- July 30, 2012
- Posted by: essay
- Category: Sample essay papers
Globalization is the process of global economic, political and cultural integration and unification. Its main consequence is global division of labor, worldwide migration of capital, human and productive resources, and standardization of legislation, economic and technological processes, as well as convergence and merging of cultures of different countries. It is an objective process that covers all aspects of society. As a result of globalization, the world becomes more connected and more dependent on its subjects. The number of problems common for groups of states increases, as well as the number and types of integrating subjects (Steger, 2009).
Economic aspects of globalization are characterized by free trade, free movement of capital, reduction of taxes on business profits, mobility of industries between different countries in order to reduce the costs of labor and natural resources.
Recognizing the internal contradiction of this process, Western experts and politicians nonetheless prefer to state its inevitability and benefits for mankind.
Adam Smith formulated the absolute advantage theory and showed that countries are interested in the free development of international trade, because they can benefit from it regardless of whether they are exporters or importers. D. Ricardo’s comparative advantage theory showed that international specialization is beneficial: if a country produces more particular commodities for fewer prices, it can gain more profits in international trade.
According to the Heckscher-Ohlin model, countries seek to export surplus and import scarce production factors, compensating for the relatively low state’s provision with production factors within the world economy (Kemp, 2008).
Globalization’s advantages and disadvantages are perceived differently at different levels in different countries by different companies. Corporations have come to realize the potential benefits of globalization of their marketing activities. Modern multinational companies are global in scale, producing and selling products and getting their financial resources wherever and however they want, as long as it best fits their long-term strategic plans. They are able to mobilize capital from any developed market in order to minimize costs and maximize profits (Steger, 2009).
Reason for globalization of world financial markets is the need to find financial resources to address global problems of world development: overcoming poverty, problems of peace; disarmament and the prevention of global nuclear war; food problem and problem of natural resources; environmental problem; demographic problem and problem of human development, etc.
The globalization of financial markets is closely linked with the formation of virtual economy. In addition, it relates to the universalization of world markets, i.e. formation of standard procedures and standardization of financial institutions (Kemp, 2008).
Strengthening the links between financial centers of different countries has caused:
- · ubiquitous presence of international financial institutions (contributing to the reduction of government interference in the activities of domestic market and liberalization of international financial relations);
- · international financial integration (free capital movement from domestic to global financial market, and vice versa);
- · financial innovations, i.e. creating the new financial instruments and technological innovation. Telecommunications help banks involve savings from deposit pools around the world and direct funds to borrowers on the terms of the highest income and lowest cost.
Like any complex process, globalization has its pluses and minuses. Development of international competition and labor division, on the one hand, allow national economies to improve their effectiveness, but on the other hand, put them at risk of weakening. But, whatever the attitude to globalization of its opponents and supporters is, we must admit that it has already become a reality and changed the entire world system (Steger, 2009).