The increasing globalization of markets

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This page is being edited by Peter Friedl EMBA09. In case of any questions/remarks contact me.


Description:

Globalization describes the process of growing integration of information, technology, capital, goods, services, and people throughout the world.

The globalization of markets can be understood as the growing interconnection and integration of markets, like financial markets, labour markets, trade markets etc.

Economic globalization can be measures in different ways [Wikipedia on Globalization]. These center around the four main economic flows that characterize globalization:

  • Goods and services, e.g., exports plus imports as a proportion of national income or per capita of population
  • Labor/people, e.g., net human migration|migration rates; inward or outward migration flows, weighted by population
  • Capital (economics)|Capital, e.g., inward or outward direct investment as a proportion of national income or per head of population
  • Technology, e.g., international research & development flows; proportion of populations (and rates of change thereof) using particular inventions (especially 'factor-neutral' technological advances such as the telephone, motorcar, broadband)

Globalization of Production: It can be observed that companies are increasingly dispersing parts of their production process to different locations around the globe to take advantage of national differences in the cost and quality of production factors (land, labor, capital, legislation).

Globalization of Markets: It has been argued that the world is moving away from an economic system in which national markets are distinct entities, isolated from each other by trade barriers and barriers of distance, time, and culture, toward a system in which national markets are merging together into one huge global marketplace.

Causes of Global Shift: Two factors underlie the trend toward the increasing globalization of markets and of production. The first is the declining of barriers to enable the free flow of goods, services, and capital. The second factor are the dramatic changes in communication, information, and transportation technologies.

Consequences of Global Shift: Companies need to recognize that industry boundaries do not stop at national borders and that they have to face this change to remain competitive. Also nations or regions have to take steps to stay competitive in this global environment.

Enablers:

Inhibitors

  • Nationalism and protectionism
  • Local power lobbies and corruption
  • Religious conflicts
  • Trade barriers and tariffs
  • Financial of economic crisis
  • War and terrorism (link to driving force Global Terrorism)
  • Increase of consumer prices

Paradigms:

Market globalization decreases national governments control on unemployment, GDP fluctuations, etc.. Laws and regulations should therefore be made on a global basis.

Possible decreasing power of governments and increasing power of companies, which set a totally different political and economic arena. The rules to adhere to in this situation have yet to be created.

The globalization of markets can benefit—and has benefited—rich and poor alike. But the integration of the global economy is outpacing the development of a healthy global policy. To realize the values and rules critical to a secure and just world—and to make the full benefits of a global market available to all—will require better global politics.

If the globalization of the market leads to continents or countries which cannot compete anymore, trade barriers (= de-globalization) might be a counter reaction.

Experts:

  • World Trade Organization
  • United Nations
  • OECD
  • IMF
  • CBS

Timing:

Globalization started with the rise of the first trade links in ancient times.

The 19th century saw a peak in globalization. Industrialization lead to reduced costs for produciton items, while rapid population growth created sustained demand for commodities and manufactures. Globalization in this period was decisively shaped by nineteenth-century imperialism. The European colonies in Africa, South-America and Asia became source for valuable natural resources and consumers for European exports.

The first World War, followed by the Great Depression in the late 1920s and early 1930s put a halt to this kind of globalization.

After the second World War globalization was largely the result of planning by politicians to break down borders hampering trade to increase prosperity and interdependence thereby decreasing the chance of future war. The removal of restrictions on free trade lead to an increase in global trade and a specialization of the manufacturing industry. The technological progress in transport infrastructure and communication technology in the 1990s was another important spur for globalization.

Although the globalization of the markets seems well progressed, the limits of globalizations are not reached. Large regions of emerging and less developed countries are not taking part in the globalized markets yet.

Web Resources: