Economic globalization is all about you―as an American citizen―using electronic goods made in Taiwan, driving a car manufactured in Europe, or consulting a customer service executive from India to troubleshoot the problem with your laptop. It's an attribute of the broad concept of globalization.
While 'globalization' refers to the process wherein regional economies, societies, and cultures come together on a common platform, 'economic globalization' is integration on the economic front, with the developed, developing, and under-developed economies coming together by means of international trade, foreign direct investments, etc.
What is Economic Globalization?
It refers to increasing economic interdependence of countries as a result of a significant rise in the movement of goods, service, technology, and capital across international borders. Some sources also define it as globalization of markets, wherein the term 'market' aptly replaces the term 'village' in the concept of 'global village'.
It has brought to the surface the concept of global marketplace or a single world market, as a result of which a manufacturer based in one part of the world can sell his product to a consumer in some other part.
It has also given rise to several new concepts including the concept of transnational corporations, i.e., those corporations which are active in a number of countries at the same time, which has become quite prominent of late.
Globalization of national economies is not just restricted to trade relations between countries, but also encompasses foreign direct investment by companies from developed nations in developing nations.
For instance, a large number of North American and European companies are investing in Asian markets. One may argue that it's the cheap labor that brings in the bigwigs from the developed countries to these countries, but that doesn't undermine the fact that it creates employment opportunities in these countries and helps their economy develop.
With due respect to the fact that coordination with each other is the need of this hour, several countries have come together on a common platform in what is referred to as the concept of 'alliance capitalism' of late. This has not just created, but also strengthened the complex networks of production and capital in different parts of the world.
Even various governments have taken a note of the need of integrating economies, and the formation of supranational organizations, like the International Monetary Fund (IMF) and World Trade Organization (WTO), have been facilitated for this very reason.
Economic Globalization Pros and Cons
No doubt about the fact that international trade, foreign direct investments, alliance capitalism, and other similar concepts have been beneficial for several people across the globe. You also cannot ignore that the trend has some negative outcomes. Consider these pros and cons when determining whether the concept is helpful for the world as a whole, or not.
The fact that the world has become a global market has come as a boon for many people. The significant rise in international trade and foreign direct investment over the last few decades has increased employment opportunities and income.
More importantly, economic globalization has also accelerated the rate at which development is taking place in various regions of the world. The fact that countries from Asia have developed in a relatively short span of time as compared to their western counterparts, highlights this fact very well.
The giant strides in terms of technological advancement that we have taken over the last few decades have also contributed to this acceleration.
With increasing opportunities, the ability of individuals to generate enormous amount of wealth has also increased. Several corporations have set up plants in other countries as it helps them evade tariffs or quotas stipulated by those countries.
This has turned out to be quite helpful for end consumer, as doing away with import duties has brought down the price of foreign goods by a great extent. With cheap labor at their disposal, these corporations can also afford to slash down the price of their goods without having to cut down on the profit margin, which is again beneficial for end consumers.
Some disadvantages of globalization which we can't ignore. The interdependence between countries is a boon, critics argue that it is our biggest problem, as the domino effect of economic crisis in one country result in severe effect on various other countries with whom it shares economic ties. The most prominent examples is being the Late-2000s recession.
The fact that corporations from developed countries invest in developing countries of Asia, wherein they get cheap labor, has not gone down to well with critics, who call it exploitation of labor. They also cite that the alarming rate at which development is occurring is not coming easy on our natural resources.
There is a little doubt about the fact that economic globalization has also triggered political and ideological tensions in various parts of the world, which are expected to escalate further as we inch away from the era of military superpower ... towards the era of economic superpower.
Lastly, the argument that development of the world as a whole has been taking place has failed to impress these critics, who cite that the interdependence of nations has not done much to help poverty-struck countries of Asia and Africa, wherein, even today, a significant portion of the world population is reeling under poverty.
With all these arguments, the critics suggest that even though economic globalization is occurring, we are not heading in right direction. To put it in the words of the Commission on Global Governance, "a sophisticated, globalized, increasingly affluent world currently co-exists with a marginalized global underclass."