase the number of job opportunities, but redistributes jobs via transferring production from high-cost nations to low-cost nations. As a result of this, a large number of peoples in high-cost countries lose their jobs due to the movement of production overseas.
Lack of local businesses:
The policy of globalization poses great threats for local and domestic businesses operating within the country. It allows big multinational companies having large resources and infrastructure to establish their supply chain and distribution in distinct countries. These big companies due to their large scale of operations provide goods and services to peoples at lower prices in comparison to local businesses. This exploits the business conditions for domestic companies who struggles to compete with such big brands. For instance, New York local hamburger joint may struggle to compete with the prices of multinational burger making company.
Increases potential global recessions:
Globalization increase the chances of global recession occurrence by making all countries interdependent on one another. The economic system of many countries is dependent on other countries such that if economy of one country starts to struggle, then this can set off chain reaction affecting different countries simultaneously. It may even lead to much worse condition bringing a financial crisis on worldwide level.
Expensive domestic goods:
The globalization presents an open market for the locally produced goods. Goods produced in one country can be freely made available in other countries where the demand is high. This will ultimately make the goods expensive in one country. For example, domestic goods such as fruits, vegetables, cereals, etc. are transported and sold at higher prices in nations facing scarcity of such items.
Hinders establishment of small and cottage industries:
Globalization up to large scale hinders the progress and development of small and cottage industries in country. Due to the entry of big multinational brands in domestic market, small industries face strong competition from big market players. Multinational companies offer better quality product at economical prices as compared to local companies. It finally restricts the personal independence of small and cottage entrepreneurs.
The price instability is a major effect of globalization on business enterprises. Many people set up their industries internationally where cheap raw materials and labour are available. They are able to cut production costs and sell of their products at lower prices. Few high-quality products differ in prices because of the stiff competition. The efforts of World Trade Organization for controlling such price fluctuations are also not successful.