Globalization

Globalization

1. The Implications of Globalization

   • Subject of intensive research
   • Four main issues of investigation
     • will globalization promote faster economic growth?
     • will globalization promote or undermine macroeconomic stability?
     • will globalization promote growing income inequality?
     • how should governmental institutions at all levels adjust their powers and responsibilities in view of the emergence of a global market?

2. Macroeconomic Stability

   • many forms of international capital flows have risen dramatically
   • Economic theory
     • asserts that trade in financial assets will benefit individual countries in ways analogous to trade in goods.
   • financial flows ought to remain restricted so as to minimize the chance that international financial disturbances would create global macroeconomic instabilities.
   • financial flows from advanced to emerging markets can create profound destabilization.

3. Income Distribution

   • trade is motivated by differing factor proportions
   • ramifications of trade between rich and poor countries are ostensibly more threatening to particular social groups,
   • theory suggests
     • regions can gain overall from this kind of trade, though workers within each country may well lose
   • there is still no consensus on the effects of the globalized economy on income distribution within the advanced and emerging markets
   • evidence suggests that growing inequalities are not simply a problem of developed economies but also of developing economies.
     • globalization is supporting a new "winner-take-all" approach in labor markets.
   • increased globalization limits the ability of union workers to achieve a "union wage premium" in collective bargaining

4. Economic Governance

   • having a deep effect on politics
   • national marketplace is losing its salience relative to international markets
   • the national market is simply too small to permit an efficient level of production in most areas of industry and even in many areas of services
   • globalization has proved a catalyst for internationally agreed-upon rules of behavior in trade
   • national government is no longer seen as a critical instrument of security
     • counties take globalization as their cue to pursue greater autonomy within the nation-state

5. Economic Growth

   • countries with large natural resource bases
     • uncompetitive in most manufacturing sectors
   • If the economy is geographically isolated
     • the chances for extensive trade are extremely limited
     • Tropics
       • impose additional burdens of infectious disease and often poor agricultural conditions
   • producers of natural resources might get "trapped" into an unsatisfactory specialization of trade
     • delaying or blocking the improvements in industry