Economic Globalization: Features, Advantages and Disadvantages

The Economic globalization Refers to the emergence of an international network of economic systems. One of the earliest known uses of the term as a noun appears in a publication entitled T Towards New Education (1930), within the framework of a holistic vision of the human experience in education.

A related term,"corporate giants", was coined by Charles Taze Russell (1897) to refer to the largely national trusts and other large corporations of the time.

Economic Globalization: Features, Advantages and Disadvantages

In the 1960s, both terms began to be used as synonyms by economists and other social scientists. Economist Theodore Levitt used the term in his article Globalization of Markets (May-June 1983) in Harvard Business Review .

Economic globalization

Economic globalization is one of the three main dimensions of the global situation that includes political globalization and cultural globalization.

Advances in transport, from the locomotive and steamships, jet engines and container ships, the development of telecommunications, the Internet and cellular telephony have been determining factors of globalization. Taken together, they have generated greater interdependence of economic and cultural activities.

Economic globalization is the interdependence of national economies that has resulted from rising levels of trade between nations. This integration of the economies of the world is possible as a result of the technological advances that allow faster communication around the world, as well as the drastic reduction of freight costs.

Nowadays, it is possible for companies to manage the production of goods efficiently, even when production facilities are at opposite ends of the world.

In addition to technological advances, governments around the world have generated institutional policies to facilitate economic globalization. International organizations such as the World Trade Organization provide an important framework for economic cooperation among nations.

An important result of economic globalization is the increasing level of foreign investment and large corporations in the economies of other countries, particularly in developing countries.

While transnational investments have helped drive growth in many underdeveloped economies, there is concern about the widening wealth gap between developed and developing countries.

The financial bubble

Because developed economies have large sums of wealth available to invest in developing countries, there is concern that foreign direct investment may create bubble markets in developing countries.

A bubble, economic cycle characterized by the rapid rise of asset prices followed by a recession, is created by an unjustified increase and without genuine guarantees in the prices of the assets, by impetus of the excessive behavior of the market.

When investors are unwilling to buy at a high price, a massive liquidation occurs, causing the bubble to deflate. The impact of bubbles on markets is detrimental to the pocket of wage earners and small traders and other sectors.

While in times of globalization trade, finance and communication have grown exponentially, with the development of populations and people the opposite occurs.

International travelers and foreign students have increased markedly, migrants grew at almost the same pace as the global population, despite the huge gaps in real wages.

Trade and capital flows are, to some extent, a substitute for the movement of people. However, a large flow of poor countries to richer countries persists, particularly through the Rio Grande and the Mediterranean Sea.

Globalization, although it has meant growing cross-border economic activity, does not generate the same results in terms of prosperity.

Globalization and history

Adam Smith Just as other economists put the origins of globalization in modern times when Christopher Columbus passed in America (1492), and then Vasco da Gama (1498) continued to Africa and snatched the commercial monopoly of spices from the Arabs and Venetians.

However, other historians locate their beginnings long before discoveries and travel to the New World. Some even place the beginnings in the third millennium BC.

Large-scale globalization began in the nineteenth century, giving way to the rapid growth of the connectivity of world economies and cultures by the end of the century and the beginning of the twentieth century. A third view holds that the world economy was fragmented and completely de-globalized before the nineteenth century.

None of these three views has succeeded in demonstrating the difference between the expansion of trade, driven by the boom in demand and supply, and its relation to population growth and trade expansion driven by the integration of markets and trade agreements And, above all, the central indicator of globalization: the convergence of commodity prices.

O'Rourke and Williamson differ from the above theories and present two empirical evidence stating that there is no concrete evidence to support the idea that the world economy was integrated before 1492-1498.

Nor is there evidence to support the view that these two dates had the economic impact on the global economy that some historians of the world assign them. But there is evidence to support the view that in the nineteenth century the globalized economic impact was very great.

These tests imply a direct look at the relationship between the factor of prices, commodities (mass produced goods) and investments.

Overview of globalization

Globalization is the great protagonist of our era. It is shaping and shaping not only economies but societies, policies and international relations. Many assume that it is also an unstoppable force.

However, the development of history suggests that it can not be assumed that globalization will be maintained over time, nor that it will be desirable in all respects.

The term globalization gained ground in the 1970s. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization:

  • Trade and transactions
  • Capital and investment movements
  • Migration and the movement of people
  • And the diffusion of knowledge.

In addition, environmental challenges such as global warming, transboundary water and air pollution, and ocean overfishing are linked to globalization.

Globalization processes affect and are affected by business and labor organization, economy, socio-cultural resources and the natural environment.

Academic literature often subdivides globalization into three main areas: economic globalization, cultural globalization, and political globalization.

According to Wolf (2014), globalization is the integration of economic activity across borders. Other forms of integration that accompany it are the expansion of the model, shape it.

Sociologists Martin Albrow and Elizabeth King define globalization as"all the processes by which the peoples of the world are incorporated into a single world society."

In The consequences of modernity , Anthony Giddens writes:"Globalization can be defined as the intensification of global social relations that link distant localities in such a way that local events are shaped by events that occur many miles away and vice versa."

In 1992, Roland Robertson, professor of sociology at the University of Aberdeen, defined globalization as"the compression of the world and the intensification of the consciousness of the world as a whole."

The opinion of the economists

Globalization in the late twentieth and early twenty-first century revived the idea of ​​the nineteenth century (central doctrine of classical liberals with John Maynard Keynes At the head) that the growth of economic interdependence promotes peace.

Some opponents of globalization see the phenomenon as a promotion of corporatist interests. They also say that the growing autonomy and power of corporate entities shapes the politics of countries.

For this reason, they advocate global institutions and policies that effectively address the demands of the working and lower income classes and environmental issues.

The economic arguments of fair trade theorists proclaim that free trade, without restriction.

Globalization allows companies to outsource / outsource labor and services, creating economic opportunities with more competitive wages and benefits for workers. Critics of globalization say it harms the poorest countries.

While it is true that free trade fosters globalization among countries, some states try to protect industry and provide national services. The main exports from the poorest countries come from agriculture.

Powerful countries often subsidize their farmers (eg the EU Common Agricultural Policy), which reduces the market price for the import of grains and other agricultural livestock products.

References

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