What is Globalization?



Aug 3, 2020
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There's this thing out there called globalization. We've all heard of it, but do you know what it is? It seems to be one of those things that we listen to the talking heads on the news discuss. It also seems that we need to take a stance on it. Are you for globalization or against it? It's not only economical, but apparently political as well. With good reason, so it seems.

Globalization has gotten popular over the past few decades. During this time, the world has seen a marked uptick in cultural, political, and economic ties between nations, trade blocks, and groups. One of the most visual indications of this is the increased trade we see so often. Whether it be with physical and tangible items or digital products and services, there's no denying that the world has become much smaller. Even hard assets such as land, real estate, and businesses have seen and increase in international trade. Global financial capital is flowing more freely than it ever has.

Have you ever asked yourself why this increase in global trade has occurred? If you think for a moment, you'll likely answer that question yourself. If not, I'll tell you. First and foremost, digital communication is more prolific and less expensive than it's ever been in the history of the world. And with the creation and existence of the internet, more people, businesses, and organizations can now buy, sell, and communicate than ever before. The internet and access to digital communication has laid the groundwork for an explosion of trade. While all of this was happening though, shipping cargo by both air and sea has become less expensive as well. The reason for these lower transportation costs can be explained by looking at shipping competition as well as improved efficiency.

Beyond this, tapping into global intellectual assets has played a huge factor in global trade. Because of the proliferation of global communication, talented employees can be accessed like never before. Today, companies are looking to employees from all over to help create computer software, digital website applications, financial products, travel and vacation planning, different types of entertainment, such as music, books, and movies, architecture, various designs, and so much more. All of these things can be easily transmitted over the digital communication cables that lie deep beneath the sea. And the best part is, the cost of this type of communication is dropping every day, while the quality is rising.

Finally, international trade agreements and treaties between nations have spurred global trade activity. Although these agreements are topics for rabid political debate, there's no denying that they've played a large part in what's going on today.

For many nations, the ratio between exports and GDP has risen. Some nations have fared better than others in this department. There are reasons for this, and those reasons are varied. Sometimes a nation can offer something that's desired internationally and sometimes there's simply an abundance of what a nation can offer that they can't use themselves. If you think about a random country, perhaps they have an abundance of copper in their ground, but don't have a developed economy that calls for that resource. By opening up internationally, they can mine and sell that copper abroad and the income from that alone might drive their GDP higher than it's ever been. Conversely, if a nation such as the United States, with its huge GDP and wide diversification, increased its imports and exports, their effect wouldn't be as dramatic as a nation's with a smaller economy. Larger economies contain much more of the division of labor internally and don't call for many imports. Nevertheless, globalization is on the rise and the majority of nations around the world are all for it. It's been highly profitable for many. In particular, as globalization grows, nations with lower incomes will change the most. They'll see their trade increase dramatically, which will help their economies tremendously. This, in turn, will rise the quality of life for millions, if not billions.
What is Globalization? was posted on 11-02-2020 by LukeLewis in the Economics Forum forum.

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