Mankind has engaged in trade throughout human history. People traded their personal belongings for other items they desired. In addition, people traded their skills for important items or other skillsets of greater or equal value. I see globalization as just that — the trading of goods and services, albeit on an international scale. Globalization spans across countries, cultures, and ideas. Instead of trading goods and services with family or neighbors, large and small enterprises are expanding their reach of potential customers to the rest of the world and using globalization to reach the most amount of people possible. Levin Institute describes globalization as an interconnected process between people, companies and governments which is driven by international trade.
Some of the forces driving globalization are reduction in trade tariffs, market liberalization, and economic integration, as well as advances in technology. Governmental reduction in tariffs and freer, more integrated markets have resulted in an increase of imports and a wider access to goods/services at much cheaper prices. For example, a Japanese car manufacturer wanting to sell cars in the U.S. market, can now, due to reduction in tariffs, open a manufacturing plant in the U.S., thereby servicing the local demand for Japanese cars, as well as reducing cost of transport. This has essentially created closely interconnected and integrated economies that look to globalization as a tool for various benefits, such as to attain higher GDPs. The less tariffs one country erects, the more business it attracts. This not only benefits the local economy of the country, but also the foreign corporation doing business within that country.
Market liberalization has also allowed firms to borrow, lend and engage in foreign transactions. The membership in the WTO of countries like China, India, and South Korea has widely opened the market of goods to global foreign investment. Because of this global forum of exchange, the World Trade Organization (WTO) was formed in 1995 to help police the free trade agreements amongst countries and help settle disputes between governments. As of June, 2014, there are 160 member in the WTO. Counties that are part of the WTO agree not to hinder trade by erecting tariffs. Instead, they subscribe to free-flow of goods, services, people and ideas, by engaging in mutually beneficial transactions.
Significant advances in technology also drive globalization. Some of the key technological advances aiding the expansion of globalization have been in manufacturing, communication, information transfer, and transportation. The advancement of technology has changed how firms transport goods, from large freight ships to jet planes. Manufacturing advancements have allowed companies to produce finished goods faster than ever before, and they are also able to deliver products at a much greater rate due to automation. The use of smartphones and cellular devices has grown dramatically with over 6 billion people having access to at least one mobile devices today. By itself, India, a developing nation, has 1.2 billion mobile users . Mobile devices allow people to reach each other instantly.
Moreover, the interconnectedness of databases allows firms to share data in a matter of seconds. Businesses are able to order supplies over the phone and get them delivered the next day or sooner, and reducing the latency between order and delivery is becoming a key facet of the marketplace.
The rise of the Internet and the evolution of information technology (IT) has greatly impacted globalization. Information technology is everywhere, from Internet on mobile devices, to smart televisions, laptops, and tablet PCs. IT has changed the dynamics of human culture and how humans interact with one another. As access to technology and information networks improve worldwide, the instantaneous exchange of ideas and information will become a global norm and borders will no longer serve as a barrier to economic and social interactions.
The rise of globalization has numerous potential effects, both positive and negative. For large enterprises, globalization has helped increase the potential size of target markets by reaching consumers in places which were previously unserviceable. For developing nations this has both been beneficial and detrimental. Bringing technology and goods which were previously unavailable to impoverished nations can help improve education and quality of life while boosting economic growth. Opening a developing economy up to free competition through trade liberalization, however, can stunt the internal economic growth of a nation by failing to protect fledgling markets, as was the case in several Latin American states in the early 1990’s (5). Although this is a risk to developing nations, potentially leading to greater economic and social inequality, I believe that generally the expansion of globalization will help increase the standard of life and level of education worldwide and greatly benefit the global community.