Economics: globalization - Essay Example

Labor. Global movement of labor increased substantially both within developing countries as well as from developing to developed countries. Remittances from abroad contributed once again to the development of the parent country. Knowledge Transfers. This is an often overlooked aspect of globalization. Exchange of technical and other know - like management and production techniques is also a valuable resource on which developing continues may not be able to spare scarce resources. On balance, there are only winners from globalization provided that economic and other policies are intelligently pursued without compromising national interest.

Just as every coin has two sides, it has to be accepted that globalization too has its attendant risks. It was Adam Smith who first introduced the concept, over two centuries ago, that markets ensure economic efficiency. Even today, open markets remain the best way to regulate an economy. However, a near perfect market where many firms produce the same type and quality of goods, with each believing that it can no way influence the market price is hard to come by. This is especially true in a globalized world economy.

The more common state is that of imperfect markets where several firms believe that a certain set of factors, e.g. brand name allows it a certain leeway in dictating the market price. Since the efforts of all firms is to maximize profits, firms will always try to seek out ways and means to exploit these and make their goods more competitive. Availability of cheaper labor and raw materials in different parts of the world will remain a key reason for firms to shift their operations overseas. Had all markets been perfect globally, there would have been no incentives for anyone to diversify as it would always be able to market its products at the going rate.

Increasing globalization of the world economy has also resulted in firms having to compete at two levels - domestic and international, while domestic market may be in a state of equilibrium, the sane is unlikely to be the case in an international market, where different national policies would come into play. On balance, markets are not as perfect as is generally believed. Goods that firms produce are never perfect substitutes for each other. One or the other firm will always have a greater percentage of market share.

This will spur rival firms to seek out various means to improve the competitiveness of their own products by exploring options overseas where conditions of imperfect competition are more likely to exist.Are there policies for dealing with transnational corporations that would enable the people of a particular country to follow their aims and ambitions, when those ambitions conflict with the requirements of transnational corporations In the face of increasing domestic competition and near perfect markets, more and more firms have been obliged to shift their operations overseas to gain a competitive edge.

Since the reason for shifting operations overse