CONCEPT OF GLOBALIZATION
WHAT IS GLOBALIZATION?
This is the technological effect in reducing the physical distance among nations through information technology to bring about socio-economic integration. It is the increased integration of world economies through trade and capital flow facilitated by the growth in information technology. Through globalization, there is cross national flows of goods and services and shon tem and long tern capital flow. Globalization is the process of international integration arising from the interchange of world views, product, ideas and other aspect of cultute. Through globalization, the whole world has become a single market. It implies that and goods and services, capital and labour are traded on worldwide basis. Globalization ensures freedom of exchange, flow of capital, goods and services and capacities across national boundaries.
FACTORS RESPONSIBLE FOR GLOBALIZATION
- Change in technology: Computerization and technological breakthrough have positive impact on globalization. Revolution in information technology has made the world to become a global village. It has dramatically transformed economic life of people all over the world.
- Trade liberalization: Different policies were introduced by nations to remove restriction on trade in order to encourage trade liberalization. This has facilitated opening up of new markets across regions of the world.
- Capital market integration: Free flow of short term and long tern funds from one country to another has significant impact on globalization. There is perfect mobility of capital because investors are searching for where to receive the highest returns.
- Mobility of labour: There is free mobility of skilled labour from one country to another. This has helped trade on a worldwide basis.
- Development of unipolar world: The collapse of Soviet Union in the 80's has lead to the emergence of a unipolar world. Most countries of the world especially the eastern nations started removing all forms of barriers to flow of goods and services.
- Emergence of new economic orders like IMF, World Bank: New international financial institutions like IMF, World Bank were set up. With the emergence of these institutions, new economic order came into being.
- Activities of General Agreement on Trade and Tariff: The General Agreement on Trade and Tariff helps in pulling down barriers to trade in member nations. This help in no small way in ensuring expansion in trade.
ADVANTAGES OF GLOBALIZATION
- Promotion of trade and exchange: Globalization promotes free flow of goods and services across national boundaries. This has lead to specialization which has increased output and productive efficiency. It helps in developing international trade.
- Free flow of capital: There is an unfettered movement of both short and long term capital from areas of surplus to areas where there aN nuximum retums.
- Improvement in quality of goods: Technological improvement has led to increase in quality of products at reduced costs. In the face ofglobalization there is a shift towards production ofquality goods using the latest technology.
- There is free flow of technology: Technological and telecommunication breakthroughs have increased through globalization. This is because there is no restriction to the flow of information and technological innovations across national boundaries.
- Promotes understanding and cooperation among nations: Globalization has helped in promoting understanding and goodwill different countries of the world.
- Improvement in standard of living: Technological knowledge helps to produce new goods and services that will improve the standard of living of the people. People have wide varieties of goods to choose from.
- Mobilization of foreign savings: Rapid capital and financial integration has helped in the mobilization of foreign savings for domestic investment and economic growth.
- It reduces government excesses in fiscal and monetary policies: When the government of a country want to introduce any policy it will consider the effect of such policy because the world is now a global village. Any bad policy may lead to isolation bf such country by other other nations. Therefore globalization helps to tame government excesses of policies.
- It expands the market ror export: Businesses and investors have wide opponunities for investment. With globalization most organizations have more access to wider markets thereby increasing export of goods.
- Increase foreign exchange earning: Massive exportation of goods and service to other countries will increase the foreign exchange earning of a country.
DISADVANTAGES OF GLOBALIZATION
- Dependence of one country on another: Through globalization there is increasing economic interdependence of national economies across the world. Even though it is a good phenomenon it may create a situation whereby the developing countries will rely solely on other countries for economic survival.
- It can lead to massive outflow of capital: Globalization can lead to inflow of fund from areas of surplus at the same time loss of confidence in the financial system of country can also lead to massive outflow ofcapital which may affect the economy as whole. For example, Nigerian economy experienced massive outflow of capital some years ago which almost cripple the financial market.
- Loss of culture: Cultural globalization affects the culture of people of other regions. The fradition and culture of the people will change as a result of integration. For example, some people dress and talk like people from other regions.
- Health problem: Through liberation of trade occasioned by globalization, different varieties of goods are imported into a country. Some of them may be dangerous or hazardous to the people.
- Environmental degradation: Some goods which can cause serious pollution are imported into the country under the guise of globalization. For example expiled computers and tyres are massively imported into the counuy.
- Collapse of businesses: Some local businesses may go bankrupt and collapse as a result ofthe economic might and competition from rich and bigger ones from other countries.
- Rich and wealthy countries can affect negatively the development of underdeveloped economies.
- If there is an economic depression in a rich and influential nation it can trigger adverse reaction to nations of the world. For example, if anything affects the economy of USA many nations will be affected.
POLICY RESPONSE TO THE EFFECT OF GLOBALIZATION
- Good governance: For globalization to be effective, the rule of law of each country should prevail. As a matter of fact everything should be done transparently.
- Economic liberation: All closed economics should be opened up through trade liberation. By so doing it will ensure economic integration.
- Strengthening of multilateral institutions: Multilateral institutions like IMF, World Bank should be strengthened to ensure that they are effective in helping to sustain growth of developing countries.
- Enhancing the financial system: The financial system of a country should be strengthened through supervision and regulation.
- Development of capital market: For integration to be fully felt, the capital market of a country should be well developed and regulated to meet up with competition from other developed economies.
- Human capital development: To ensure effective globalization, it is expedient that nations should develop their human capital through training and quality education.
- Research development: Enough resources should be deployed to develop research in both the technical and technological education.