Category: Business

Free trade is meant to encourage trade and commerce by removing the various trade tariffs and making it possible for traders from all over the world to become more competitive. It is but natural for various countries to become more protective of their own products and hence the need for a centralized agency to monitor, regulate and to arbitrate in all trade-related disputes. That’s the reason why the world trade organization was created in the first place. But despite several free trade agreements being inked between several nations under the aegis of WTO, the negative effects of such agreements became more apparent over the decades.

Lowered wages:  Free trade agreements essentially imply that two or more nations are willing to remove various trade barriers, adjust or remove various trade tariffs so as to enable traders from these nations to be able to compete more effectively with each other. As a result, most free trade agreements are often viewed as a race to the bottom, where companies slash prices all across the board in order to compete effectively with others. As a result, most of these companies offset the basement prices by slashing wages and even forcing their workers to work in unhealthy and unsanitary conditions. Even a few US companies had recently been fined for the same, case in example, the Maquiladoras.

Illegal immigration: A few companies have started to employ illegal immigrants since they would not have any legal protection and that the company in question can pay them below the legal minimum wage. Hiring illegal migrants also means that the company would not have to pay any tax either. Surprisingly most companies attempt to hire illegal migrants and utilize the various benefits in order to compete more effectively on the global market.

Child labor: As local companies slash wages in order to make their products more competitive in the global market, one of the unexpected byproducts of such a move was the renewed focus on child labor with more children being hired than ever before. Child labor is illegal but local governments often lack the adequate manpower to prevent the same. One reason why children are hired in place of adults is that they are nimble and are only paid half of what an adult worker earns.

Environmental damage: As local farmers attempt to compete effectively with their counterparts across the world, there is a renewed focus to increase the production yield. As a result, more tracts of forested land and natural habitats are being cleared across the world at an alarming rate. A recent study highlighted the fact that several species, both flora and fauna face an immediate threat of extinction as a result of the loss of their natural habitats. And if this continues the same way, then our environment and even our way of life would be in immediate danger.

These are some of the negative effects of free trade and more often than not, it is the underdeveloped nations that had to pay the price of entering into a free trade agreement with a developed nation.

The industrial revolution was the period from 1760 to 1820 when the economies of rural America and Europe became urban and industrial, they transitioned from being agricultural economies to those of industrial ones. In the 1700’s when the industrial revolution began in Britain, the way of manufacturing goods completely changed. Goods were usually manufactured using simple machines and hand tools in people’s homes and with the advent of the industrial revolution, there arrived specialized machinery that were set-up in huge factories where goods were mass produced.

There were huge improvements in the textile and iron industries. Steam locomotives were also developed during this period. This brought in improved communication, transportation and banking services. There were huge volumes of goods being produced, that was seen never before by the likes of men. There was also greater variety and it improved the standard of living for some. But, the standard of living for a lot was miserable, to say the least. The wealthy and business owners had the means and knowledge to make more money while the workers in the factories suffered. So, the industrial revolution has its positives and its negatives as we can see. So, let me list them down for you.

Positive effects of the industrial revolution:

Innovation:
The industrial revolution ushered in an era of innovation that would change the way humans lived. The steam engine paved way for faster transport. The steam engine powered trains increased trade and communication between places that previously were too far to have proper economic ties with. Rail tracks and rails became more common across the world. The steam powered boats also made maritime travel faster. Steam powered ships were faster and steadier even in dire weather conditions. Agriculture was also improved. Farmers found ways to grow more and also make farms more uniform and larger, they found a crop rotation system that allowed them to use the land throughout the year and not wait for seasons to pass. Inventions and innovations in the textile industry such as the flying shuttle, spinning jenny and power looms all together almost increased textile production ten-fold. The first synthetic dyes were also invented during this period. There were also new methods to produce cast iron more easily and methods to mass produce steel were also found during this period. Telegraphs and electric power and lighting also made their way to the scene. It was an era of great innovation and invention. The likes of which paved the way for the modern world we live in.

More and More:
There were higher standards of living with a portion of the population having more disposable income than before. There were more jobs than previously available, factories needed more workers than ever before. Products became more affordable due to mass production and there was also a larger variety than ever before. Cities started developing, gone were the days where people lived in small towns or villages. Concrete jungles where millions resided started taking shape. Services like banking, communication, transportation all saw an increase in number and quality. Telegraph lines were successfully laid across the Atlantic. The economy saw great growth during this period.

Negative effects of the industrial revolution:

The condition of the poor and working class:
The weaker sections of the society now had it more rough than ever. A lot of people form rural areas migrated to cities in search of jobs as back home in their small towns and villages, their home based small scale industries couldn’t compete with the mass-produced goods of the factories with advanced machinery. They couldn’t compete either in quality or price and hence just shifted to cities in search of jobs. However, even though there were more jobs than ever, there were also more people than ever who were looking for jobs. This led to the creation of slums and since demand for jobs was high, factory owners chose to exploit the opportunity and provide very low wage. Even though the jobs were badly paid for, a lot of people rushed to take these jobs as they were in a very desperate state. Survival was the primary agenda. This period also saw the workers working in some of the most dangerous conditions. Cramped spaces with machines which had dangerous parts exposed were common place. The number of accidents and deaths that occurred in factories was quite high. Workers also worked anywhere between 10-14 hour shifts 6 days a week and were also paid minimal wages for the same.

Child labor:
To make matters worse. Factory owners chose to exploit children too. Children could do the same work an adult did at the fraction of an adult’s wage and they were easier to control and also were small and this made them ideal to work in small confined areas that a normal adult wouldn’t fit in.

Positives and negatives of Economic Growth

We would have often heard of increase or decrease in GDP, what does this mean? GDP is the way we define the economic growth. Increase in GDP is the economic growth. Which in turn defines the productivity of the country. Usually bringing in the advanced technology, increasing the literacy rates and increase in production as well as quality of goods and services, defines the economic growth. And this productivity should be more, than compared to before period of time.

Causes of the Economic Growth

Increase in immigration and birth rates also increases the economic growth. The increase in the above, in turn increases more labor and more production of goods and services, which is the “economic growth”. But not all the goods and services contribute to economic growth. Increase in consumption, trade i.e. net exports and imports, investment on firms stand as causes for economic growth.

Positives of the Economic Growth:

Increase In employment factors

Increase in production of goods and services reflects an increase in call for more labors as well as employees for jobs. So employment curve gradually increases, resulting in proper sharing of nation’s wealth. It also relates to the benefit of the business people as it increases profits. If you notice growth is an important factor for every nation, because it is the way we can divide the wealth pie between rich and poor and poverty can be reduced. And every country’s wish to eliminate the poverty.

No taxes if there is an Economic Growth

If country’s revenue increases then there is no need for tax imposition on people. Because now the government of that country is having more revenue with it to invest on poor people as well as on welfare of the people like, providing financial supports and goods to public. As of now the country will be having good wealth to spend on people. It invests on bringing in more advanced technology and greater resources.

Country’s pride lies in Economic Growth

If country’s GDP increases, it means they are having advanced and upgraded techniques for their people like, advanced methods for diseases, hybrid cars and many more which helps the country to extend its technology and put in to use to actually help other countries as well as people will have more purpose for their lives. It leads to more relations with other countries regarding exports and imports and becomes more civilized country globally.
Benefits a person experiences by Economic Growth.

Person in the society experiences:

Profits in business, higher productivity followed by higher wages, lower costs per unit in the market, standard of living, lifestyle increases, and labor productivity increases, life assurance increases.

Negatives of the Economic Growth:

Effects to natural resources and consumption of more resources

Due to increase in production, there will be an increase in industry sector as well as production sector resulting in increase in pollution and industry effluents, less space for transportation as more industries come to picture. All this will have bad consequences such as loss of natural resources due to pollution and deforestation.
People and industry firms tend to consume more and more resources for production of more goods and services, for example fuel, petrol, minerals, scarce resources.

Higher costs of goods and services

Sometimes increase in real GDP, creates changes that people cannot reform and experience poverty as the pie of the wealth of the country may not be distributed properly. Obviously there is an increase in revenue of the country, but the rich get richer and poor poorer. This type of changes and inequalities are seen more in up grading countries and fast growing countries. The people due to increased economic growth experience, higher costs and this is called inflation.

Culture and country’s heritage

In this journey of increasing productivity, there will be more advanced technology and new practices that we lose the control on our past practices and culture.
There is a common flaw which every country faces, while undergoing economic growth. I.e. if the country is getting developed and advanced, then population increases as well as immigrants increase, due to available resources in this country, now people migrate from villages and towns to cities, and thus creating overpopulation in cities, which in turn is nothing but increased pressure on available resources and, this leads to scarcity of available resources and finally increase of prices of goods and prices. Which is a counter part of advantage of economic growth.

Only some people will have access to it

Some people who live in remote areas may not have access to this increasing technology and may not take advantage of this. They may not get benefits of literacy affects or hybrid cars. Again same thing repeats, rich get access but poor remain the same without benefits.