Name : Armie L.

Rico Subject : BM 228 Social Responsibility

Time : 7:00 a.m. to 12:00 noon Professor : Dr. E. E. Llamedo

ECONOMIC GLOBALIZATION AND THE BUSINESS PLACE

Introduction

Economic globalization is one of the three main dimensions of

globalization commonly found in academic literature, with the two others being

political globalization and cultural globalization, as well as the general term of

globalization. Economic globalization refers to the widespread international

movement of goods, capital, services, technology and information. It is the

increasing economic integration and interdependence of national, regional, and

local economies across the world through an intensification of cross-border

movement of goods, services, technologies and capital. Economic globalization

primarily comprises the globalization of production, finance, markets, technology,

organizational regimes, institutions, corporations, and people. Globalization has

been a boon to businesses, consumers and the Western economy as a whole.

Now, however, we are at risk of having a backlash against globalization and all

the opportunities that increasing economic freedom has provided us with over

the past decades. There is a new anxiety running through Western societies that

challenges previous perceptions about freer trade as a win-win for every country.
 There is rather a proliferating suspicion that globalization may have been great

for some countries, but not for others, and that it is affluent countries in the West

that have drawn the shortest straw.

To understand and evaluate economic globalization, one has to

investigate and account for not only economic activities and their impact but also

the institutions and the rules (or “the system”) that govern and should govern

these activities and consequences. While economic globalization has been

expanding since the emergence of trans-national trade, it has grown at an

increased rate due to improvements in the efficiency of long-distance

transportation, advances in telecommunication, the importance of information

rather than physical capital in the modern economy, and by developments in

science and technology. The rate of globalization has also increased under the

framework of the General Agreement on Tariffs and Trade and the World Trade

Organization, in which countries gradually cut down trade barriers and opened

up their current accounts and capital accounts. This recent boom has been

largely supported by developed economies integrating with developing countries

through foreign direct investment, lowering costs of doing business, the reduction

of trade barriers, and in many cases cross-border migration.

Summary of the topic/s/Topics digest

Globalization is about interconnecting people around the world beyond the

physical barrier of geographical boundaries. These advances in economic

globalization were disrupted by World War I. Most of the global economic powers

constructed protectionist economic policies and introduced trade barriers that

slowed trade growth to the point of stagnation. This caused a slowing of

Globalization did not fully resume until the 1970s, when governments began to

emphasize the benefits of trade. Today, follow-on advances in technology have

led to the rapid expansion of global trade. Three suggested factors accelerated

economic globalization: advancement of science and technology, market

oriented economic reforms, and contributions by multinational corporations. The

1956 invention of containerized shipping, along with increases in ship sizes, were

a major part of the reduction in shipping costs. Globalization has made it easier

for new companies to start competing with old incumbents. The trade sector has

increased the number of people that it employs, both through exports and

imports. Globalization helped to reduce high inflation rates in Western

economies, giving consumers more “bang for the buck”. Many goods that

previously were affordable to only the few – e.g. a mobile phone or sewing

machine – are now common in most households.

Recommendations

There are many different ways to examine how globalization has improved

businesses, living standards and the performance of the entire economy. Let us

start, however, with a quick primer on trade and what economists mean when

they are talking about globalization. There are several explanations to the

remarkable growth of trade over time, but one obvious factor behind it has been

firms and their business development. In a way, the growth of exports is just

another way of saying that firms have gradually sold more to foreign customers

or that foreign customers have played an increasingly important role for the total

sales by the corporate sector. As a thought experiment, try to imagine how a

company would have evolved without globalization. There is no way to fully

some of the differences in business opportunity between alternative scenarios.

And one difference is obvious: if a company only has market access to the

inhabitants in its home country (in Ericsson’s case, ten million Swedes) it has to

build another type of business than if it has access to the global market. What is

more, market size is of particular importance for those companies that produce

goods and services that are innovative and have a high intensity of R&D or

capital expenditures. If their potential customer base is small, it means that every

unit of sales has to recoup a larger share of the investments the firm made in

developing and producing a product. The flip side of the coin, however, is that the

growth of customers abroad help these firms to spread development and

production expenditures over many more unit of sales.

Conclusion

Globalization has spurred the spread of new technology, helping to make

economies greener and more productive. It helps to reduce gender wage

discrimination and giving new opportunities to women. Globalization was a great

force of spreading new technologies and providing new economic opportunity to

labor in both developed and developing economies. Contrary to much

commentary, it helped to put a higher premium on human capital and giving firms

new chances to employ the staff they need to compete successfully. It is for this

reason that the age of globalization experienced a growth in global trade that,

functionally, reflected the breakup of large multinationals into fragmented supply

and value chains. No large company has enough resources to become

produce a good or service.

If companies had to rely on just domestic markets for their sales and

inputs, they would not have been able to innovate and develop products in the

way they actually have over the past 30 years. It would have been too costly, and

– most likely – they would have to produce in ways that, compared with today,

would have made the quality of products substantially lower. It is often forgotten

how many markets in the pre-globalization era were dominated by expensive

products with low quality. And that did not happen by chance; it was rather the

consequence of narrow opportunities for business in how they could compete

and develop their offerings.

Workers have benefitted substantially from the way that globalization increased

the premium for scale and specialization. There is a general pattern in the world

economy that open economies are much better for workers than less open

economies (see Box 4). And the improvements made in open economies partly

comes from the fact that the new production they generate depends more on

human capital. Workers that have more and better education, and that is better at

delivering creative solutions to problems, have higher salaries and better

employment conditions.