Effect of globalization in the current era
Answers
Answered by
1
Globalization has become a familiar enough word, the meaning of which has been discussed by others before me during this conference. Let me nonetheless outline briefly what I understand by the term. I shall then go on to consider what has caused it. The bulk of my paper is devoted to discussing what we know, and what we do not know, about its consequences. I will conclude by considering what policy reactions seem to be called for.
THE CONCEPT
It is the world economy which we think of as being globalized. We mean that the whole of the world is increasingly behaving as though it were a part of a single market, with interdependent production, consuming similar goods, and responding to the same impulses. Globalization is manifested in the growth of world trade as a proportion of output (the ratio of world imports to gross world product, GWP, has grown from some 7% in 1938 to about 10% in 1970 to over 18% in 1996). It is reflected in the explosion of foreign direct investment (FDI): FDI in developing countries has increased from $2.2 billion in 1970 to $154 billion in 1997. It has resulted also in national capital markets becoming increasingly integrated, to the point where some $1.3 trillion per day crosses the foreign exchange markets of the world, of which less than 2% is directly attributable to trade transactions.
While they cannot be measured with the same ease, some other features of globalization are perhaps even more interesting. An increasing share of consumption consists of goods that are available from the same companies almost anywhere in the world. The technology that is used to produce these goods is increasingly standardized and invariant to the location of production. Above all, ideas have increasingly become the common property of the whole of humanity.
This was brought home to me vividly by a conference that I attended four years ago, where we discussed the evolution of economic thought around the world during the half-century since World War Two (Coats 1997). We debated whether the increasing degree of convergence in economic thinking and technique, and the disappearance of national schools of economic thought, could more aptly be described as the internationalization, the homogenization, or the Americanization of economics. My own bottom line was that economics had indeed been largely internationalized, that it had been substantially homogenized, but only to a limited extent Americanized, for non-American economists continue to make central contributions to economic thought, as the Nobel Committee recognized by its award to Amartya Sen a few weeks before this conference took place. Incidentally, the nicest summary of the change in economic thinking over the period was offered by the Indian participant in that conference, who remarked that his graduate students used to return from Cambridge, England focusing on the inadequacies of the Invisible Hand, while now they return from Cambridge Mass. focusing on the inadequacies of the Visible Hand! In the same vein, one of the more telling criticisms of my phrase "the Washington Consensus" was that the (substantial though certainly incomplete) consensus on economic policy extends far beyond Washington.
However, there are areas where globalization is incomplete, even in the economic sphere. In particular, migration is very far from being free. Highly skilled professionals have a relatively high degree of mobility, but those without skills often face obstacles in migrating to higher-wage countries. Despite the difficulties, substantial proportions of the labour forces of some countries are in fact working abroad: for example, around 10% of the Sri Lankan labour force is now abroad.
Moreover, globalization is much less of a reality in other fields than it is in the economic one. Culture still displays strong national, and even regional and local, variations. While English is clearly in the process of emerging to be a common world language, at least as a second language, minority languages are making something of a comeback, at least in developed countries. Sport is still very different around the world: the Americans have still not learnt to play cricket, and most of the rest of us have still not learned to understand what they see in baseball. Although the nation state is far less dominant than it used to be, with significant powers being devolved both downwards to regional and local authorities and upwards to international and in Europe to supranational institutions (and although "interfering in the internal affairs of another state" is less frowned on than formerly), politics is still organized primarily on the basis of nation-states.
THE CONCEPT
It is the world economy which we think of as being globalized. We mean that the whole of the world is increasingly behaving as though it were a part of a single market, with interdependent production, consuming similar goods, and responding to the same impulses. Globalization is manifested in the growth of world trade as a proportion of output (the ratio of world imports to gross world product, GWP, has grown from some 7% in 1938 to about 10% in 1970 to over 18% in 1996). It is reflected in the explosion of foreign direct investment (FDI): FDI in developing countries has increased from $2.2 billion in 1970 to $154 billion in 1997. It has resulted also in national capital markets becoming increasingly integrated, to the point where some $1.3 trillion per day crosses the foreign exchange markets of the world, of which less than 2% is directly attributable to trade transactions.
While they cannot be measured with the same ease, some other features of globalization are perhaps even more interesting. An increasing share of consumption consists of goods that are available from the same companies almost anywhere in the world. The technology that is used to produce these goods is increasingly standardized and invariant to the location of production. Above all, ideas have increasingly become the common property of the whole of humanity.
This was brought home to me vividly by a conference that I attended four years ago, where we discussed the evolution of economic thought around the world during the half-century since World War Two (Coats 1997). We debated whether the increasing degree of convergence in economic thinking and technique, and the disappearance of national schools of economic thought, could more aptly be described as the internationalization, the homogenization, or the Americanization of economics. My own bottom line was that economics had indeed been largely internationalized, that it had been substantially homogenized, but only to a limited extent Americanized, for non-American economists continue to make central contributions to economic thought, as the Nobel Committee recognized by its award to Amartya Sen a few weeks before this conference took place. Incidentally, the nicest summary of the change in economic thinking over the period was offered by the Indian participant in that conference, who remarked that his graduate students used to return from Cambridge, England focusing on the inadequacies of the Invisible Hand, while now they return from Cambridge Mass. focusing on the inadequacies of the Visible Hand! In the same vein, one of the more telling criticisms of my phrase "the Washington Consensus" was that the (substantial though certainly incomplete) consensus on economic policy extends far beyond Washington.
However, there are areas where globalization is incomplete, even in the economic sphere. In particular, migration is very far from being free. Highly skilled professionals have a relatively high degree of mobility, but those without skills often face obstacles in migrating to higher-wage countries. Despite the difficulties, substantial proportions of the labour forces of some countries are in fact working abroad: for example, around 10% of the Sri Lankan labour force is now abroad.
Moreover, globalization is much less of a reality in other fields than it is in the economic one. Culture still displays strong national, and even regional and local, variations. While English is clearly in the process of emerging to be a common world language, at least as a second language, minority languages are making something of a comeback, at least in developed countries. Sport is still very different around the world: the Americans have still not learnt to play cricket, and most of the rest of us have still not learned to understand what they see in baseball. Although the nation state is far less dominant than it used to be, with significant powers being devolved both downwards to regional and local authorities and upwards to international and in Europe to supranational institutions (and although "interfering in the internal affairs of another state" is less frowned on than formerly), politics is still organized primarily on the basis of nation-states.
Answered by
2
please me in brain list
As noted by the McKinsey professionals, ‘countries that participate in global flows gain exposure to ideas, research, technologies, talent and best practices from around the world.’ Therefore, it comes as no surprise that global digital flows support global economic growth. As per the report, global flows raised world GDP growth by 10 percent in 2014 alone!
Finally, digital globalization creates an entirely new type of goods that are traded: virtual goods. Here we speak about E-books, online games, apps, music and video streaming services, which are just a ‘click away’, yet part of a global trading system. In fact, any smartphone user is most probably taking part in this trade of virtual goods on a daily basis, for example when commuting, queuing, or procrastinating J
As such, we are witnessing a new era of globalization and the great opportunities this era offers. Yet, it is also important to note that not all countries (and individuals) participate in digital globalization equally. As with many different types of flows, digital flows also remain dominated by a small group of leading countries, mainly developed ones. Given this new phase of globalization and the continuous development of the digital world in general, it seems that staying away from this world is not an option. As the McKinsey report authors conclude, ‘for countries that have been slow to participate, the opportunities for catch-up growth are too substantial to ignore’.First of all, everyone can participate in digital globalization; hence, globalization becomes more inclusive. The McKinsey analysis shows that the amount of cross-border bandwidth that is used has grown 45 times since just 2005. As noted in one of my previous blog posts, social media platforms allow every ‘average Facebook user’ to tap into the global market. As such, globalization is not only up to big multinationals anymore, but also for small businesses and entrepreneurs around the world.
Another change stemming from digital globalization concerns increased efficiency. With all digital platforms and technology available, entrepreneurs, small businesses and large companies can manage their international (and also domestic) operations faster, with fewer resources and with less cost. For example, just think about the telecommuting options, which save internationally active employees both time and money, which they would otherwise spend on travel. Naturally, information flows and its immediate accessibility allow companies for better planning, decision making and flexibility in light of global market changes as well.Yet, McKinsey professionals argue that globalization is not done yet with big shifts and new patterns… On the contrary, we seem to be entering a new era of globalization. More specifically, the McKinsey report highlights that, if in the 20th century globalization was visible mainly in terms of physical goods and finances, then today we are entering a phase of digital globalization, defined largely by flows of data and information. As a matter of fact, digital flows of data and information now generate more economic value than global trade of physical goods. And that sounds like a major shift, given that the digital world has been nascent only for some 15 years, and yet, through its impact on GDP, already outnumbers the centuries-old trade of goods!
Naturally, this shift of globalization to a more digital form implies considerable changes!Although many consider globalization to be the buzzword of the last decades, economic historians would argue that globalization has a history that stretches back thousands of years. As brought up in a relevant Economist article, the trend of trade expansion is linked to specialization and is ‘nearly as old as civilization’. The process seems quite logical indeed: first you specialize, hence become good in making certain goods, and then you try to sell them to those that are not as good in the same craft. Given the similar population background and environmental conditions in a certain geographical area, one needs to look for customers outside one’s region, thus expanding the trade and integrating with different markets. Naturally, discoveries of new territories, development of infrastructure and modes of transportation were the great shifts in globalization that created rapid growth and spread of global trade, which eventually developed into the globalized world we witness today.
As noted by the McKinsey professionals, ‘countries that participate in global flows gain exposure to ideas, research, technologies, talent and best practices from around the world.’ Therefore, it comes as no surprise that global digital flows support global economic growth. As per the report, global flows raised world GDP growth by 10 percent in 2014 alone!
Finally, digital globalization creates an entirely new type of goods that are traded: virtual goods. Here we speak about E-books, online games, apps, music and video streaming services, which are just a ‘click away’, yet part of a global trading system. In fact, any smartphone user is most probably taking part in this trade of virtual goods on a daily basis, for example when commuting, queuing, or procrastinating J
As such, we are witnessing a new era of globalization and the great opportunities this era offers. Yet, it is also important to note that not all countries (and individuals) participate in digital globalization equally. As with many different types of flows, digital flows also remain dominated by a small group of leading countries, mainly developed ones. Given this new phase of globalization and the continuous development of the digital world in general, it seems that staying away from this world is not an option. As the McKinsey report authors conclude, ‘for countries that have been slow to participate, the opportunities for catch-up growth are too substantial to ignore’.First of all, everyone can participate in digital globalization; hence, globalization becomes more inclusive. The McKinsey analysis shows that the amount of cross-border bandwidth that is used has grown 45 times since just 2005. As noted in one of my previous blog posts, social media platforms allow every ‘average Facebook user’ to tap into the global market. As such, globalization is not only up to big multinationals anymore, but also for small businesses and entrepreneurs around the world.
Another change stemming from digital globalization concerns increased efficiency. With all digital platforms and technology available, entrepreneurs, small businesses and large companies can manage their international (and also domestic) operations faster, with fewer resources and with less cost. For example, just think about the telecommuting options, which save internationally active employees both time and money, which they would otherwise spend on travel. Naturally, information flows and its immediate accessibility allow companies for better planning, decision making and flexibility in light of global market changes as well.Yet, McKinsey professionals argue that globalization is not done yet with big shifts and new patterns… On the contrary, we seem to be entering a new era of globalization. More specifically, the McKinsey report highlights that, if in the 20th century globalization was visible mainly in terms of physical goods and finances, then today we are entering a phase of digital globalization, defined largely by flows of data and information. As a matter of fact, digital flows of data and information now generate more economic value than global trade of physical goods. And that sounds like a major shift, given that the digital world has been nascent only for some 15 years, and yet, through its impact on GDP, already outnumbers the centuries-old trade of goods!
Naturally, this shift of globalization to a more digital form implies considerable changes!Although many consider globalization to be the buzzword of the last decades, economic historians would argue that globalization has a history that stretches back thousands of years. As brought up in a relevant Economist article, the trend of trade expansion is linked to specialization and is ‘nearly as old as civilization’. The process seems quite logical indeed: first you specialize, hence become good in making certain goods, and then you try to sell them to those that are not as good in the same craft. Given the similar population background and environmental conditions in a certain geographical area, one needs to look for customers outside one’s region, thus expanding the trade and integrating with different markets. Naturally, discoveries of new territories, development of infrastructure and modes of transportation were the great shifts in globalization that created rapid growth and spread of global trade, which eventually developed into the globalized world we witness today.
Similar questions