Introduction To Globalization and Economic Globalization
Introduction To Globalization and Economic Globalization
What is Globalization?
It is a term used to describe the increasing connectedness and interdependence of the world-easier and
faster transfer of capital, goods, services, information and people across national borders.
Global movement towards integration of the economy, finance, commerce and communication.
Goods, services, capital and information flow across seamless national borders.
Opening up local and nationalistic perspectives to a broader view of interconnectedness and
interdependent world with free transfers of capital, goods, and services across national borders.
Globalization’s concept is complex and multifaceted as the definitions deal with economic, political or
social dimension. (It affects all aspects of the society)
4 Main Dimensions/Types of Globalization
a. Economic- increasing cross-border trade in goods, services and financial capital.
b. Political- increasing international governance
c. Technological- increasing speed of technological diffusion across the global economy
d. Cultural/Social- increasing movement of knowledge, culture and people across borders
Globalization could bring either integration and/or fragmentation, things flow easily in a global world,
hindrances or structural blocks are also present. Some view it as a positive phenomenon but some see it
as occurring through and with regression, colonialism and destabilization (disadvantages of
globalization).
Causes of Globalization
Globalization driving force is technology progress.
a. Improved Communications
- The development of communication technologies such as internet, email and mobile phones have been
vital to the growth of globalization because they help MNCs to operate throughout the world.
- The development of satellite TV channels and online applications provided a worldwide marketing
avenue for international product.
b. Improved Transportations
- Allowed easy mass movement of goods throughout the world.
c. Free Trade Agreements
-No or minimum trade barriers among countries. Example of trade barriers are tariffs, quotas, licenses and
standardization (product are produced in accordance with a set of guidelines), all seeking to make foreign
goods more expensive or available in a limited supply.
d. Global Banking
- Modern communication technologies allow vast amounts of capital o flow freely and instantly throughout the
world.
e. Growth of Multi-National Corporations (MNC’s)
-MNC refers to a company that operates in more than one country (McDonalds, MicroSoft, etc..)
-MNCs produce goods and services in a massive scale throughout the world.
a. Core Countries
These are dominant capitalist countries that exploit peripheral countries for labor and raw materials. They
are strong in military power and not dependent on any one state or country. They serve the interests of the
economically powerful. They are focused on higher skill and capital intensive production. Core countries
are powerful, and this power allows them to pay lower prices for raw goods and exploit cheap labor, which
constantly reinforces the unequal status between core and peripheral countries. The first core region was
located in northwestern Europe and made up of England, France, and Holland. Today, the United States is
an example of a core country. The U.S. has large amounts of capital, and its labor forces are relatively well
paid.
b. Periphery Countries
These countries fall on the other end of the economic scale. These countries lack a strong central
government and may be controlled by other states. These countries export raw materials to the core
countries, and they are dependent on core countries for capital and have underdeveloped industry. These
countries also have low-skill, labor-intensive production, or, in other words, cheap labor. Periphery
countries are commonly also referred to as third-world countries. Eastern Europe and Latin America were
the first peripheral zones. An example from today is Cape Verde, a chain of islands off the west coast of
Africa. Foreign investors promote the extraction of raw materials and the production of cash crops, which
are all exported to core countries.
c. Semi-Periphery Countries
These countries fall in the middle of the economic spectrum. These countries share
characteristics of both core and periphery countries. These are core regions in decline or periphery regions
attempting to improve their economic position. These countries are sometimes exploited by core countries,
but they also may exploit periphery countries themselves. For example, India is largely dependent on core
countries for capital, but India has a growing technology industry and an emerging consumer market.
Internationalization- Process of increasing the enterprise of a certain local company in the international
market, expansion of the client base of a local business in the global or international market, results
include increasing influence of the enterprise of local market and influence globalization
Regionalization- Refers to regional concentration of economic flows, societal integration within a region
and often undirected process of social and economic integration
3. The Third Way Theory (Transformationalism)
Global economy is undergoing significant qualitative changes that redefine relationships between
governments, firms and communities.
It looks for ways of transforming the power of the nation-state to cope with the pressure of globalization.
Metaphors Of Globalization
In order for us to understand the concept of globalization, we will utilize metaphors. Metaphors make use of one
term to better understand another term. The state of matter (the solid and liquid) will be used to elaborate more
about globalization.
1. Solidity
The epochs that precede today’s globalization paved way for people, things, information, and places to harden
over time. Consequently, they have limited mobility (Ritzer, 2015). The social relationships and object
remained where they were created. Solidity also refers to barriers or make difficult movement of things.
Furthermore, solids can either be natural or man-made. Examples of natural solids are landforms and bodies of
water. Man-made barriers include Great Wall of China and the Berlin Wall. An imaginary line such as the nine-
dash line use by People’s Republic of China in their claim to the South China Sea is an example of modern
manmade solid. Obviously, these examples still exist. However, they have tendency to be melt. This should not
be taken literally, like an iceberg melting. Instead, this process involves how we can describe what is happening
in today’s global world. It is becoming liquid.
2. Liquidity
Liquid, as state of matter, takes the shape of its container. Moreover, liquids are not fixed. Liquidity, therefore,
refers to the increasing ease of movement of people, things, information, and places in the contemporary world.
Zygmunt Bauman’s ideas were the ones that have much to say about characteristic of liquidity. First, today’s
liquid phenomena change quickly and their aspects, spatial and temporal, are in continuous fluctuation. This
means that space and time are crucial elements of globalization. In global finance, for instance, changes in the
stock market are matter of seconds. Another characteristic of liquid phenomena is that their movement is
difficult to stop. For example, videos uploaded on YouTube or Facebook are unstoppable once they become
viral, the so-called Internet sensations become famous not only in their homeland but also to the entire world.
Finally, the forces (the liquid ones) made political boundaries more permeable to the flow of people and things
(Cartier, 2001). This bring us what Ritzer (2015) regarded as the most characteristics of liquid: it “tends to melt
whatever stands in its path (especially solids)”. The clearest example is the decline, if not death, of nation-state.
Liquidity and solidity are in contrast interaction. However, liquidity is the one increasing and proliferating
today. Therefore, the metaphor that best describe globalization is liquidity.
A. ECONOMIC GLOBALIZATION
-International mobility of individuals, capital, technology, goods and services.
-Refers to how different countries and regions have become interdependent across the globe.
-Increasing interdependence of world economies as a result of the growing scale of cross-border trade of
commodities and services, flow of international capital and wide and rapid spread of technology.
-The phenomenon have several interconnected dimensions such as:
a. globalization of trade of goods and services
b. globalization of financial and capital markets
c. globalization of technology and communication
d. globalization of production
2. Trade Liberation- A free trade is a pact between two or more nations to reduce barriers to imports and
exports among them. Under free trade policy, goods and services may be bought or sold across international
borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
2. Production globalization is the sourcing of materials and services from other countries to gain advantage
from price differences in different nations. For example, you might purchase materials and components for your
cameras from multiple countries and then assemble the product in yet another international location to reduce
your costs of production. This change should lead to lower prices for consumers since products cost less to
produce. It also impacts jobs, since production may shift from one country to another, usually from more
developed countries to less developed countries with lower average wage rates.
At present, there is an obvious change in businesses, a state known as globalization of business, as changes in a
business from a company associated with a single country to one that operates in multiple countries occur.
ECONOMIC INTEGRATION
Economic integration involves agreements between countries to permit, to varying degrees, the flow of capital,
labor, goods, and services across their respective international borders (Tovias, 1994). It is an arrangement
between different regions that often includes the reduction or elimination of trade barriers, and the coordination
of monetary (consists of the decisions made by a government concerning the money supply and interest rates)
and fiscal policies (the use of taxation and government spending policies to affect the overall business activity).
The aim of economic integration is to reduce costs for both consumers and producers and to increase trade
between
the countries involved in the agreement.
3. Customs Union
A customs union is formed by countries that not only eliminate trade barriers between the members but also
have a unified trade policy with countries outside of the union. For example, a customs union will establish a
common tariff that is applied to all imports coming into each member country. The tariff revenues may be split
among the members, according to a formula agreed to by the members. An example of a customs union is the
Andean Community consisting of Bolivia, Colombia, Ecuador, and Peru.
4. Common Market
A common market has all of the characteristics of a customs union but also eliminates barriers to the movement
of capital, labor, and technology. Restrictions on immigration, emigration, and foreign investment between
members are lifted. Mercosur (short for Mercado Común del Sur (or Common Market of the South) is a South
American group of nations that is an example of a common market.
5. Economic Union
The highest level of economic integration occurs in economic unions. In addition to all of the economic
integration features found in common markets, members of an economic union must be able to maintain
consistency with monetary policy, fiscal policy, and tax policy. An economic union also uses a common
currency. It should be noted that an economic union requires that member states give up a significant amount of
their independent sovereignty. The European Union is an example of an economic union.
*In other words, the more integrated economies become, the fewer the trade barriers are, and the more
economic and political coordination there is between countries.
References:
Lobo, J, Maliban, N, & Mesinas, M. (2019) The Contemporary World. Books Atpb. Publishing Corp.
Claudio, L & Abinales, P. (2018) The Contemporary World. C & E publishing, Inc.
Brazalote, T & Leonardo, R. (2019) The Contemporary World. C &E publishing, Inc.