The Impact of Globalization on the Economy
1. Introduction
The paper considers the extent to which globalization of the economy has taken place. It is going to be established that globalization of the economy is currently at a high level.
2. What is globalization?
– The definition of globalization
Globalization is a process of increased interconnectedness among people, organizations, and countries. Globalization has been driven by international trade, investment, and technology. With increased global trade, businesses have become more multinational, with production and marketing operations in many countries around the world. The global economy has also become increasingly financialized, with capital flows moving more freely around the world. And finally, information and communication technologies have transformed how people communicate and connect with each other, making the world seem smaller.
– History of globalization
The process of globalization started long ago, but it has accelerated rapidly in recent years. The first wave of globalization took place between 1870 and 1914, when there was a dramatic increase in global trade and investment. The second wave took place between 1945 and 1973, when decolonization led to a further increase in global trade and investment. The third wave began in the 1980s and is still ongoing, characterized by a further increase in global trade and investment as well as by the globalization of other aspects of social life, such as culture and technology.
3. The current state of globalization
– The global economy
The global economy has grown rapidly in recent years, driven by an increase in international trade and investment as well as by the globalization of other aspects of social life, such as culture and technology (Wells). With this growth, however, has come increased economic inequality both within and among countries (Economist).
In 2017, global trade reached a record $19.5 trillion (World Trade Organization), up from $17 trillion in 2016. This growth was driven by an increase in both exports and imports: exports grew by 4 percent while imports grew by 5 percent (WTO). The top five exporting countries were China ($2.2 trillion), the United States ($1.6 trillion), Germany ($1.3 trillion), Japan ($686 billion), and the Netherlands ($604 billion). The top five importing countries were China ($1.9 trillion), the United States ($1.6 trillion), Germany ($1.5 trillion), Japan ($693 billion), and France ($602 billion) (WTO).
The United Nations Conference on Trade and Development (UNCTAD) reports that FDI flows reached a record $1.52 trillion in 2017, up from $1.43 trillion in 2016 (UNCTAD). The top five host economies were the United States ($275 billion), China ($136 billion), Hong Kong ($116 billion), Singapore ($75 billion), and Switzerland ($59 billion). The top five source economies were the United States ($40 billion), China ($31 billion), Japan ($30 billion), Hong Kong ($27 billion), and Singapore ($24 billion) (UNCTAD).
The World Bank reports that remittances—money sent home by migrants working abroad—reached a record $613 billion in 2016, up from $586 billion in 2015 (World Bank). This growth was driven by an increase in both the number of migrants sending money home as well as the amount of money they were sending: there were an estimated 250 million migrants sending money in 2016, up from 244 million in 2015, and the average amount of money sent home was $2,413, up from $2,347 in 2015 (World Bank). The top five remittance-receiving countries were India ($69 billion), China ($64 billion), Mexico ($31 billion), the Philippines ($30 billion), and Egypt ($26 billion) (World Bank).
– Multinational corporations
The globalization of the economy has led to the rise of multinational corporations (MNCs). These are companies that have production and/or marketing operations in more than one country. MNCs have grown rapidly in recent years, with the top 100 companies now having operations in an average of 60 countries (UNCTAD). The largest MNC is American company Walmart, which has operations in 27 countries and employs 2.3 million people (Fortune). The second-largest MNC is French company Total, which has operations in 130 countries and employs 100,000 people (Fortune). The third-largest MNC is German company Siemens, which has operations in 190 countries and employs 370,000 people (Fortune).
– The financial crisis
The globalization of the economy has led to increased financialization, with capital flows moving more freely around the world. This has made the world economy more vulnerable to financial shocks. The most recent example of this was the global financial crisis of 2007-2008, which began with the collapse of the US subprime mortgage market and quickly spread around the world (IMF). The crisis resulted in a sharp decrease in global trade and investment as well as a rise in unemployment and poverty levels (Economist).
– Emerging economies
The globalization of the economy has had a significant impact on emerging economies. These are economies that are in the process of industrializing and developing. Many emerging economies have benefited from increased trade and investment as well as from the transfer of technology and know-how from developed economies. However, some emerging economies have been negatively affected by the globalization of the economy, particularly those that are highly dependent on exports of raw materials or have experienced sudden capital inflows (IMF).
4. Conclusion
In conclusion, it can be seen that globalization of the economy is currently at a high level. Global trade and investment flows have reached record levels, driven by an increase in multinational corporations and by the globalization of other aspects of social life, such as culture and technology. However, globalization has also led to increased economic inequality both within and among countries. The most recent example of this is the global financial crisis of 2007-2008, which highlights the need for improved regulation of global financial markets.