Over the course of the 20th century, globalization is all we talk about. It has considerably improved our living standards, all over the world. Globalization worldwide has boosted productivity, by using workers in more productive ways, which enables a better development overall. Consumers are also buying more foreign goods, and trade has flourished greatly over the past century.
Some critics might argue that globalization brings more competition between developing countries, and destroy jobs and push down wages, in developed countries as well. One of their arguments is that countries reduce wages, taxes, welfare benefits and environmental controls to make themselves more 'competitive', which is brought by the competitiveness between countries. There are obviously positive and negative effects coming from globalization. But to understand what is really happening we have to look at the definition of globalization and what is meant by it.
Even though people still argue that globalization is new, it has been happening for longer than we think. Globalization started 50 years before the first world war. But it ended abruptly due to the first world war, and did not start again due to the second world war and the Great Depression. To restore their prosperity, firms and government agreed to reduce trade barriers. After 1995, trade flourished again due to the GATT, the General Agreement on tariffs and Trade, which organized a series of negotiations that gradually reduced import tariffs. By the end of the 1970's, one of their systems collapsed, enabling currencies to "float" against one another, at whatever rate the market set. This was the rebirth of global capital markets. Most of Europe followed the American trend except France and Italy. Continental European nations are now worried, because America has been exposed to capital markets for much longer.
Two forces have been driving globalization forward. One of them is obviously technology. Everything has become cheaper due to the falling costs of production. Communication has become much better due to technology, and firms can communicate with their entities all over the world whenever they wish to.
The second major force driving globalization forward is liberalization. Almost every country has lowered its barriers to foreign trade and international capital. For example, Britain and France are more open to trade than they used to in 1913, while Japan is less open now than then. In theory, the wages and prices of goods should be the same in countries all over the world, yet there are some major differences between the United States and Europe or Japan. This reflects a variety of factors including tastes, transport costs, difference in taxes and inefficient distribution networks.
But while capital and product markets have been increasingly integrated, labor markets have not. This means that even though tens of millions of people work outside their home countries, the labor force is less mobile. There are many reasons for it, such as language, cultural barriers, and incompatible educational and professional qualifications.
Could globalization be reversed a second time? Doubtful. Because of technological advancements and lower communication costs, as well as better foundations for market systems, it is less likely that globalization can be reversed at this stage.
Some critics might argue that globalization brings more competition between developing countries, and destroy jobs and push down wages, in developed countries as well. One of their arguments is that countries reduce wages, taxes, welfare benefits and environmental controls to make themselves more 'competitive', which is brought by the competitiveness between countries. There are obviously positive and negative effects coming from globalization. But to understand what is really happening we have to look at the definition of globalization and what is meant by it.
Even though people still argue that globalization is new, it has been happening for longer than we think. Globalization started 50 years before the first world war. But it ended abruptly due to the first world war, and did not start again due to the second world war and the Great Depression. To restore their prosperity, firms and government agreed to reduce trade barriers. After 1995, trade flourished again due to the GATT, the General Agreement on tariffs and Trade, which organized a series of negotiations that gradually reduced import tariffs. By the end of the 1970's, one of their systems collapsed, enabling currencies to "float" against one another, at whatever rate the market set. This was the rebirth of global capital markets. Most of Europe followed the American trend except France and Italy. Continental European nations are now worried, because America has been exposed to capital markets for much longer.
Two forces have been driving globalization forward. One of them is obviously technology. Everything has become cheaper due to the falling costs of production. Communication has become much better due to technology, and firms can communicate with their entities all over the world whenever they wish to.
The second major force driving globalization forward is liberalization. Almost every country has lowered its barriers to foreign trade and international capital. For example, Britain and France are more open to trade than they used to in 1913, while Japan is less open now than then. In theory, the wages and prices of goods should be the same in countries all over the world, yet there are some major differences between the United States and Europe or Japan. This reflects a variety of factors including tastes, transport costs, difference in taxes and inefficient distribution networks.
But while capital and product markets have been increasingly integrated, labor markets have not. This means that even though tens of millions of people work outside their home countries, the labor force is less mobile. There are many reasons for it, such as language, cultural barriers, and incompatible educational and professional qualifications.
Could globalization be reversed a second time? Doubtful. Because of technological advancements and lower communication costs, as well as better foundations for market systems, it is less likely that globalization can be reversed at this stage.
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