Globalization
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GlobalizationandItsEffect11.docxRunning head: GLOBALIZATION AND ITS EFFECTS
GLOBALIZATION AND ITS EFFECTS
Globalization and Its Effects
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EFFECTS OF GLOBALISATION ON FINANCIAL SERVICES
Globalization refers to the integration of economies and societies through cross-country flows of information, ideas, technologies, goods, services, capital, finance, and people. Globalization has been of significant help in many ways in the production and delivery of goods and services. Globalization as a concept has affected specific sectors of the economy such as the financial sector.
The growth of globalization has led to the development of technological forces which have been breaking down the barriers between people in different geographical locations and barriers to flow of trade. Financial services have been boosted as a result of the integration of these economies and societies. Like all things, globalization has its fair share of advantages and disadvantages.
Some of the advantages of globalization on financial services include a reduction in poverty levels, reduction of costs, rapid industrialization, better allocation of resources, the creation of employment opportunities, balanced economic development and better life quality is achieved. On the other hand, some of the demerits of globalization on financial services include exploitation of labor, becoming a threat to local industries and loss of a country's sovereignty.
There is a reduction in costs which are incurred by individuals who are involved in the production process and distribution process of the goods and services. This way the goods and services are made more affordable to the customers because their initial costs have been gradually reduced due to globalization. The costs of the goods and services are usually cut all the way from their raw materials, e.g., by having their raw materials subsidized by a certain percentage.
There is rapid industrialization brought about by the fact that many industries are coming up due to the rapid technological advances. There has been an increase in the income elasticity demand for goods and services. Globalization has led to the reduction in the transaction costs of capital and good which are used in the production of goods and other related services. This way, there are more goods and services which are available in the market.
There is better allocation of resources which eventually leads to having balanced economic development throughout the targeted region. There is easier access to credit facilities as well as financial services to the business society at large which allows for business continuity even during times of financial crisis. Banking services have been devolved, and this has led to the development of services such as mobile banking and online banking services.
There is the creation of job opportunities for the unemployment because of the rapid industrialization. The increment in the number of industries has led to the opening up of very many different job opportunities which help in the absorption of the skilled and semi-skilled laborers reducing the dependency ratio in the country. With all these benefits coming with globalization, the citizens can enjoy better living standards.
On the other hand, some of the disadvantages are exploitation of labor resources by industries. The many industries that come up due to rapid industrialization need a lot of manpower to be fully operational and productive. This leads to the employees being over-exploited and more often than not under-paid. Another disadvantage is the loss of a nation's sovereignty due to the massive external influence of foreign industries operating within a country which eventually leads to having a lot of foreign commodities in the market, and thus local industries crumble under the unfair and unchecked competition.
Therefore, as we can see, the concept of globalization on financial services has its fair share of advantages and disadvantages which are discussed above.
Reference
Globalisation and its impact on financial services. (2012, October 23). Retrieved from https://www.slideshare.net/mangal182/globalisation-and-its-impact-on-financial-services
