The main reason for globalization
Answers
Main reasons that have caused globalisation
Improved transport, making global travel easier. For example, there has been a rapid growth in air-travel, enabling greater movement of people and goods across the globe.
Containerisation. From 1970, there was a rapid adoption of the steel transport container. This reduced the costs of inter-modal transport, making trade cheaper and more efficient.
Improved technology which makes it easier to communicate and share information around the world. E.g. internet. For example, to work on improvements on this website, I will go to a global online community, like Upwork, the world's largest online workplace. There, people from any country can bid for the right to provide a service. It means that I can often find people to do a job relatively cheaply because labour costs are relatively lower in the Indian sub-continent.
Growth of multinational companies with a global presence in many different economies.
Growth global trading blocks which have reduced national barriers. (e.g. European Union, NAFTA, ASEAN)
Reduced tariff barriers encourage global trade. Often this has occurred through the support of the WTO.
Firms exploiting gains from economies of scale to gain increased specialisation. This is an essential feature of new trade theory.
Growth of global media.
Global trade cycle. Economic growth is global in nature. This means countries are increasingly interconnected. (e.g. recession in one country affects global trade and invariably causes an economic downturn in major trading partners.)
Financial system increasingly global in nature. When US banks suffered losses due to sub-prime mortgage crisis, it affected all major banks in other countries who had bought financial derivatives from US banks and mortgage companies.
Improved mobility of capital. In past few decades, there has been a general reduction in capital barriers, making it easier for capital to flow between different economies. This has increased the ability for firms to receive finance. It has also increased the global interconnectedness of global financial markets.
Increased mobility of labour. People are more willing to move between different countries in search for work. Global trade remittances now play a large role in transfers from developed countries to developing countries.
Explanation:
- Globalization helps in increasing the standard of living.
- Globalization increases the market value of a country.
- It helps to reduce the restrictions on capital investments.
- It creates subsidies to trade with the rest of the world.
- It has increased trade with the rest of the world.
- The international flow of technology and capital is increased.
- Production can be done in any region of the world where the raw material is available at cheaper prices.
- Globalization helps in the reduction of costs.
- Helps in building better political and social links.