Growth of globalisation
Globalisation is the term used to describe the growing economic integration of the world’s economy. It is suggested that as globalisation takes place, national economies are becoming integrated into a single ‘global economy’ with similar characteristics. There are interrelationships throughout the world between businesses, between consumers and between businesses and consumers. Decisions taken in one part of the world affect other parts. The process is driven by technological advances and reductions in the costs of international transactions, as well as reductions in the costs of transportation.
Certain factors have contributed to the growth of globalisation. At a national economy level, we can refer to the way that national economies are becoming more closely integrated with each other. One obvious example of this is the way that countries within Europe have become more closely integrated in recent years, both with the single market measures of 1992, and most recently the establishment of the single European currency. Tariffs and other impediments have been gradually reduced under the auspices of the General Agreement on Tariffs and Trade (GATT) in the period after the second world war.
This process has been continued under the guidance of the World Trade Organisation (WTO). All these moves have meant a more integrated and interdependent global economy. Technological change has played an important role in globalising the world’s economy. More powerful computers and communications technology have allowed easy transfer of data. The internet is beginning to revolutionise the way in which consumers purchase products. The cost of transportation has fallen.
Between 1930 and 1990 the average revenue per mile in air transport fell from 68 cents to 11 cents (at 1990 US dollar prices). The cost of a three minute telephone call between New York and London fell from $244 to $3. Consumer tastes and their responses have changed. Consumers in many countries are more willing to buy foreign products. Examples include cars from Korea and Malaysia which are now purchased in Europe. It could also be argued that consumers around the world have increasingly similar tastes.
Also read about globalization in the Philippines
Some food products, such as Cadbury’s chocolate, are sold in many countries with little difference to their ingredients. Between 1980 and 1990 the volume of international trade almost doubled. In part this can be accounted for by increases in production during the same period. However, since 1945, increases in production have been far outstripped by increases in the volume of international trade. The overall number of poor people has at last stopped increasing, falling, in fact, by an estimated 200 million.
Life expectancy and schooling are rising in the new globalisers to levels close to those in rich countries in the 1960s. The operation of multinational companies can be seen in many countries around the world. Familiar products and brand names appear worldwide. For example, by 1995, the production of foreign branches of multinational companies generated $7,000 billion. This exceeded global exports of goods and services by 20%. Many businesses base their strategic decisions on the global market rather than the national market.
For example, a business may make parts for a product in several different countries, and assemble them in another because this is the most cost effective and efficient method to get the product to its consumer. This will tend to make use of the business’ competitive advantage by locating production wherever it is most efficient. Businesses are increasingly merging or joining with others, often in other countries, in order to better provide its goods or services to a global market. Both manufacturers and retailers are operating on a global basis.
This can also help with distribution in foreign markets. There is economic logic behind globalisation – it makes sense for countries to specialise in activities in which they have a comparative advantage. It is this that has kept world trade growing on a faster trend than world output though all the turbulence of wars and political upheavals in latter half of last century. Since 1950, world trade volume has risen by nearly 2900% – evidence that new markets have developed, and that large multinationals are taking advantage of this.
Globalisation’s fiercest critics, however, argue that this process is a force for oppression, exploitation and injustice. Markets, they claim, have been developed on the exploitation of cheap labour in such countries as Malaysia, Taiwan and the Philippines. Conflicting views have questioned the nature and future of globalisation. Some see it as a natural development of markets throughout the world, while others see it as an artificially developed system that does not responsibly utilise the world’s scarce resources.
Some attribute the new economic paradigm to the success of globalisation, and the benefits it has brought us. Subsequent to the attacks on September 11, economists argue that the forces of globalisation, which once seemed unstoppable, are facing new resistance. Fears over security might raise the costs of international trade and persuade more businesses to ‘stay at home’. However, on reflection, it would seems that only a seismic shock would be able to cancel out the forces that made the world economy increasingly integrated during the second half of the 20th century.