Effects of Globalization on the Micro Level

Globalization was generally derived from the assumptions of neo-classical stintings. In order for a country to get scotch development, it must open its economy to trade relaxation method. Trade liberalization serve wells as a redistribution mechanism of crown and goods. Poor and evolution countries toilette export unlimited volume of goods and services to genuine countries. Added to that, the capital inf grims from true countries would serve as a stimulant for capital build-up in the pass receiver country (developing countries).Because essential countries usually experience wear upon shortages, tire immigrants from developing countries would serve as the compensating medium. Here economists assume that the income derived from restriction migration would then serve as capital bring outlay. While for many economists globalisation is a validatory thrust of development, certain practical issues were laid exposing the bad effects of globalization on the micro-level (ind ividual and communal).There ar generally two negative impacts of globalization on the micro-level. The first impact focuses on the condition of the labor force of developing countries (exposed to globalization). It is generally far-famed while globalization aims for wealth redistribution amongst developing and developed countries, inequality in terms of income and capital change magnitude (Goldberg, R.K., and N. Pavcnik, 2006). Skil guide workers from developing countries are paid slight than unskilled workers from developed countries. In China, for example, after opening to globalization, several multi-national corporations (which are based in developed countries) transferred a signifi stick outt portion of capital to the country.The reason can be derived from the cost of labor in the country. It is estimated that the cost of labor in China is one-eight (on the average) compared to labor cost in developed countries (Goldberg, R.K., and N. Pavcnik, 2006). Multi-national corpora tions found it perspicacious to shift a significant portion of their capital to labor-rich China. The economic assumptions are clear. Labor surplus would drive the market to realign wages. The more workers, the less average labor price. The inverse relationship between the number of needful workers and labor price pushed these corporations to growth their capital inflow to China. Needless to say, because labor costs are below the market price of labor, these multi-national corporations can increase their profit level, generating new capital (to be transferred to the mother country).Added to that, it was found out that after 10 years of exposure to trade liberalization, China see vast disparities in terms of income of its own citizens. Urban workers, on the average, wealthy person generally higher incomes than rural workers. Needless to say, these urban workers are generally better off than their rural counterparts. Thus, the vast disparity of income between developed and develo ping countries is mirrored out in the labor price of urban and rural workers. It can be said that the macro-level effect of globalization resulted to essential income disparities. This owes much to the economic rationalizing of multi-national corporations regarding the proper handling of labor costs.Exposure to eternal working hours and poor working conditions are also major impacts of globalization in the workplace. These impacts severely decreased the labor productivity of developing countries. Stallings (2007, pp. 6-7) noted that in Latin America, the opening of several countries to trade liberalization and privatization led to capital build-up in the short-run. Foreign direct investment and other capital inflows contributed to economic growth as well as sustainability of the industrial sector.The labor sector though suffered. The expected level of employment growth as well as improvement in labor productivity in many sectors of several Latin American countries was not met. In fact, nigh industries like the garment and textile industries suffered from stagnation and high-costs of operations. Several governments were labored to see longer working hours and tax incentives to several multi-national companies. The general effect labor productivity decreased by half. Strikes became a common sight in the streets of major Latin American cities. Companies owned by local residents were forced to close as a result of the policy. Multi-national corporations though can soft shift their capital base to countries undeterred by political and economic debacles.We come now to the second general effect of globalization on the micro-level. Globalization requires that all national currencies be on a locomote status. This would allow the efficient transfer of capital from developed countries to developing countries. As such, many economists assume that this policy would generally improve the overall economic standing of developing countries in terms of capital outlay and engineering science acquisition. This is though not the case.Akar (2007) noted that floating currencies would essentially alter the predictability of the market. Inflation, or in many cases stagflation, are usually the main economic problems in developing countries. Because developing countries only own a small function of the worlds total monetary reserve, they can easily be affected by price changes in the world market (Kasapidis, R, 1999). charge changes can destroy the predictability of the markets of developing countries. Inflation can become extremely unpredictable.Thus, this puts financial institutions on a very high-level of insecurity. This high risk can be translated to low-level investment schedule of firms. Nonetheless, the overall enliven rate increases as a result of monetary downfalls. Increases in arouse rate causes inflation and concomitantly, low economic output.On the individual level, as inflation progresses, the present volume of goods and service that c an be bought by the value of money is less than the previous volume of goods and services bought. In a simple relationship, globalization requires that national currencies be on a floating status. For developing countries, putting its national currencies on a floating status increases the risks on financial institutions. These risks are translated to high inflation and low economic output. The end the current purchasing power of a consumers income is devalued.BibliographyAkar, O. (2007). Globalization. ready(prenominal) from Accessed 24 October 2007.Goldberg, P.K., & N. Pavcnik. (2006). Distributional Effects of Globalization in ontogenesis Countries. Available from Accessed 24 October 2007.Kasapidis, R. (1999). The Opportunities and Dangers of Globalization. Available from Accessed 24 October 2007.Stallings, B. (2007). Globalization and Liberalization A View from the Developing Countries. U.N. Economic Commission for Latin America and the Caribbean. Available fromAccessed 24 Oct ober 2007.