Globalization

Introduction
What is globalization? Is it interdependence of world economies? or inter related economic, social and political activities followed as the unique world?

At present, globalization has recognized as the driving force of changing world economies. Is it bad or good? Is it able achieving expected outcomes?

Is Globalization a development ideology or tactical method followed by super powers to control economic and political power? What do you think?

1.1 Definitions
Globalization is not a recent phenomenon. The information shows that the world economy was globalized 100 years ago as it is today. As expansion of international trade, technology and investment over the world, literature of globalization were also enriched with sound conceptual base. Thus the globalization has defined from the different point views of social scientists

According to Webster’s dictionary, globalize means “to make worldwide in scope of application.”

As a multi-faceted concept, globalization has described in terms of economic dimension and their social, political and distributional dimensions. The term globalization defines 'boundryless trade and information' or 'Integration of the World Economy’ through trade, investment and the global movement of capital. Thereby, the globalization has defined according to various disciplines;

From the economists’ point of views, globalization is a growing economic interdependence of all countries and integration of national market into one global market through the increasing amount and variety of cross border transactions in goods and services, capital and money movements and technology transfers.

According to political scientists; globalization is the spread of democracy, human rights, basic freedom, gender equity, good governess and civil society for the sake of achieving sustainable economic development to overcome the poverty and environmental issues.

Socially, it is an organization of social life on a global scale, and growth of a global consciousness, hence to the consolidation of world society


Activity 1.1:
Explain the definitions and different views of globalization

1.2 Conceptual Base

The conceptual foundation of globalization was based on five characteristics such as trade, capital movements, labor movements and spread of knowledge and technology. Though this categorization is somewhat subjective, it indicates the main features of globalization i.e. international trade, international investment international immigration and technology.

As the multi lateral trading system the globalization was evolved from center-periphery theory that the development was occurred as input –output channel between the center of European countries and the periphery of developing countries, Thus the periphery was used as the market for output produced by the center and the source of raw materials supplied for the center.

Thus the theories related to globalization were derived from international trade theories, international investment theories, models of international labour movements, technological and knowledge.

International trade theories were developed by classical and neo-classical economists by emphasizing the type of trade and gains from international trade. Thus the comparative advantage theory was presented and developed by David Ricardo, Hecksher and Ohlin and Samuelsson. It explained how determine international trade, resource utilization and consequence effect of receiving trade gains as static and dynamic gains among trade partners. New trade theories such as Human Skills Theory, Product Life Cycle Theory Overlapping Demand Theory and strategic trade theories are explained how international trade is occurred under competitive advantage.

International investment theories such as Two Gap Model, Debt Cycle Theory and the Theory of Assets Selection and the labour migration theories provide the theoretical sound for the globalization process.


Activity 1.2:


Describe the conceptual and the theoretical base of globalization



1.3: Driving Forces of Globalization

According to past experience of globalization process over the world, four elements were recognized as the driving forces of globalization. It includes technological advancement, liberalization policies, factor mobility and internationalization of business activities

Technological Advancement

As will be discussed in the next sessions technology play a vital role in increasing efficiency of production and trade by expanding production possibility frontier Technological change occurs when the same amount of output can be produced by fewer factor inputs, or equivalently, when the same amount of inputs can produce greater amount of output. As a result of innovations, research, & development (R&D) activities done in the the world, technological innovations have led to increase the productivity of industrial and agricultural products and to slash the transportation and other cost remarkably.

Thus, the relationship between globalization and technology was closely linked together for the benefit towards the world development. As defined by Paul Romer (1996), “The technology invokes images of manufacturing, but most economic activity takes place outside of factories. Ideas include the innumerable insights about packaging, marketing, distribution, inventory control, payments, information systems, transactions, processing, quality control and worker motivation that are all used in the creation of the economic value in a modern economy.” Thus as a broad concept, it is considered as a “black box” which represents the economy’s production function, in which technology defines the efficiency with which inputs are transformed into output.

Consequently conversions of Technological advancement were positively contributed to increase and double the Gross Domestic Products (GNP) and the per capita income of many developing countries within a short period. Compared to western industrial countries that spend nearly 100 years for doubling economic growth, newly industrial countries like Korea, Singapore, Taiwan and the Honking were able to double their GNP witin ten fifteen years due to conversion effect of technological advancement from industrilized countries.. Innovations and R&D activities done in developed countries were caused to increase the food production and food security of the world economy.

The liberalization of trade and investment has expanded the boundaries of factor and product mobility. Thus liberalization allows any country to access resources, finance, technology and market. Due to the strong relationship between trade and growth, all developing countries peruse outward looking or primary export led development strategies that encouraging the production of exports. It seems that newly developed East Asian countries have followed liberal economic policies strictly before they developed. GATT/WTO is also play a vital role in the reduction or elimination of broader barriers to trade through multi lateral trade negations.

International mobility of human capital or labor immigration becomes one of the main factors in globalization both in terms of transferring technology and remitting capital to mother country. Measuring of human capital is based on education. Though, education and human capital treated as synonymous, education does not always result in the creation of human capital. Expenditure on education, the percentage of children attending in school and average years of schooling are regarded as the main measures used for measuring human capital.

As a result of development of world economy since World War II, value of human capital and international immigration was increased in the world. At the end of 1970s, more than 20 million labors were flowed across the world, of who 12 million were from developing countries and 8 million from developed countries. Unite States admitted about 500.000 technical and professional workers, of nearly three fourth from developing countries. Canada, Australia, New Zealand and some EU countries also received many immigrants from developing countries.

Internationalization of business and trade activities through bi lateral and multi lateral trade arrangements were significantly affected to world trade. Reginald and area economic integration are also important in this processs.

Activity 1.3:


List key driving forces of globalization and explain the role of conversion of technological advancement for accelerating global economic development