Aspects of Economic Globalization

Introduction

Globalization has accelerated rapidly over the last 20 years, with trade and cross-border capital flows both rising substantially relative to GDP. Trade in goods and services has expanded cotinuously in most countries, and financial integration has also proceeded rapidly.

Economic globalization is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology, and capital. Whereas globalization is centered around the rapid development of science and technology and increasing cross-border division of labor, economic globalization is propelled by the rapid growing significance of information in all types of productive activities and marketization, and the advance of science and technologies. Depending on the paradigm, economic globalization can be viewed as either a positive or a negative phenomenon.

Economic globalization comprises the globalization of production, markets, competition, technology, corporations and industries. While economic globalization has been occurring for the last several hundred years (since the emergence of trans-national trade), it has begun to occur at an increased rate over the last 20–30 years under the framework of General Agreement on Tariffs and Trade and World Trade Organization which made countries to gradually cut down trade barriers and open up their current accounts and capital accounts. This recent boom has been largely accounted by developed economies integrating withless developed economies, by means of foreign direct investment, the reduction of trade barriers, and in many cases cross border immigration.

It can be argued that economic globalization may or may not be an irreversible trend. There are several significant effects of economic globalization. There is statistical evidence for positive financial effects as well as proposals that there is a power imbalance between developing and developed countries in the global economy. Furthermore, economic globalization has an impact on world cultures.

Chapter I - History of globalization

The historical origins of globalization are the subject of on-going debate. Though some scholars situate the origins of globalization in the modern era, others regard it as a phenomenon with a long history.

Since the word has both technical and political meanings, different groups will have differing histories of "globalization". In general use within the field of economics and political economy, however, it is a history of increasing trade between nations based on stable institutions that allow firms in different nations to exchange goods and services with minimal friction.

Globalization refers to the increasingly global relationships of culture, people, and economic activity. It is generally used to refer to economic globalization: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import quotas.

However, there are some researchers who point out that the origins of the history of globalization can be traced back to the ancient civilizations.The example of the earliest forms of globalization is the trade links between the Sumerian civilization and the Indus Valley Civilization. In fact, after this age,there are numerous instances where trade links were established between various countries like India, Egypt, Greece, and Roman Empire and so on.There were regular business links between the Parthian Empire, Roman Empire and Han Dynasty.

The popularity of the trade relations led to the development of various trade routes like Silk Road.

The term "liberalization" came to mean the acceptance of the Neoclassical economic model which is based on the unimpeded flow of goods and services between economic jurisdictions. This led to specialization of nations in exports, and the pressure to end protective tariffs and other barriers to trade. The period of the gold standard and liberalization of the 19th century is often called "The First Era of Globalization". Based on the Pax Britannica and the exchange of goods in currencies pegged to specie, this era grew along with industrialization. The theoretical basis was David Ricardo's work on Comparative advantage and Say's Law of General equilibrium. In essence, it was argued that nations would trade effectively, and that any temporary disruptions in supply or demand would correct themselves automatically. The institution of the gold standard came in steps in major industrialized nations between approximately 1850 and 1880, though exactly when various nations were truly on the gold standard is contentiously debated.

The "First Era of Globalization" is said to have broken down in stages beginning with the first World War, and then collapsing with the crisis of the gold standard in the late 1920's and early 1930's. Countries that engaged in that era of globalization, including the European core, some of the European periphery and various European offshoots in the Americas and Oceania, prospered. Inequality between those states fell, as goods, capital and labour flowed remarkably freely between nations.

The industrial revolution in the 19th century was one of the major periods in the history of globalization. Due to the industrial revolution, there was a significant increase in the quantity and quality of the products. This led to higher exports and better trade and business relations.Due to better products and colonization,lots of countries across the world becamethe consumers of the European market. The phase of pre globalization perhapscame to an end after the First World War.

Globalization, in the modern sense of the term, came into existence after the Second World War. One of the main factors for this was the plan by the world leaders to break down the borders for fostering trade relations between nations. It was also in this period that major countries like India, Sri Lanka, Indonesia and some countries in South America gained independence. As a result, these countries started having their own economic systems and established trade relations with the rest of the world.