Economic globalisation: definition and drivers
Economic globalisation describes the process of growing integration between local, national and regional economies and markets.
David Held et al. (1999) suggest that the process of globalisation can be understood in terms of intensity, extensity, velocity and impact:
Intensity refers to the growing number, consistency and magnitude of interactions between local, national and regional economies
Extensity refers to the stretching of economic interconnections across the globe and the integration of more and more local, national and regional economies into the global economy
Velocity refers to the growing speed at which economic connections can be made and interactions occur
Impact – the growing magnitude, extent and speed of economic integration means that local and national events can have global repercussions likewise local and national events are increasingly shaped by incidents occurring on the other side of the planet.
The rapid advance of economic globalisation has led some commentators to endorse the view, first outlined by Japanese management consultant Kenichi Ohmae (1990), that we increasingly inhabit a ‘borderless world’.
This perspective suggests that businesses operate in a seamlessly integrated global economy where political borders, especially those of nation states, cease to be significant factors in commercial decisions.
The rapid expansion in the flows of goods, services, capital, knowledge and people between local, national and regional economies lend credence to this view. Ultimately, however, this portrait of globalisation is exaggerated.
Political borders are still important impediments to the flows of business (witness the many barriers to importing and exporting goods and services over national borders) and people (for instance, try travelling to another country without a passport). Likewise, there are relatively few markets for goods or services that are genuinely global. In short, the definition, extent and business implications of economic globalisation remain highly contested.
Impressions on economic globalisation
In a more critical elaboration Waters (2001: 35-36) argues that somewhere within the equation of economic globalisation;
‘A financial-capital oligarchy emerges out of an institutional amalgamation between bank capital and industrial. This provides the mechanisms for an extension of capitalist exploitation beyond national boundaries by means of capital exports. International capitalist monopolies form, dividing the world between themselves economically and, through the agency of the colonial state, territorially…monopolistic firms only give the appearance of being capital exporters when they are in fact net capital importers…they import profits made in colonies which provide for internal capital accumulation…commodities can be imported to the center at low prices while manufactured goods can be exported at high prices with the difference providing a surplus which returns to the investor and thus makes capital grow. As a consequence, underdevelopment is perpetuated as a pattern of dependency between the colonialist and the colonised.’
‘The dramatic advance of [economic] globalisation and neoliberalism…has been accompanied by an explosive growth in inequality and a return of mass poverty and unemployment. The very opposite of everything which the modern state and modern citizenship is supposed to stand for. The net result is a massive growth in inequality…taking the planet as a whole, the combined wealth of the 358 richest people (all of them dollar billionaires) is greater than the total annual income of 45 percent of the world‘s poorest inhabitants, that is, 2.6 billion people.’ (Cited in Wolf 2004: 139)
There is also a lively debate about precisely what drives economic globalisation.
One view is that the forces of market competition that compels businesses to seek new markets and innovations that have helped to reduce transport and communication costs propel globalisation.
Other emphasise the role of states, especially in recent decades, in removing artificial impediments to the conduct of international business.
During the past 40 years almost all countries have embraced, to varying degrees, economic liberalisation which have reduced barriers to entry for foreign trade and investment.
What do you consider to be the single most important driver of economic globalisation?
To what extent do you agree with any of these impressions on economic globalisation and why?
Held, D., McGrew, A., Goldblatt, D., and Perraton, J. (1999) Global Transformations: Politics, Economics and Culture. Stanford: Stanford University Press
Ohmae, K. (1990) The Borderless World: Power and Strategy in the Interlinked Economy. New York: Harper Business
Waters, M. (2001) Globalisation 2nd edn. London: Routledge
Wolf, M. (2004) Why Globalization Works: The Case for the Global Market Economy. New Haven: Yale University Press
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