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Globalization and Economy - Essay Example

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Introduction Globalization involves the changes and trends that have taken place in relation to economic, social, cultural and geographical interactions. These factors have an influence on the markets of different countries globally. The manner by which these factors interact has led to the development and emergence of a new kind of global market…
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Globalization and Economy

Download file to see previous pages... What is Globalization? Globalization means that the market goes beyond national borders, thus integrating world trade and financial markets (Czenter, 2002, p. 8). Globalization is the result of countries reducing their barriers for other countries to trade with them or directly investment in the country’s industries. These barriers were traditionally erected, so that each country had a buffer between all other countries, and globalization dismantles them (O’Riain, 2000, p. 2). This integration of world systems is accomplished in one of three major ways, according to O’Raiain (2000). The first way is through an integration of markets through the process of international trade and production. The second way is that states compete with one another to attract foreign capital and also compete with one another for the right to organize the global economy. Third, “models of state market interaction may diffuse through the world-system through the interaction of the states and particularly through the influence of transnational organizational actors” (O’Riain, 2000, p. 3). That said, 70% of trade occurs between the triad of North America, Western Europe and East Asia (Ostry, 2005). Multinational companies are the drivers for free trade. However, Ostry (2005) argues that these companies really are not globalizers, as much of their trade and investments are regional. For instance, multinational companies in Western Europe tend to trade to other countries in Western Europe, while American firms by and large invest in their neighboring countries of Canada, Mexico and South America. Meanwhile, Japanese firms tend to trade and invest with South Korea, China and Southeast Asia (Ostry, 2005). Advantages and Disadvantages of Globalism Globalization may be either advantageous or disadvantageous, and whether it is one or the other depends upon different factors. For instance, globalization might break down the economic backbone of some countries that are still developing (Czenter, 2002, p. 14). Some countries that were considered to be developing as of 2002 were China, Malaysia, the Phillipines and India, and the effects of globalization on these countries’ labour markets were studied by Frenkel & Kuruvilla (2002). Frenkel & Kuruvilla note that there were two competing schools of thought on how globalization would affect labour markets and employment relations in developing countries. One school of thought was that free trade and foreign direct investment can only help developing countries, as these countries should experience job growth and increased wages due to there being an increase of industrial activity in these countries. The other school of thought was that free trade and foreign direct investment would have a negative effect on labour markets and employment relations in these developing countries. This is because of increased competition from the foreign firms, so that domestic goods are replaced by those made abroad; a displacement of domestic workers due to the fact that multinationals export jobs to these countries; and increased technology means fewer jobs for workers (International Labour Organization, 2011). This is also because some international markets are only open to the stronger countries, closing the door to countries that do not have a strong international portfolio (Frenkel & Kuruvilla, 2002, p. 3). Dries & Swinnen (2003) found that globalization is often advantageous for ...Download file to see next pagesRead More
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