Economic Globalization and Global Economic Integration - Assignment Example

Running Head: GLOBALIZATION AND GLOBAL ECONOMIC INTEGRATION Executive Summary Name Institution Question 2 Economic Globalization and Global Economic Integration Globalization can be described as the general growth of the world’s economy in terms of integration of national economies of the industrialized world countries and other developing nations (Hard, 2011). Globalization has led to realization of the operation as well as emergence of worldwide economy that appears to be single. The unification of the world’s economy has led to economic order in the world through reduction of cross boarder flow barriers, international trade barriers, trade tariffs, export fees and quota associated with import of goods and services. Globalization has enabled material growth and wealth in terms of goods and services under an international umbrella of labor division with efficiencies driven by competition, specialization as well as relations across the globe (Waugh, 2000). Generally, globalization describes a scenario in which various regional economies, cultures, political arenas and societies have been integrated by means of transport, trade as well as communication. Transnational circulation of cultural ideas, political issues and other factors such as biological and socio-cultural factors is also referred o as globalization. However, this paper particular focuses on economic globalization, global economic integration, their benefits and whether the benefits are sufficient enough to justify further globalization (Levin, 2000). Economic globalization is described as the integration of varying national economies across the globe into one single international world economy by means of direct foreign investments, trade, technology, flow of capital and international migration (Omar, 1999). Economic globalization entails increased interdependence of various national economies across the globe followed by an increase in the movement of goods and services across international boarders as well as international exchange of capital, technology as well as investments. It is actually the main process that leads to emergence of one single world market place consisting of various economies across the globe. In economic globalization, factors such as production, technology, competition and markets play a very important role when it comes to international trade and direct investments (Walsh, 2004). Just like economic globalization, global economic integration is described as the unification of trade and national economies by abolishment of various barriers such as tariffs, cross-boarder restrictions and other measures that limit free international interaction. Global economic integration ensures that all world financial markets are unified to enhance central or global regulation of the world market (Szuchman, 2005). There are various benefits associated with both economic globalization as well as global economic integration: First, there has been a tremendous increase in the gross domestic product (GDP) across the globe since 1960s. The per capita gross domestic product has accelerated from 1.5 percent in 1960s up to 5.2 percent in 1990s (Bell, 2009). The increase in GDP across the global economy saw some rich nations record a decline in growth purposely to strike a regional economic balance between the rich and the poor countries. Regional economic balance is important since it enhances steady flow and balance of the global economy. This has also enhanced narrowing down or reduction in the gap that exist between the rich and the poor. It is evident that economic globalization has seen the globalizers grow in relation with rich nations in the world (Guillen, 2003). On the other note, the globalizers have been able to reduce the per capita income gap that exists between them and the richer nations. For instance, twenty years ago, China and India were among the poorest countries in the world but due to their economic expansion as a result of economic globalization and global economic integration, the two countries have been able to narrow down the inequality and have been incorporated in first world countries in the world. Economic globalization has enabled movement of capital across boarders thus leading to capital market integration (Allen, 2010). In this aspect, economic globalization has achieved its full benefits by enabling individuals as well as firms to carry out short term investment portfolios through purchasing as well as selling of financial assets that are highly liquid (Levin, 2000). Economic globalization and global financial integration has enabled individuals as well as firms to carry out long term foreign investments by purchasing long term bonds under offer by foreign firms or by acquisition of a non controlling equity interest in the firms belonging to foreign nations. Through economic globalization, firms and individuals can make a further step to carry out a direct investment in foreign nations through purchasing of controlling share interest in such foreign firms of by owning a majority of the subsidiary available in a foreign market (Allen, 2010). Economic globalization and integration of world economy has let to a tremendous growth and progress in technology. Following economic globalization, there have been various technological changes that have facilitated linkages across the global economies (Klein, 2004). First, technology in the transportation sector has been on an improving edge simply to cut down the economic costs incurred in transport and exchange of goods, capital and services among the economies. Improvement in the transport sector has also been a stepping stone towards expansion and exchange of technology itself across the world economies. Firms across the global arena have been able to learn and implement how to apply technological advances in the sectors of communication, computing technologies and transport in order to become more active and competitive in the world’s economy (Trudy, 1997). Economic globalization has been beneficial to mangers and other personnel in multinational first by enabling them apply cheap and affordable telecommunication services in order to coordinate their operations and those of their subsidiaries as well as those of their suppliers across national boarders and continents. The world’s financial firms have made use of economic globalization and technological advancement to come up with computing technologies to trade financial products like currency options on an international market and this has enabled such first monitor and identify investments opportunities in foreign markets or nations (Garner, 2003). Another benefit of economic globalization is that it has contributed a lot to reduction of poverty levels across the global arena. Economic globalization has seen most world economies record a growth of about 5.5 percent annually in terms of income including China where the poorest fifth realized an income growth of at least 4.0 percent (Smith & Davis, 2007). Economic globalization has also seen a tremendous decline in the number of individuals living below a dollar per day in several countries. For instance, economic globalization enabled china to reduce its population living below a dollar per day from 20 percent to 15 percent while Bangladesh managed to reduce such a population from forty three to about thirty six percent. Economic globalization has also recorded benefits in terms of its effect on distribution, growth as well as efficiency. There are many ways in which economic globalization has promoted efficiency gains (Bell, 2009). Economic globalization has contributed to the reduction in barriers hindering movement of goods as well as services across the national boarders and other factors of production. The competition that has resulted due to economic globalization has led to production of dynamic efficiency gains by means of improved management as well as growth of technology (Wajnryb, 2010). In this aspect, economic globalization has elicited improvement in production and manufacturing sectors across the global nations to ensure that all the good and services produced are of high standard or meets the minimum specifications of the world market standards to enable the products trade and compete on international level. It has been noted that the efficiency value gains are consequently greater when they happen in times of full utilization of available resources as compared to when they add to unemployment or rather excess capacity. Fortunately, since economic globalization and economic crisis/stagnation appear to be a coincidence, the efficiency gains in most global nations that come as a result of improved allocation of resources tend to have a positive impact on the problems of unemployment, inequality as well as poverty levels. It is clearly argued that economic globalization and global integration of economies have led to introduction of reforms that have acted as a basis for more rapid and efficient economic growth in both medium and long term span (Guillen, 2003). Considering growth, the short run consequences of economic globalization and global economic integration have proved to be of contractionary nature. Following the increased national as well as international competition, there has been a lot of pressures advocating for reduction in costs and at the same time increasing productivity (Stephen, 2002). Governments on the other hand have been constrained to make reductions or cut down their public expenditures for purposes of decreasing budget deficits and at the same time controlling the rates of inflation in their respective economies. The integration of national economies has also enabled most countries to pursue and explore expansionist policies in the world product markets and this has been able to enhance stimulation of consumer demands as well as promotion of employment (Allen, 2010). Considering the long term benefits of economic globalization and global economic integration, it can be ascertained that the high levels of efficiency, high competition as well as the creation of a conducive and hospitable business environment across the globe are likely to spur or elicit investments, technological growth or progress and enterprise and all these will generally contribute to faster growth of global economy on a much sustainable economic basis. With this in place, there is absolutely no doubt that individual countries or groups of countries can be able to take advantage of the economic growth to forge ahead due to the presence of an effective mechanism for policy coordination at a world level. However, it should be noted that the emerging new environment and global forces in the world market can counteract the influences stated above in order to stimulate the expansion of the global economy as well (Bell, 2009). Distribution is also another issue that relates to benefits associated with economic globalization as well as integration of global economies. To be specific, economic globalization and global economic integration have affected the distribution of income among other things as result of change in the level of economic activity, taxation in the public, government expenditure, flow of resources, trade, prices of products and other factors of production. It is clearly evident that global economic integration and economic globalization have led to tremendous increase in income in various world economies thus leading to improved living standards within respective world economies. In other words, the number of individuals living below the required world standards has been reduced due to balance of income distribution (Garner, 2003). Since global economic integration and economic globalization are likely to result in increased national and international competition, most countries are likely to benefit from increased flow of volume and resources, trade expansion as well as internationalization of manufacturing and production sectors of the economy. This will see most countries in the world attract direct foreign investments, foreign funding, technology expansion as well as increased volumes and rates of exports and imports (Koppala, 2007). In such scenarios, global economic integration and economic globalization are likely to attain rising rates of employment and employment opportunities and at the same time see increased wages for workers in the economy. The inequality in such economies is also likely to reduce due to balance in distribution of income and allocation of economic resources. However, this is sufficient to justify further expansion of globalization since the less competitive and unstable nations are most likely to be the victims of capital out flows, skills, investments as well as entrepreneurship. Such countries are mostly likely to be caught up in downward spiral of employment, wages and production and this will greatly lead to increased inequalities and poverty levels in such economies (Bell, 2009). I think that the above benefits are not sufficient enough to justify expansion of economic globalization and global economic integration. For instance, the increased integration of the global market for products and services has continued to undermine various countries’ ability to pursue polices that are likely to lead to expansion and stimulation of demand as well as employment promotion. In addition, there is completely no machinery at the international level to consolidate and coordinate the various micro-policies and macro-policies of the individual nations (Siegal & Connolly, 2002). Since the markets making up a single global market are facing contractionary effects, the initiative by economic globalization and global economic integration to initiate, lower rates of interest, increase expenditure by the public and increase lending by the banks automatically leads to overreaction that comes in form of capital flows, creditworthiness and changes in interest as well as exchange rates. The overall consequence of these effects is that markets fail to hold to macro-economic policies of their respective governments or countries and this makes them to become prisoners of the global market (Guillen, 2003). Further expansion of economic globalization and global economic integration may also have an effect of deepening the level of inequalities. In this aspect, the market forces such as labor and capital may be expected by most countries to increase the rates of interest while at the same time lower the wages. This is likely to happen because the management of such markets is designed to control the rates of interest and at the same time ensure minimum wages. Considering these factors, the deflationary effects on the economic activities of these countries is likely to put more pressure on the employment opportunities as well as wages and this may be reinforced by emerging technologies which are geared towards saving input of labor (Allen, 2010). Although economic globalization and global economic integration are likely to benefit various world corporations, such benefits are not sufficient enough to justify further expansion of globalization due to the impact already being faced by the working class in most of the global countries (Nixon & Gomez, 2000). Considering most industrialized countries, there is a lot of pressure on the wages and the employment sectors resulting from elevated levels of global competition, internal competition, production internationalization as well as the technological progress. It has been realized that the fate of the working class in such industrialized countries is worse and would have been even worst if there could have been no laws and restrictions on labor migration (Bell, 2009). The commission on economic and global issues has recently given out a proposal for an agenda that will see various economic conditions improved especially those concerning developing or third world countries. This is purposely to enhance these countries’ standing in the global economy and continued economic integration. Although we have mentioned various benefits associated with economic globalization and global economic integration, unless mechanisms are put in place to combat the negative impacts of the process on the third world countries, further expansion of globalization will see most of these third world countries lose control of the economic agenda to developed countries. The only thing that can be done in order to rectify this social injustice dilemma is to give voice to the developing and third world countries. The only way in which the developing and third world countries can be given a voice is through integration of international institutions of economy such as World Bank as well as IMF. In order for the IMF and the World Bank to give voice to third world and developing countries, the two world economic institutions should come up with global rules and regulations aimed at offering protection to the developing or third world countries. The challenge that still remains is that there are still no enough chances for the leaders from these developing or third world countries to influence and advocate for such global rules and regulations (Garner, 2003). In order to achieve the full benefits of economic globalization and the integration of world economies, the international agencies charged with the responsibility of lending must work hand in hand or close with all the global developing nations to ensure that there are changes pertaining to how and where the available economic credit is concentrated. On this note, such agencies should also work towards realization of elevated or accelerated levels of financial growth and development in the third world or developing nations across the world. The commission on economic and global issues is also making a suggestion on the need for all persons across the globe to earn social respect and recognition. In order for the above mentioned benefits of economic globalization and global integration of economy to justify further expansion of economic globalization, the commission insists that the United Nations should expand its agenda to incorporate a program that will see it work closely with the lending agencies in an international level to ensure a credible and balanced system of distribution of the world’s available economic resources as well as credit (Bell, 2009). Since most of the international lending agencies appear to be nation based in spite of their respective titles, the commission gives an instinct or a proposal that all international lending agencies be expanded to be able to accommodate and contain all nations across the globe with great and serious emphasis on establishment of universal competitiveness among these nations. One of the main factors that will see universal competitiveness among the world states sail through will be enhancing the spread of knowledge and skills across the nations at state level. This can be best done or achieved though offering of educational opportunities and facilities on national level (Guillen, 2003). Other ways in which knowledge and skills can be distributed at state level is through organizing of training seminars and other events as well as through advancement of technology. It is evident that most economists in the world are suggesting that further expansion of globalization of the world’s economy and various programs should be set in place and implemented to help developing and third world countries adjust to the changes in global economy resulting from economic globalization. This strategy will be beneficial and implemented for the sake of international economic relations and interactions (Allen, 2010). Lastly, various world economic movements like fair trade as well as the anti sweatshop have on several occasions anticipated for expansion of the global economy through global economic integration (Laird, 2002). However, since the associated benefits have not fully justified further expansion of global economy, these movements have put in place measures and programs that work towards realization and promotion of a global economy that is more socially just. A world economic movement such as fair trade movement has been on the fore front working towards reducing or alleviating all forms of economic exploitation resulting from enhancement of economic globalization. Another function that is played by this fair trade movement concerns working towards ensuring that trade is improved both internally and at global level (Garner, 2003). The movement mainly focuses on disadvantaged producers in order to enhance their production and development in the global economic sector. The movement also creates awareness concerning various possible forms of economic exploitation against the developing countries. If these conditions were in place, then the befits of economic globalization as well as the global economic integration could be sufficient enough to justify expansion and further growth and development of the world’s economic globalization and economic integration (Hard, 2011). References Allen, J. (2010). Economic globalization. Mississauga: John Wiley & Sons Canada Ltd. Bell, J. (2009). Migration and International Trade (3rd ed.). Philadelphia: Open University Press. Garner, A (2003). Global Dimension of Regional Integration Model. Philadelphia: Temple University Press. Guillen, M. (2003). Economic Globalization: Trends, Risks and Risk Prevention. Princeton: Princeton University Press. Hard, R. (2011). The Forces of Economic Globalization. Retrieved on August 25, 2011 from http://www.ycsg.yale.edu/activities/files/Bhagwati5-13-04.pdf Levin, M. (2000). 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