book.chapter Defining globalization

Globalization is a term used ubiquitously yet lacks a precise, universally accepted definition. At its core, globalization refers to the emergence of a unified global marketplace for labor, goods, services, and capital. In this idealized single market, workers receive equal pay regardless of location, goods cost the same everywhere, interest rates converge across borders, and flows of investment capital face minimal restrictions. Of course, the world remains far from this vision. Major upheaval continues as the world moves closer to this integrated ideal. Some experts thus propose a more grounded definition of globalization as "the acceleration of processes in the international economy and domestic economies that operate toward unifying world markets." While the exact meaning is debated, scholars largely agree globalization stems from several political, economic, and technological developments over recent decades: - China's economic opening to the West beginning in 1979. - The fall of the Berlin Wall in 1989. - Policy decisions by major powers like the US to remove trade barriers and liberalize capital flows, such as the General Agreement on Tariffs and Trade in 1947 and Uruguay Round from 1986-1994. - The establishment of the World Trade Organization in 1994. - Ongoing reductions in communication and transportation costs fueled by new technologies. - Deregulation allowing unrestricted cross-border capital flows. Globalization threatens many companies by enabling firms worldwide to access resources and incorporate them into existing markets in new ways. These resources include: - Low-cost skilled labor forces. - Cutting-edge manufacturing facilities. - Innovative and experienced technicians. - Access to leading-edge innovation and problem-solving skills. - The ability to rapidly scale up production without large upfront investments. - Shorter time-to-market and compressed product development cycles. - Ready-to-use modules and components to create new products. - World-class manufacturing and operations expertise. - On-demand production capacity and professional services like marketing. - Unrestricted access to the most capable manufacturers globally. As scholar Suzanne Berger describes, "The liberalization of trade opens new zones for investment and production, as an ever-wider array of goods and services can be made in low-wage markets and exported into the markets of advanced countries." Firms leverage production bases in developing countries not just to export back home but also to reach those emerging markets. Newly open economies represent entirely new customer bases. The ingenuity of the American workforce continually reinvents the economy in unpredictable ways. Over the past half-century, advances in agricultural technology dramatically increased farm productivity. As a result, the farming workforce shrank from 20% in 1940 to only 2% today. The grandchildren of farmers became website designers, CAT scan technicians, and other high-wage roles unimaginable in 1940. Technology leads to new opportunities in ways impossible to predict. Globalization integrates economies and societies worldwide to an unprecedented degree. It has swallowed consumers, corporations, and entire industries while eroding traditional boundaries and reducing the power of bureaucrats, politicians, and militaries. The global economy exerts tremendous power over local and national affairs across the planet. The nature of global threats has evolved over the past fifteen years. In the 1980s, advanced economies like Japan and Germany posed the largest perceived threats to American workers and economic dominance. Today, rapidly growing developing countries like China and India represent the new challengers. Developing countries now account for 31% of global merchandise exports, with over 70% being manufactured goods. Globalization continually reshapes economic relations and realities. In summary, while scholars continue working to reconcile the many contradictory claims surrounding globalization, a standard definition remains elusive. Globalization broadly refers to the expanding integration and interdependence between countries and peoples worldwide, driven by policies liberalizing trade and capital flows, new technologies shrinking communication costs, and the resulting rise of a more unified global marketplace.