which phase of globalisation allowed movement of goods and services across borders but not labour?
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Globalization Key Issue English (PDF) 08/02 - May 2008
Globalization: A Brief Overview
By IMF Staff
A perennial challenge facing all of the world's countries, regardless of their level of economic development, is achieving financial stability, economic growth, and higher living standards. There are many different paths that can be taken to achieve these objectives, and every country's path will be different given the distinctive nature of national economies and political systems. The ingredients contributing to China's high growth rate over the past two decades have, for example, been very different from those that have contributed to high growth in countries as varied as Malaysia and Malta.
Yet, based on experiences throughout the world, several basic principles seem to underpin greater prosperity. These include investment (particularly foreign direct investment), the spread of technology, strong institutions, sound macroeconomic policies, an educated workforce, and the existence of a market economy. Furthermore, a common denominator which appears to link nearly all high-growth countries together is their participation in, and integration with, the global economy.
There is substantial evidence, from countries of different sizes and different regions, that as countries "globalize" their citizens benefit, in the form of access to a wider variety of goods and services, lower prices, more and better-paying jobs, improved health, and higher overall living standards. It is probably no mere coincidence that over the past 20 years, as a number of countries have become more open to global economic forces, the percentage of the developing world living in extreme poverty—defined as living on less than $1 per day—has been cut in half.
As much as has been achieved in connection with globalization, there is much more to be done. Regional disparities persist: while poverty fell in East and South Asia, it actually rose in sub-Saharan Africa. The UN's notes there are still around 1 billion people surviving on less than $1 per day—with 2.6 billion living on less than $2 per day. Proponents of globalization argue that this is not because of too much globalization, but rather too little. And the biggest threat to continuing to raise living standards throughout the world is not that globalization will succeed but that it will fail. It is the people of developing economies who have the greatest need for globalization, as it provides them with the opportunities that come with being part of the world economy.
These opportunities are not without risks—such as those arising from volatile capital movements. The International Monetary Fund works to help economies manage or reduce these risks, through economic analysis and policy advice and through technical assistance in areas such as macroeconomic policy, financial sector sustainability, and the exchange-rate system.
The risks are not a reason to reverse direction, but for all concerned—in developing and advanced countries, among both investors and recipients—to embrace policy changes to build strong economies and a stronger world financial system that will produce more rapid growth and ensure that poverty is reduced.
The following is a brief overview to help guide anyone interested in gaining a better understanding of the many issues associated with globalization.
What is Globalization?
Economic "globalization" is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political, and environmental dimensions of globalization.
The term "globalization" began to be used more commonly in the 1980s, reflecting technological advances that made it easier and quicker to complete international transactions—both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity—village markets, urban industries, or financial centers.
There are countless indicators that illustrate how goods, capital, and people, have become more globalized.
The value of trade (goods and services) as a percentage of world GDP increased from 42.1 percent in 1980 to 62.1 percent in 2007.
Foreign direct investment increased from 6.5 percent of world GDP in 1980 to 31.8 percent in 2006.
The stock of international claims (primarily bank loans), as a percentage of world GDP, increased from roughly 10 percent in 1980 to 48 percent in 2006.1
The number of minutes spent on cross-border telephone calls, on a per-capita basis, increased from 7.3 in 1991 to 28.8 in 2006.2
The number of foreign workers has increased from 78 million people (2.4 percent of the world population) in 1965 to 191 million people (3.0 percent of the world population) in 2005.
What Is Globalization?
How much has the modern global economy helped or hurt American businesses, workers, and consumers? Here is a guide to this complex and much debated topic.
What Is Globalization?
And How Has the Global Economy Shaped the United States?
Originally published October 29, 2018
Last updated October 24, 2022
After centuries of technological progress and advances in international cooperation, the world is more connected than ever. But how much has the rise of trade and the modern global economy helped or hurt American businesses, workers, and consumers? Here is a basic guide to the economic side of this broad and much debated topic, drawn from current research.
Globalization is the word used to describe the growing interdependence of the world’s economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information. Countries have built economic partnerships to facilitate these movements over many centuries. But the term gained popularity after the Cold War in the early 1990s, as these cooperative arrangements shaped modern everyday life. This guide uses the term more narrowly to refer to international trade and some of the investment flows among advanced economies, mostly focusing on the United States.
The wide-ranging effects of globalization are complex and politically charged. As with major technological advances, globalization benefits society as a whole, while harming certain groups. Understanding the relative costs and benefits can pave the way for alleviating problems while sustaining the wider payoffs.
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Today, Americans rely on the global economy for many of the things they buy and sell, and to expand their businesses and make investments. Many products and services have become affordable to the average American through the coordination of production across countries.
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The Peterson Institute for International Economics (PIIE) is an independent nonprofit, nonpartisan research organization dedicated to strengthening prosperity and human welfare in the global economy through expert analysis and practical policy solutions.
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THE HISTORY OF GLOBALIZATION IS DRIVEN BY TECHNOLOGY, TRANSPORTATION, AND INTERNATIONAL COOPERATION
Since ancient times, humans have sought distant places to settle, produce, and exchange goods enabled by improvements in technology and transportation. But not until the 19th century did global integration take off. Following centuries of European colonization and trade activity, that first “wave” of globalization was propelled by steamships, railroads, the telegraph, and other breakthroughs, and also by increasing economic cooperation among countries. The globalization trend eventually waned and crashed in the catastrophe of World War I, followed by postwar protectionism, the Great Depression, and World War II. After World War II in the mid-1940s, the United States led efforts to revive international trade and investment under negotiated ground rules, starting a second wave of globalization, which remains ongoing, though buffeted by periodic downturns and mounting political scrutiny.
GLOBALIZATION IN CHARTS
Foreign direct investment (FDI) involves establishing ownership or controlling interest of a business in another country.
China, India, and Brazil dropped their rates to enter the World Trade Organization (WTO).
Global supply chains are production networks that assemble products using parts from around the world (known as intermediate goods). Today, 80 percent of world trade is driven by supply chains run by multinational corporations. Trade in intermediate goods is now nearly twice as large as trade in final goods and is especially important in advanced manufacturing, like autos.
Globalization in Business With History and Pros and Cons
Globalization is the spread of products, investment, and technology across national borders and cultures.
Globalization in Business With History and Pros and Cons
By JASON FERNANDO Updated June 29, 2022
Reviewed by SOMER ANDERSON
Fact checked by AMANDA BELLUCCO-CHATHAM
Alex Dos Diaz / Investopedia
What Is Globalization?
Globalization refers to the spread of the flow of financial products, goods, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade.
Globalization is the spread of products, technology, information, and jobs across nations.
Corporations in developed nations can gain a competitive edge through globalization.
Developing countries also benefit through globalization as they tend to be more cost-effective and therefore attract jobs.
The benefits of globalization have been questioned as the positive effects are not necessarily distributed equally.
One clear result of globalization is that an economic downturn in one country can create a domino effect through its trade partners.
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Corporations gain a competitive advantage on multiple fronts through globalization. They can reduce operating costs by manufacturing abroad, buy raw materials more cheaply because of the reduction or removal of tariffs, and most of all, they gain access to millions of new consumers.
Globalization is a social, cultural, political, and legal phenomenon.
Socially, it leads to greater interaction among various populations.
Culturally, globalization represents the exchange of ideas, values, and artistic expression among cultures.
Globalization also represents a trend toward the development of a single world culture.
Politically, globalization has shifted attention to intergovernmental organizations like the United Nations (UN) and the World Trade Organization (WTO).
Legally, globalization has altered how international law is created and enforced.
On one hand, globalization has created new jobs and economic growth through the cross-border flow of goods, capital, and labor. On the other hand, this growth and job creation are not distributed evenly across industries or countries.
Specific industries in certain countries, such as textile manufacturing in the U.S. or corn farming in Mexico, have suffered severe disruption or outright collapse as a result of increased international competition.
Globalization's motives are idealistic, as well as opportunistic, but the development of a global free market has benefited large corporations based in the Western world. Its impact remains mixed for workers, cultures, and small businesses around the globe, in both developed and emerging nations.
The History of Globalization
Globalization is not a new concept. Traders traveled vast distances in ancient times to buy commodities that were rare and expensive for sale in their homelands. The Industrial Revolution brought advances in transportation and communication in the 19th century that eased trade across borders.
The think tank, Peterson Institute for International Economics (PIIE), states globalization stalled after World War I, and nations' moved toward protectionism as they launched import taxes to more closely guard their industries in the aftermath of the conflict. This trend continued through the Great Depression and World War II until the U.S. took on an instrumental role in reviving international trade.
Globalization has sped up at an unprecedented pace, with public policy changes and communications technology innovations cited as the two main driving factors.
One of the critical steps in the path to globalization came with the North American Free Trade Agreement (NAFTA), signed in 1993.
One of NAFTA's many effects was to give American auto manufacturers the incentive to relocate a portion of their manufacturing to Mexico where they could save on the costs of labor.
NAFTA was replaced in 2020 by the United States-Mexico-Canada Agreement (USMC).
Governments worldwide have integrated a free market economic system through fiscal policies and trade agreements over the last 20 years. The core of most trade agreements is the removal or reduction of tariffs.
This evolution of economic systems has increased industrialization and financial opportunities in many nations. Governments now focus on removing barriers to trade and promoting international commerce.
Pros and Cons of Globalization
Proponents of globalization believe it allows developing countries to catch up to industrialized nations through increased manufacturing, diversification, economic expansion, and improvements in standards of living.
Outsourcing by companies brings jobs and technology to developing countries, which helps them to grow their economies. Trade initiatives increase cross-border trading by removing supply-side and trade-related constraints.
Globalization has advanced social justice on an international scale as well, and advocates report that it has focused attention on human rights worldwide that might have otherwise been ignored on a large scale.
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