Essay: Globalization leads to inflationary pressures

Sample Essay

This basically implies that if prices go up in country X, the cost of production goes up, as the costs of raw material rises. When this happens, the country Y which imports a product from it also faces the rise in prices. The impact is more widespread, where if inflation levels rise in country X which is a supplier of raw material for country Y all the industries that use that raw material suffer as a result. The oil crisis was more pronounced due to this fact as oil prices went up the cost of owning cars, electricity generation, plastics, and every industry where oil was used went up. Thus rade openness of globalization leads to inflationary pressures in the long run.

There have been losses to the biggest proponent of globalization, America, in the words of Adam S. Posen,

There are many reasons why. First, now that unemployment is rising, the US workforce has finally reacted to the economic insecurity caused by its lack of health insurance and job protections, all curtailed further by the Bush administration. Second, both parties have moved away from the center, especially in Congress, and it was always a coalition of moderates from both parties which supported trade liberalization. Third, the foreign policy misadventures of the Bush administration have fed isolationism and fear of the openness among the US electorate. Fourth, in the United States just as in Western Europe, there is a seductive—though fundamentally unfounded—belief that the economic emergence of China, India, Brazil, and the former Soviet Union has shifted the relative advantages of globalization away from the rich countries, so their approach to trade and investment should be more defensive.( Adam S. Posen 2008).

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