The Nature and Effects of the Emergence of Globalisation as a Feature of the World Economy - Essay Example

?The general economic term of globalization as it is used today was first coined in the 1980’s in order to describe how technological advances have helped fuel and advance international trade of not only physical goods, but of information and capital financial flows (The Economist, 2011). Globalization can have a lot of different meanings to different people; it clearly has to do with the increased integration of the global markets, trade and its effects on the national economies (Uua, 2011). During the last 30 years there have been tremendous increases in the speed and volume of international trade of goods and services, but also a corresponding increase in international capital flows and international financing (Rappa). So what does globalization really mean to the overall world economies in general and what are the real reasons for the increased expansion and global integration of the financial and the general goods and service markets? The concept of globalization is not a new one, with individuals, from scholars, politicians and economists having different viewpoints as to the reasons for globalization as well as the positive and negative consequences of increased economic and industrial integration. Even during the 1960’s and 70’s multinational corporations started to shift their long term operational focus from a domestic to a global operational infrastructure (Colander, 2002).The were a lot of reasons that contributed to the paradigm shift that help drive the globalization of our manufacturing and service infrastructures as well as our financial and monetary systems. Advances in transportation methods such as cheaper air transport made it economically feasible for corporations to transport goods quite quickly and affordably. Starting in the 1980’s, the personal computer has created a revolution in the way business and individuals interact with each other and it has provided cheaper data processing and storage costs. It has increased worker productivity and operational efficiency for all businesses in general. Coupled with the advent of the internet the computer with its inherent functionality of quickly being able to share technical information, ideas and the ability for a team of individuals to be able to cooperate and share information, solutions and ideas seamlessly from different corners of the world has simply revolutionized the way we do business, especially with the wider availability of broadband services starting in the 1990’s (Emilian, Marcel, Hurduzeu, Vlad, 2011). The computer age, technological and communication advances have allowed multinational corporations and nations to expand their economies to more easily integrate themselves to the global trade and financial markets therefore benefiting from increased economic prosperity for many previously underdeveloped economies. The increased trade has allowed unprecedented levels of economic growth for many of the countries that have successfully positioned themselves in the global arena (Imf, 2008). The ability for a company to choose to operate out of any country is a very important aspect of globalization, where an organization can choose among many nations to source its materials, manufacturing and headquarters and therefore has shifted the industrial operational structure towards one driven by efficiency and profitability instead of national barriers. The nullification of previous import tariffs and general protectionism previously played by many countries has played an important part in the globalization of economic trade by decreasing the amount of tariffs and other obstacles in the international trade of goods and services. It has become a driving factor in the advent of economic and financial globalization. The minimization of trade barriers was created with the idea of optimizing trade, financial flows and providing the maximum level of opportunity for economic benefits to the participating corporations and international economies in a bid to drive a general economic shift to a more fully integrated globalize trade and financial system. Non-Government Organizations such as the World Trade Organization, International Monetary Fund and the United Nations have also played a major role in the loosening of trade barriers and facilitating global commerce (Intriligator, 2003) Overall globalization has helped many national economies grow at a tremendous rate. Foreign Direct Investment has helped the spread of the right technologies, major infrastructure improvements and, information networks to help these growing economies to be able to compete at an international level. It is a fact that globalization for underdeveloped or emerging economies has directly contributed to the tremendous growth in both the overall the overall size of the economy and the individual wealth of most of its participants. Since 1980,the value of goods traded in the global markets as a percentage of GDP has increased from 42.7% to 62.1% by 2007 Foreign direct investment has increased from 6.5% of GDP in 1980 to 31.8% by 2006 Stock international claims as a percentage of GDP (primarily through bank loans) accounted for 10% during 1980 compared with 48% by 2006 There are significant regional disparities because of different economical structures between different nations as well as lack of investor confidence due to volatile political environment, lack of educated work force, poor infrastructure and poor macro-economic policies. These factors have created a general disparity in the ability of countries to take advantage of economic globalization. For example, while general poverty levels fell in East and South Asia, it actually rose in sub-Saharan Africa (Imf, 2008) If we look at the overall economic impact of globalization, the same cannot be said for most of the industrialized economies such as the overall economic impact in the United States and Europe, where millions technical and professional high paying jobs have been exported to other parts of the world by multinational corporations as a result of economic globalization. Although up until recently even the economies of these industrialized nations benefited as a whole because globalization, many millions of individuals lost their source of income, and the jobs that are available are usually low-wage jobs, typically service related. For example, back in the 1960’s the United States was the manufacturing hub of the world, with one of the strongest economies of the world due to its highly developed infrastructure, well-educated workforce, no foreign debt to speak of and a strong dollar. By the 1980’s with the oil crisis of the 70’s and the increased wave of economic liberalization brought about international trade agreements with future major global manufacturing hubs such as China entering the international competition for economic growth, the United States started to exert more and more of its manufacturing base to places like China and Asia. Today, over 50% of the revenues produced by the top fortune 500 companies are created from their international operations, about half of all the publicly held government debt is held by international investors and we depend heavily on borrowing and foreign investment for our economic growth (Bergstein, 2011). The elimination of the Glass Steagall Act (2011) regulated the type and level of risks of acceptable financial that commercial banks could invest in brought about the derivatives crisis, and the era of corporate welfare to Wall Street. This has caused the world economies to intertwine to the dollar to stagnate in a recession putting in danger the stability of the global finance system (Theeconomiccollapseblog, 2011). References Bergstein, F. (2011). U.S. Economy: Beyond a Quick Fix. Peterson Institute for International Economics. [Accessed 17 November 2011]. Colander, D. (2002). Globalization and Economics. Middlebury College [Accessed 16 November 2011]. Emilian, C., Marcel, R., Hurduzeu, G., Vlad, L. (2011). Foreign Direct Investment Expansion – Essential Globalization Factor. Theoretical and Applied Economics, Volume XVII, 1(554). pp. 163-172. [Accessed 17 November 2011]. Imf.gov (2008). Globalization: A Brief Overview. International Monetary Fund. [Accessed 17 November 2011]. Intriligator, L. (2003). Globalization of the World Economy: Potential Benefits and Costs and a Net Assessment. Milken Institute, 33. [Accessed 17 November 2011). Hubpapges.com (2011). What is “The Glass-Steagall Act” – And shy we need it back. < http://thejcrevelator2.hubpages.com/hub/glasssteagallact> [Accessed 17 November 2011]. Rappa, A. Globalization: power, authority, and legitimacy in late modernity. [Accessed 17 November 2011]. The Economist (2011). Globalization. [Accessed 17 November 2011]. Theeconomiccollapseblog.com (2011). The Economic Collapse. [Accessed 17 November 2011]. Uua.org (2011). Economic Globalization. Unitarian Universalism Association of Congregations. [Accessed 17 November 2011] Read More