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What is Globalisation?
Globalisation means integrating the economy of the country with the world economy. As a result of globalisation international markets regarding goods, services, technologies, finance and labour are integrated. National economies are thrown open to the market forces of the world and the scope of government's national macro economic policies is curtailed. In short, free flow of economic transactions across the political boundaries of nations or borderless trade is globalisation.
In a broader sense, globalisation is the expansion and intensification of connections and movements-of people, goods, capital, ideas and cultures-between countries. To some people, this process implies the need to replace national institutions with the global ones. A more integrated global system has also increased consciousness of such shared problems as pollution, disease, crime and terror, which many have come to believe can only be dealt at the global level. Most broadly, globalisation is the expansion and intensification of linkages and flows across borders.
While globalisation is primarily considered as a synonym for global business comprising of four aspects-trade, capital investments, movement of people and spread of information technology, it is much more than that. The same forces that allow businesses to operate also allow social activists, labour organisers, journalists, academics and many others to work on a global stage. However, technology and trade are considered the two leading forces in globalisation. Technology provides the mechanisms that make globalisation possible and trade is globalisation applied.
According to the International Monetary Fund," Globalisation is characterised by increases in flow of trade, capital and information, as well as mobility of individuals across borders."
Liberalisation is also an offshoot of globalisation. It implies freedom to the entrepreneurs to establish any industry, trade or business venture. De-control, deregulation and de-licensing are its buzzwords. It insists on free capital markets which are open to private as well as foreign enterprises.
Privatisation means that the ownership of any entity is transferred from public to private sector. It gives priority to the role of private sector instead of public sector.
Characteristics of Globalisation
- Integration of domestic economy with the global economy.
- Opening up of the economy to foreign capital, foreign investment, foreign technology and free competition.
- Free international trade with liberalised approach towards exports and imports. Removal of all tariffs and non-tariff restrictions.
- Expansion of multinational corporations.
- Free flow of international capital and other economic transactions across the political boundaries of the nations.
- Information technology is integral to the process of globalisation.
- The scope of the process of globalisation has been increasing rather than narrowing over time, taking on cultural, political, social and environmental dimensions in addition to the economic.
- Several international institutions including the WTO, World Bank, IMF and UN agencies play an important role in the process of globalisation.
- Thus, globalisation is characterised by skrinking space, shrinking time and disappearing borders. It has swung open the door to opportunities.
Factors Responsible for Globalisation
Major causes of emergence of globalisation are:
- Policies of Liberalisation: Pursuance of policies of liberalisation by different countries in the post-communist era mainly account for the growth of globalisation. As a result of these policies, restrictions on international economic transactions were removed. With the removal of these constraints, road to globalisation was all clear. First, impact of openness was witnessed in world trade (in goods and services). It was followed by foreign direct investment and financial sector.
- Technological Revolution: Revolution in the spheres of transport and communication has converted the world into a global village. Jet aircrafts, computers, satellites, internet, e-commerce, e-mail and information technology all have served to remove frontiers of time and space. Besides, the cost of transmission and reception of information has fallen considerably.
- New Forms of Industrial Organisation: Development of new managerial techniques in the industrial organisation has also accelerated the process of globalisation. Owing to technological advancement mentioned above, falling share of wages in the cost of production, increasing importance of mutual closeness between producers and consumers, etc, firms are in a dilemma to choose between foreign trade and foreign direct investment to participate in expanding international sector.
- Failure of Soviet Socialist Model: In the late 1980s and early 1990s, centrally planned and command economies of the Soviet Union and East European countries miserably failed. By 1991, communist system collapsed in these countries due to dismal economic performance, controlled markets and closed door policy. After the failure of Soviet Socialist Model, all these countries adopted Western model of free market economy, policies of liberalisation and globalisation.
- Example of Some Developing Countries: Experience of some Asian developing countries also promoted the idea of globalisation. These countries were South Korea, Thailand, Malaysia, Taiwan, Hong Kong and Singapore who by adopting the policies of liberalisation and globalisation achieved new heights of economic success. Their economic success story earned for them the name of "Asian Tigers". China also succeeded in achieving high rate of economic growth by resorting to the process of globalisation. These success stories inspired other countries to globalise their economies.
- Role of USA: After the triumph of the US in the Cold War, it proved to the world that the Western capitalism and liberalism are far superior to socialism and communism. After the victory of capitalism, the US pursued the liberal foreign policy of enlargement of free market democracies more vigorously. Countries of the world started following the bandwagon of the US. Since 1945, America has been emerging as a super power in the world polity. Disintegration of the Soviet Union, collapse of communism and triumph of capitalism elevated the status of America to a sole super power. Political supremacy of the US has also been instrumental in hastening the process of globalisation.
- Role of International Institutions: Several International institutions namely, the WTO, IMF, World Bank as well as UN agencies such as ILO, UNDP, UNCTAD, etc have also created an international environment in which the process of globalisation may flourish. With the formation of WTO in 1995, this process was accelerated. It is the primary rule making body of the globalisation process. The United Nations Organisation (UNO) also plays a key role as a central pillar of the international system in the management of global economic integration.