Economic globalization
Encyclopedia
Economic globalization refers to increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology and capital. Whereas globalization
is centered around the diminution of international trade regulations as well as tariffs, taxes, and other impediments that suppresses global trade, economic globalization is the process of increasing economic integration
between countries, leading to the emergence of a global marketplace or a single world market. Depending on the paradigm, economic globalization can be viewed as either a positive or a negative phenomenon.
Economic globalization comprises the globalization of production, markets, competition, technology, and corporations and industries. While economic globalization has been occurring for the last several hundred years (since the emergence of trans-national trade
), it has begun to occur at an increased rate over the last 20–30 years. This recent boom has been largely accounted by developed economies
integrating with less developed economies
, by means of foreign direct investment
, the reduction of trade barrier
s, and in many cases cross border immigration.
It can be argued that economic globalization may or may not be an irreversible trend. There are several significant effects of economic globalization. There is statistical evidence for positive financial effects as well as proposals that there is a power imbalance between developing and developed countries in the global economy. Furthermore, economic globalization has an impact on world cultures.
, labor markets, and capital markets make up the economy and define economic globalization. Beginning as early as 4000 BC, people were trading livestock, tools, and other items as a means of money. People residing in Sumer
, an early civilization in Mesopotamia, came up with a token system that was seen as one of the first forms of commodity money. Labor markets consist of workers, employers, wages, income, supply, and demand. Labor markets have been around as long as commodity markets. Labor markets grew out of commodity markets because labor was needed to grow the crops and tend to the livestock. The growth of commodity and labor markets grew into a capital market where companies and governments handle longstanding funds. The process of this blending of markets in the economy took thousands of years to become what it is today.
By the early 1900s, it was rare to come across a town that was not influenced by foreign markets—whether it be in labor, prices, or any other policy of business. With advances in ship building technology and the inventions of the railroad and telephone, communication with other parts of the country and world was readily available. Towns were no longer limited to what they alone could produce and what the next two towns over would trade with them. People everywhere had the accessibility and resources to obtain goods from the other side of the world. However, these great advances in economic globalization were disrupted by World War I
. Most of the global economic powers constructed protectionist economic policies and introduced trade barriers that slowed economic growth to the eventual point of stagnation which can be seen as a precurser to the Great Depression
in the late 1920s. This caused a slowing of world-wide trade and even led to other countries introducing immigration caps. Globalization of the economy didn’t fully resume until the 1970s. Today, advances in technology and computer networks, both as a way of sending and receiving information, have led to a worldwide globalization of the economy.
's prominent economist Gao Shanguan, economic globalization is an irreversible trend due to the fact that the world markets are in great need of science and information technologies. With the growing demands of science and technology, Shanquan states that with world markets take on an "increasing cross-border division of labor" that works its way down to every facet of globalized markets from both developed and developing nations.
Nevertheless, Princeton University
professor Robert Gilpin
argues that though economic globalization seems to be irreversible, nations' various economic policies have suppressed the impetus for their own economies to move forward, which he states has been shown in the past, thus debunking Shanquan's theory of economic globalization as a primarily irreversible phenomena. Further, in his recent book entitled Globalization: Power, Authority, and Legitimacy in Late Modernity, Antonio L. Rappa agrees with Gilpin's argument of economic globalization as being reversible and references International Studies professor Peter J. Katzenstein
accessing that due to the symbiotic nature of globalization and regionalism, so does the conflict between economic regionalism and multiculturalism.
Despite many analysts' concerns about the inequality gap between developed and developing nations, there is no evidence to suggest that inequality increases as international trade increases. Rather, growth benefits of economic globalization are widely shared. While several globalizers have seen an increase in inequality, most notably China, this increase in inequality is a result of domestic liberalization, restrictions on internal migration, and agricultural policies, rather than a result of international trade.
Economic globalization also has helped to decrease poverty around the world. Poverty has been reduced as evidenced by a 5.4 percent annual growth in income for the poorest fifth of the population of Malaysia. Even in China, where inequality continues to be a problem, the poorest fifth of the population saw a 3.8 percent annual growth in income. In several countries, those living below the dollar-per-day poverty threshold declined. In China, the rate declined from 20 to 15 percent and in Bangladesh the rate dropped from 43 to 36 percent.
The final positive effect to be mentioned is the narrowing gap between the rich and the poor. Evidence suggests that the growth of globalizers, in relation to rich countries, suggests that globalizers are narrowing the per capita income gap between the rich and the globalizing nations. China, India, and Bangladesh, who were among the poorest countries in the world twenty years ago, have greatly influenced the narrowing of worldwide inequality due to their economic expansion.
and the International Monetary Fund
) must give voice to developing countries. A solution is to issue global rules that protect developing countries. It is still difficult for leaders of developing nations to influence these global rules.
In order to create better economic relations globally, international lending agencies must work with developing countries to change how and where credit is concentrated as well as work towards accelerating financial development in developing countries. There is a need for social respect for all persons worldwide. The Economic Commission of Latin America and the Caribbean suggests that in order to ensure such social respect, the United Nations should expand its agenda to work more rigorously with international lending agencies. Despite their title, international lending agencies tend to be nation-based. The ECLAC suggests that international lending agencies should expand to be more inclusive of all nations and they propose that there is a need for universal competitiveness. Key factors in achieving universal competition is the spread of knowledge at the State level through education, training and technological advancements. Economist, Jagdish Bhagwati
, also suggests that programs to help developing countries adjust to the global economy would be beneficial for international economic relations.
Several movements, such as the Fair Trade
movement and the Anti-sweatshop
movement, have worked towards promoting a more socially just global economy. The Fair Trade movement has played a significant role in alleviating exploitation due to economic globalization. For example, Fair Trade sales account for 1.6 billion US dollars each year. The Fair Trade movement works towards improving trade, development and production for disadvantages producers. Furthermore, the movement works to raise consumer awareness of exploitation of developing countries. Fair Trade works under the motto of “trade, not aid”, to improve the quality of life for farmers and merchants by participating in direct sales, providing better prices and supporting the community.
Yu Xintian wrote in a cultural impact study that there were two contrary trends in culture due to economic globalization. Xintian argues that culture and industry not only flows from the west while effecting people, but he says there is also a cultural nationalization or an effect of localization that wishes to promote and protect individual cultures. He also points out that economic globalization began after WWII, where as internationalization began over a century ago and is something completely different.
George Ritzer wrote about the McDonaldization
of society and how fast food businesses spread throughout the United States and the rest of the world, forcing world populations to adopt fast food culture. In this book, Ritzer also writes about how other businesses have copied the McDonalds Corportation's
business model for expansion and influence. In 2006, 233 of 280 or well over half of the new McDonalds opended were overseas. In 2007, Japan had 2,828 McDonalds locations and serves as just one example of the globalized effect of international corportaions. The Body Shop
, a British ecologically conscious cosmetic company, represents the process of McDonaldization
working in all directions. Various countries export their own versions of McDonaldization
but have the same influences in standardizing world culture.
Global media news companies export information through news, radio, and internet. This creates a mostly one-way flow of information, and exposure of mostly western products and values. Companies like CNN, Reuters, and the BBC dominate the global airwaves while having a particular western point of view. Other media news companies such as Al Jazeera may offer a different point of view, but have a far smaller audience and thus effect fewer people in influence.
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
is centered around the diminution of international trade regulations as well as tariffs, taxes, and other impediments that suppresses global trade, economic globalization is the process of increasing economic integration
Economic integration
Economic integration refers to trade unification between different states by the partial or full abolishing of customs tariffs on trade taking place within the borders of each state...
between countries, leading to the emergence of a global marketplace or a single world market. Depending on the paradigm, economic globalization can be viewed as either a positive or a negative phenomenon.
Economic globalization comprises the globalization of production, markets, competition, technology, and corporations and industries. While economic globalization has been occurring for the last several hundred years (since the emergence of trans-national trade
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
), it has begun to occur at an increased rate over the last 20–30 years. This recent boom has been largely accounted by developed economies
Developed country
A developed country is a country that has a high level of development according to some criteria. Which criteria, and which countries are classified as being developed, is a contentious issue...
integrating with less developed economies
Developing country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called developing countries...
, by means of foreign direct investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
, the reduction of trade barrier
Trade barrier
Trade barriers are government-induced restrictions on international trade. The barriers can take many forms, including the following:* Tariffs* Non-tariff barriers to trade** Import licenses** Export licenses** Import quotas** Subsidies...
s, and in many cases cross border immigration.
It can be argued that economic globalization may or may not be an irreversible trend. There are several significant effects of economic globalization. There is statistical evidence for positive financial effects as well as proposals that there is a power imbalance between developing and developed countries in the global economy. Furthermore, economic globalization has an impact on world cultures.
History
International commodity marketsCommodity markets
Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts....
, labor markets, and capital markets make up the economy and define economic globalization. Beginning as early as 4000 BC, people were trading livestock, tools, and other items as a means of money. People residing in Sumer
Sumer
Sumer was a civilization and historical region in southern Mesopotamia, modern Iraq during the Chalcolithic and Early Bronze Age....
, an early civilization in Mesopotamia, came up with a token system that was seen as one of the first forms of commodity money. Labor markets consist of workers, employers, wages, income, supply, and demand. Labor markets have been around as long as commodity markets. Labor markets grew out of commodity markets because labor was needed to grow the crops and tend to the livestock. The growth of commodity and labor markets grew into a capital market where companies and governments handle longstanding funds. The process of this blending of markets in the economy took thousands of years to become what it is today.
By the early 1900s, it was rare to come across a town that was not influenced by foreign markets—whether it be in labor, prices, or any other policy of business. With advances in ship building technology and the inventions of the railroad and telephone, communication with other parts of the country and world was readily available. Towns were no longer limited to what they alone could produce and what the next two towns over would trade with them. People everywhere had the accessibility and resources to obtain goods from the other side of the world. However, these great advances in economic globalization were disrupted by World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
. Most of the global economic powers constructed protectionist economic policies and introduced trade barriers that slowed economic growth to the eventual point of stagnation which can be seen as a precurser to the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
in the late 1920s. This caused a slowing of world-wide trade and even led to other countries introducing immigration caps. Globalization of the economy didn’t fully resume until the 1970s. Today, advances in technology and computer networks, both as a way of sending and receiving information, have led to a worldwide globalization of the economy.
Irreversibility
According to ChinaChina
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
's prominent economist Gao Shanguan, economic globalization is an irreversible trend due to the fact that the world markets are in great need of science and information technologies. With the growing demands of science and technology, Shanquan states that with world markets take on an "increasing cross-border division of labor" that works its way down to every facet of globalized markets from both developed and developing nations.
Nevertheless, Princeton University
Princeton University
Princeton University is a private research university located in Princeton, New Jersey, United States. The school is one of the eight universities of the Ivy League, and is one of the nine Colonial Colleges founded before the American Revolution....
professor Robert Gilpin
Robert Gilpin
Robert Gilpin is a scholar of International Political Economy and the professor emeritus of Politics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University. He holds the Eisenhower professorship...
argues that though economic globalization seems to be irreversible, nations' various economic policies have suppressed the impetus for their own economies to move forward, which he states has been shown in the past, thus debunking Shanquan's theory of economic globalization as a primarily irreversible phenomena. Further, in his recent book entitled Globalization: Power, Authority, and Legitimacy in Late Modernity, Antonio L. Rappa agrees with Gilpin's argument of economic globalization as being reversible and references International Studies professor Peter J. Katzenstein
Peter J. Katzenstein
Peter Katzenstein is the Walter S. Carpenter, Jr. Professor of International Studies at Cornell University. He was educated in his native Germany. Katzenstein has received degrees from the London School of Economics, Swarthmore College, as well as a Ph.D. from Harvard University...
accessing that due to the symbiotic nature of globalization and regionalism, so does the conflict between economic regionalism and multiculturalism.
Positive effects
There are at least three positive financial effects of economic globalization. "Per capita GDP growth in the post-1980 globalizers accelerated from 1.4 percent a year in the 1960s and 2.9 percent a year in the 1970s to 3.5 percent in the 1980s and 5.0 percent in the 1990s. This acceleration in growth is even more remarkable given that the rich countries saw steady declines in growth from a high of 4.7 percent in the 1960s to 2.2 percent in the 1990s. Also, the non-globalizing developing countries did much worse than the globalizers, with the former's annual growth rates falling from highs of 3.3 percent during the 1970s to only 1.4 percent during the 1990s. This rapid growth among the globalizers is not simply due to the strong performances of China and India in the 1980s and 1990s—18 out of the 24 globalizers experienced increases in growth, many of them quite substantial."Despite many analysts' concerns about the inequality gap between developed and developing nations, there is no evidence to suggest that inequality increases as international trade increases. Rather, growth benefits of economic globalization are widely shared. While several globalizers have seen an increase in inequality, most notably China, this increase in inequality is a result of domestic liberalization, restrictions on internal migration, and agricultural policies, rather than a result of international trade.
Economic globalization also has helped to decrease poverty around the world. Poverty has been reduced as evidenced by a 5.4 percent annual growth in income for the poorest fifth of the population of Malaysia. Even in China, where inequality continues to be a problem, the poorest fifth of the population saw a 3.8 percent annual growth in income. In several countries, those living below the dollar-per-day poverty threshold declined. In China, the rate declined from 20 to 15 percent and in Bangladesh the rate dropped from 43 to 36 percent.
The final positive effect to be mentioned is the narrowing gap between the rich and the poor. Evidence suggests that the growth of globalizers, in relation to rich countries, suggests that globalizers are narrowing the per capita income gap between the rich and the globalizing nations. China, India, and Bangladesh, who were among the poorest countries in the world twenty years ago, have greatly influenced the narrowing of worldwide inequality due to their economic expansion.
Negative effects and solutions
The Economic Commission for Latin America and the Caribbean (ECLAC) has proposed an agenda to support conditions for developing countries to improve their standing in the global economy. Economists have theories on how to combat the disadvantages faced by developing countries. However, the advantaged countries continue to control the economic agenda. In order to rectify the social injustice dilemma, international economic institutions (such as the World BankWorld Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
and the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
) must give voice to developing countries. A solution is to issue global rules that protect developing countries. It is still difficult for leaders of developing nations to influence these global rules.
In order to create better economic relations globally, international lending agencies must work with developing countries to change how and where credit is concentrated as well as work towards accelerating financial development in developing countries. There is a need for social respect for all persons worldwide. The Economic Commission of Latin America and the Caribbean suggests that in order to ensure such social respect, the United Nations should expand its agenda to work more rigorously with international lending agencies. Despite their title, international lending agencies tend to be nation-based. The ECLAC suggests that international lending agencies should expand to be more inclusive of all nations and they propose that there is a need for universal competitiveness. Key factors in achieving universal competition is the spread of knowledge at the State level through education, training and technological advancements. Economist, Jagdish Bhagwati
Jagdish Bhagwati
Jagdish Natwarlal Bhagwati is an Indian-American economist and professor of economics and law at Columbia University. He is well known for his research in international trade and for his advocacy of free trade....
, also suggests that programs to help developing countries adjust to the global economy would be beneficial for international economic relations.
Several movements, such as the Fair Trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
movement and the Anti-sweatshop
Anti-sweatshop
Anti-Sweatshop refers to campaigning movements to improve the conditions of workers in Sweatshops, i.e. manufacturing places characterized by low wages, poor working conditions and often child labor...
movement, have worked towards promoting a more socially just global economy. The Fair Trade movement has played a significant role in alleviating exploitation due to economic globalization. For example, Fair Trade sales account for 1.6 billion US dollars each year. The Fair Trade movement works towards improving trade, development and production for disadvantages producers. Furthermore, the movement works to raise consumer awareness of exploitation of developing countries. Fair Trade works under the motto of “trade, not aid”, to improve the quality of life for farmers and merchants by participating in direct sales, providing better prices and supporting the community.
Effects on world cultures
Economic globalization may have various strong impacts on different world cultures. Populations may mimic the international flow of capital and labor markets in the form of immigration and the merger of cultures. Foreign resources and economic measures may impact different native cultures and may cause assimilation of a native people. Researchers are now studying the effects of economic globalization on the youth in various world populations such as Arab, South American, South East-Asian, Caribbean, and African populations. As these populations are exposed to the English language, Computers, western music, and North American culture, changes are being noted in shrinking family size, immigration to larger cities, more casual dating practices, and gender roles are transformed.Yu Xintian wrote in a cultural impact study that there were two contrary trends in culture due to economic globalization. Xintian argues that culture and industry not only flows from the west while effecting people, but he says there is also a cultural nationalization or an effect of localization that wishes to promote and protect individual cultures. He also points out that economic globalization began after WWII, where as internationalization began over a century ago and is something completely different.
George Ritzer wrote about the McDonaldization
McDonaldization
McDonaldization is a term used by sociologist George Ritzer in his book The McDonaldization of Society . He explains it occurs when a culture possesses the characteristics of a fast-food restaurant. McDonaldization is a reconceptualization of rationalization, or moving from traditional to rational...
of society and how fast food businesses spread throughout the United States and the rest of the world, forcing world populations to adopt fast food culture. In this book, Ritzer also writes about how other businesses have copied the McDonalds Corportation's
McDonald's
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by the eponymous Richard and Maurice McDonald; in 1948...
business model for expansion and influence. In 2006, 233 of 280 or well over half of the new McDonalds opended were overseas. In 2007, Japan had 2,828 McDonalds locations and serves as just one example of the globalized effect of international corportaions. The Body Shop
The Body Shop
The Body Shop International plc, known as The Body Shop, has 2,400 stores in 61 countries, and is the second largest cosmetic franchise in the world, following O Boticario, a Brazilian company...
, a British ecologically conscious cosmetic company, represents the process of McDonaldization
McDonaldization
McDonaldization is a term used by sociologist George Ritzer in his book The McDonaldization of Society . He explains it occurs when a culture possesses the characteristics of a fast-food restaurant. McDonaldization is a reconceptualization of rationalization, or moving from traditional to rational...
working in all directions. Various countries export their own versions of McDonaldization
McDonaldization
McDonaldization is a term used by sociologist George Ritzer in his book The McDonaldization of Society . He explains it occurs when a culture possesses the characteristics of a fast-food restaurant. McDonaldization is a reconceptualization of rationalization, or moving from traditional to rational...
but have the same influences in standardizing world culture.
Global media news companies export information through news, radio, and internet. This creates a mostly one-way flow of information, and exposure of mostly western products and values. Companies like CNN, Reuters, and the BBC dominate the global airwaves while having a particular western point of view. Other media news companies such as Al Jazeera may offer a different point of view, but have a far smaller audience and thus effect fewer people in influence.
See also
- Free TradeFree tradeUnder a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
- GlobalizationGlobalizationGlobalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
- MundializationMundializationThe word mundialisation, is the English version of the French word "mondialisation", which today refers in French to what is referred to in English as "globalisation"...
- World EconomyWorld economyThe world economy, or global economy, generally refers to the economy, which is based on economies of all of the world's countries, national economies. Also global economy can be seen as the economy of global society and national economies – as economies of local societies, making the global one....
- Jihad vs. McWorldJihad vs. McWorldJihad vs. McWorld is the title of a 1992 article that was later adapted into a book by political scientist Benjamin Barber, in which he puts forth a theory that describes the struggle between "McWorld" and "Jihad" Jihad vs. McWorld is the title of a 1992 article that was later adapted into a book...
- InternationalizationInternationalizationIn economics, internationalization has been viewed as a process of increasing involvement of enterprises in international markets, although there is no agreed definition of internationalization or international entrepreneurship...