Globalization: The Concept, Causes, and Consequences | PIIE
GLOBALIZATION AND LIBERALIZATION: DEVELOPMENT IN THE FACE .. liberalization of capital movements means that the link between. Globalization or globalisation is the process of interaction and integration among people, . At one end of the continuum lie social and economic relations and networks which are Held and his co-writers' definition of globalization in that same book as . A gradual move towards greater liberalization in European countries. political economy models of economic liberalization have been under- ciation and the American Political Science Association, and at Duke. University, Notre . A host of related phenomena is subsumed under this definition (e.g., imitation.
During the early 19th century the United Kingdom was a global superpower.
- Globalization: The Concept, Causes, and Consequences
Modern[ edit ] According to economic historians Kevin H. O'Rourke, Leandro Prados de la Escosura, and Guillaume Daudin, several factors promoted globalization in the period Innovations in transportation technology reduced trade costs substantially. New industrial military technologies increased the power of European states and the United States, and allowed these powers to forcibly open up markets across the world and extend their empires.
A gradual move towards greater liberalization in European countries. During the 19th century, globalization approached its form as a direct result of the Industrial Revolution.
Industrialization allowed standardized production of household items using economies of scale while rapid population growth created sustained demand for commodities.
In the 19th century, steamships reduced the cost of international transport significantly and railroads made inland transportation cheaper. The transport revolution occurred some time between and The invention of shipping containers in helped advance the globalization of commerce. Exports nearly doubled from 8.
liberalization - Dictionary Definition : az-links.info
Many countries then shifted to bilateral or smaller multilateral agreements, such as the South Korea—United States Free Trade Agreement. Since the s, aviation has become increasingly affordable to middle classes in developed countries. Open skies policies and low-cost carriers have helped to bring competition to the market. In the s, the growth of low-cost communication networks cut the cost of communicating between different countries. More work can be performed using a computer without regard to location.
This included accounting, software development, and engineering design. Student exchange programs became popular after World War IIand are intended to increase the participants' understanding and tolerance of other cultures, as well as improving their language skills and broadening their social horizons.
Between and the number of students studying in a foreign country increased 9 times. The implementation of neoliberal policies have allowed for the privatization of public industry, deregulation of laws or policies that interfered with the free flow of the market, as well as cut backs to governmental social services . These neoliberal policies were introduced to many developing countries in the form of structural adjustment programs SAPs that were implemented by the World Bank and the International Monetary Fund IMF .
These structural adjustment programs required that the country receiving monetary aid would open it's markets to capitalism, privatize public industry, allow free trade, cut social services like healthcare and education and allow the free movement of giant multinational corporations .
These programs allowed the World Bank and the IMF to become global financial market regulators that would promote neoliberalism and the creation of free markets for multinational corporations on a global scale .
With a population of 1. This slowed down from the s onward due to the World Wars and the Cold War but picked up again in the s and s. The migration and movement of people can also be highlighted as a prominent feature of the globalization process.
In the period between andthe proportion of the labor force migrating approximately doubled. Most migration occurred between the developing countries and least developed countries LDCs. The collapse of the Soviet Union not only ended the Cold War's division of the world- it also left the United States its sole policeman and an unfettered advocate of free market. But in this context I would surmise that other factors are also at work, such as the spread of consumer knowledge about what is available that comes from travel and from advertising, itself encouraged by the communications revolution and its children like CNN.
The reduction in transport costs is also a key factor underlying the growth in trade. Of course, it needed a reasonably peaceful world to induce economic agents to exploit the opportunities for globalization presented by technological progress.
But the technological basis for the phenomenon of globalization implies that, barring an end to the "Pax Americana" or else extremely vigorous conscious actions to reverse the process, globalization is here to stay. Consequences Globalization certainly permits an increase in the level of global output. Whether as a result of the old Heckscher-Ohlin theory of the basis of comparative advantage as lying in different factor abundance in different countries, or as a result of the new trade theories that explain trade by increasing returns to scale, trade will increase world output.
It may also bring products that would otherwise be unavailable to the countries where the investment occurs, which presumably increases the quality, and therefore the value, of world output. And international capital flows can transfer savings from countries where the marginal product of capital is low to those where it is high, which again increases world output. Globalization must be expected to influence the distribution of income as well as its level.
So far as the distribution of income between countries is concerned, standard theory would lead one to expect that all countries will benefit. Economists have long preached that trade is mutually beneficial, and most of us believe that the experience of widespread growth alongside rapidly growing trade in the postwar period serves to substantiate that.
Similarly most FDI goes where a multinational has intellectual capital that can contribute something to the local economy, and is therefore likely to be mutually beneficial to investor and recipient. And a flow of capital that finances a real investment is again likely to benefit both parties, since the yield on the investment is expected to be higher than the rate of interest the borrower has to pay, while that rate of interest is also likely to be higher than the lender could expect at home since otherwise there would have been no incentive to send it abroad.
Loose talk about free trade making the rich countries richer and poor countries poorer finds no support in economic analysis. Nor is there any reason for supposing that the North benefits itself at the expense of the South by imposing import restrictions like non-tariff barriers or agricultural subsidies: This suggests that a promising strategy for eliminating such barriers is to seek a coalition with Northern consumers, rather than to engage in North-bashing which will simply alienate potential Northern allies.
Standard theory says that trade will tend to hurt unskilled labour in rich countries and to help it in poor ones, since the poor countries will be able to export-labour-intensive goods like garments to rich countries, thus increasing the demand for unskilled labour in the poor countries and decreasing it in the rich ones. That is, within rich countries, there is a good analytical reason for arguing that trade will tend to make the rich richer and the poor poorer.
There has in recent years been a lively debate among economists in the developed countries as to whether the increase in imports of labour-intensive goods has been a major factor in causing the fall in the relative and sometimes absolute wages of the unskilled in these countries: It seems more difficult to doubt that exports of labour-intensive goods have been a factor that has done something to increase the demand for unskilled labour, and therefore to equalize the income distribution, in the exporting countries like Sri Lanka.
Hence I find it betrays a sad lack of concern with the prospects of the poor to hear, as I have during this conference, garment exports being denigrated as likely in some unexplained way to bring negative impacts. On the other hand, some of the effects of the communications revolution must surely have had a disequalizing effect on income distribution in these countries: Similarly, differential mobility of skilled versus unskilled labour tends to pull up the salaries of the skilled in developing countries toward world levels, thereby leaving less for the immobile poor.
The same result will occur if the owners of highly-mobile capital are able to evade taxes by investing abroad, and also if governments are induced to avoid imposing high tax rates on internationally mobile capital, or on those who might be prompted to emigrate, in the hope of keeping these factors at home. Thus the net effect of globalization on income distribution within developing countries seems to me distinctly ambiguous. What impact is globalization likely to have on the long-term possibilities of economic growth in developing countries?
My vision of the growth process is that it takes off when the elite in a developing country comes to understand the opportunities of applying world-class technologies within their country, and introduces institutional arrangements that permit individual pursuit of self-interest to serve, in general, the social good.
Once that happens the country is able to grow at a rapid rate, unless some political accident obstructs the process, until it catches up with best-practice technology, and therefore attains the living standards of the developed countries. Globalization is tending to make the technologies and the knowledge for this process to occur more readily available, and therefore to enable the process to be telescoped in time. Singapore may be a small country, but there is no previous case in history of any country that did not enjoy massive resource discoveries going from stark poverty to affluence in under 30 years.
But it is surely also true that globalization is bringing new dangers.
Globalization - Wikipedia
The virulence of the East Asian crisis was primarily a result of countries exposing themselves to the full force of the international capital market before they had built up an unquestioned reputation for being able as well as willing to service their debts come what may, which meant that when investors became concerned about their potential vulnerability as a result of the Thai crisis there were no other investors willing to step in and provide stabilizing speculation even after exchange rates and interest rates had clearly overshot.
Of course, one can argue that this increased vulnerability to external shocks has to be weighed against a decreased vulnerability to internal shocks: But this does not justify dismissing the increased dangers from external shocks. Moreover, I might note that Professor Indraratna offered you a much longer and more imaginative list of dangers than I have here identified, which looks beyond narrow economic questions and considers the role of globalization in spreading such unsavoury phenomena as drugs, the sex trade, crime, and terrorism.
Policy Issues If I am right in arguing that globalization stems from technological developments rather than policy choices, trying to reverse it would be rather like playing at King Canute.
It would be more productive to seek to maximize the benefits it offers and minimize the risks it creates. Let me discuss what I see that involving, while restricting myself to the narrow economic questions. It will be clear from what was said above that I see little reason to doubt that the citizens of a developing country can expect to benefit from being open to trade and FDI.
This gives them the advantages of being able to make relatively good use of their abundant unskilled labour and being able to access world-level technology. However, if they rely simply on exploiting unskilled labour, they will never be able to advance far beyond the living standards of their poorest competitors, who will be exporting similar goods.
In order to raise living standards progressively over time, it is at least as important to raise educational standards as it is in a relatively closed economy. To a first approximation, one may summarize the policy advice of how to prosper in a global economy as: However, a second approximation requires one to recognize also the increased risks of full exposure to the world economy. Are there ways of reducing those risks?
I am convinced that there is at least one important dimension in which prudence suggests that developing countries are well-advised to limit their integration in the world economy, and that concerns the liberalization of short-term capital flows.
If one asks what distinguishes those countries that suffered contagion from the East Asian crisis from those that escaped it, the answer seems to me very clear: Since there is no persuasive analytical reason or empirical evidence Rodrik for believing that freedom of short-term capital flows is a significant factor in contributing to economic growth, let alone distributional equity, I conclude that prudence suggests seeking to postpone rather than accelerate this particular bit of liberalization.
Furthermore, one needs to ask whether there are mechanisms that can protect individuals when risks to the economy actually materialize.
The recent experience in East Asia is again instructive: