Economic globalization is the increasing economic integration and interdependence of national, regional and local economies across the world through an intensification of cross-border movement of goods, services, technologies and capital. [ 1 ] Whereas globalization is a broad set of processes concerning multiple networks of economic, political and cultural interchange, contemporary economic globalization is propelled by the rapid growing significance of information in all types of productive activities and marketization, and by developments in science and technology. [ 2 ]

Economic globalization primarily comprises the globalization of production and finance, markets and technology, organizational regimes and institutions, corporations and labour. [ 3 ]

While economic globalization has been expanding since the emergence of trans-national trade. it has grown at an increased rate over the last 20–30 years under the framework of General Agreement on Tariffs and Trade and World Trade Organization. which made countries gradually cut down trade barriers and open up their current accounts and capital accounts. [ 2 ] 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 barriers. and in many cases cross border immigration.

While globalization has radically increased incomes and economic growth in developing countries and lowered consumer prices in developed countries, it also changes the power balance between developing and developed countries and has an impact on the culture of each affected country. And the shifting location of goods production has caused many jobs to cross borders, requiring some workers in developed countries to change careers. [ citation needed ]

Contents

§ History [ edit ]

Beginning as early as 4000 BC, people were trading livestock, tools, and other items. In Sumer. an early civilization in Mesopotamia. a token system was one of the first forms of commodity money. [ 5 ] Labor markets consist of workers, employers, wages, income, supply and demand. Labor markets have been around as long as commodity markets. The first labor markets provided workers to grow crops and tend livestock for later sale in local markets. Capital markets emerged in industries that required resources beyond those of an individual farmer. [ 6 ]

By the early 1900s, it was rare [ dubious – discuss ] to come across a town that was not influenced by foreign markets—whether it be in labor, prices, or any other part of business. [ 7 ] With advances in ship and rail transport and electronic communications, trade with other parts of the world became much easier. Towns were no longer limited to what they alone could produce and what nearby towns over could trade with them.

These 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 trade growth to the point of stagnation. [ 8 ] This caused a slowing of world-wide trade and even led to other countries introducing immigration caps. [ 9 ] Globalization didn’t fully resume until the 1970s, when governments began to emphasize the benefits of trade. [ 10 ] Today, follow-on advances in technology have led to the rapid expansion of global trade. [ 11 ]

Three suggested factors accelerated economic globalization: advancement of science and technology, market oriented economic reforms and contributions by multinational corporations. [ 10 ]

A reduction of transportation and communication costs were a key part of the growth of globalization. Since the 1930s, ocean shipping costs fell by half, airfreight by 85%, and telecommunications by 99%.

The GATT/WTO framework led participating countries to reduce their tariff and non-tariff barriers to trade. Governments shifted their economies from central planning to markets. These internal reforms allowed enterprises to adapt more quickly and exploit opportunities created by technology shifts. [ 12 ]

Multinational corporations reorganized production to take advantage of these opportunities. Labor-intensive production migrated to areas with lower labor costs, later followed by other functions as skill levels increased.

The 1956 invention of containerized shipping. increases in ship sizes were a major part of the reduction in shipping costs. [ 13 ] [ 14 ]

§ Irreversibility [ edit ]

According to prominent Chinese economist Gao Shanguan, economic globalization is an irreversible trend due to the fact that 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. [ 10 ]

However, Princeton University professor Robert Gilpin argues that nations’ economic policies have mistakenly slowed their own growth by resisting globalization, showing that globalization is not irreversible. [ 15 ] Antonio L. Rappa agrees that economic globalization is reversible and cites International Studies professor Peter J. Katzenstein. [ 16 ]

§ Effects [ edit ]

§ Economic growth and poverty reduction [ edit ]

Economic growth accelerated and poverty declined globally following the acceleration of 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. [ 17 ]

Growth Rate of Real GDP per capita

According to the International Monetary Fund. 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. [ 17 ]

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. [ 17 ]

Globalizers are narrowing the per capita income gap between the rich and the globalizing nations. China, India, and Bangladesh, once among the poorest countries in the world, have greatly narrowed inequality due to their economic expansion. [ 17 ]

§ Multinational corporations [ edit ]

The spread of multinational corporations has accompanied the rise of globalization. One of the many changes they have brought to developing countries is increased automation, which may damage less-automated local firms and require their workers to develop new skills in order to transition into the changing economy, leaving some behind. The necessary education infrastructure is often not present, requiring a redirection of the government’s focus from social services to education. [ 18 ]

ECLAC states that 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. [ 19 ] ECLAC further suggests that the United Nations expand its agenda to work more rigorously with international lending agencies and that they become more inclusive of all nations. Key factors in achieving universal competition is the spread of knowledge at the State level through education, training and technological advancements. [ 20 ] Economist Jagdish Bhagwati suggested that programs to help developing countries adjust to the global economy would be beneficial for international economic relations. [ 21 ]

Several movements, such as the fair trade movement and the anti-sweatshop movement, claim to promote a more socially just global economy. The fair trade movement works towards improving trade, development and production for disadvantaged producers. The fair trade movement has reached 1.6 billion US dollars in annual sales. [ 22 ] 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. [ 23 ]

§ Capital flight [ edit ]