Globalization (Economics)

Economic integration of national economies into the international economy through trade. Globalization is mainly the result of tech nological innovation that reduces the cost of production and facilitates the rapid movement of economic and financial resources as well as finished products across national boundaries.

By definition, globalization is not a novel phenome non. The first wave of globalization occurred roughly between 1870 and 1914, as a result of the removal of trade barriers and new technologies that reduced trans portation costs as a result of the introduction of railways and the shift from sail ships to steamships. The second wave of globalization occurred after World War II until about 1980. It was largely propelled by manufacturing and agglomeration economies (clusters and vertical link ages) to exploit location and minimize costs associated with transportation, coordination, and monitoring.

The latest wave is characterized by the breakthrough of some developing countries into the world markets for manufactures by taking advantage of labor-intensive skills. These countries include China, Bangladesh, Mexico, and Thailand. The latest wave has been expe dited by the advent of the Windows operating system, uploading, outsourcing, insourcing, off-shoring, and sup ply-chaining (the immediate replacement of goods sold as a result of electronic communication with the sup plier). Technological innovation also eliminates the reliance on intermediaries. For example, rural farmers can now bypass the dominant classes and castes to participate directly in markets because of information diffusion.

Contemporary globalization is not without aversion. Critics point to unemployment (as a result of job dis placement and changing structure), increasing poverty, child labor, wage depression, inconvenient cultural transformation; and environmental problems caused by the agents of globalization (including transnationals, the World Trade Organization, and the International Monetary Fund) in some areas of the world. Those in favor of globalization see the problems in terms of the lack of efficient management of irreversible globalization. For more information, see Bhagwati (2004), Carbaugh (2007), Friedman (2006), Lowenfeld (2003), and Stiglitz (2003).