How does Globalisation work?

Globalisation in international economics refers to the web of connections formed by investments and trade across nations' economy. Although there has always been globalisation, the modern period only really started in earnest in the early nineteenth century. Beginning with the Industrial Revolution, improvements in communication (like the telegraph) and transportation (like railways and steamships) allowed for more cross-border commercial engagement and collaboration.

Economic protectionism, which seeks to shield home enterprises from international competition and labour markets by enacting trade obstacles like tariffs, is the antithesis of economic globalisation, or free-market commerce across borders.

Introduction

Our current linked world is the product of global integration, which was fueled by technology, transportation, and international collaboration. Many nations experienced prosperity as a result of increased cross-border movement of people, information, and products, which helped many people escape poverty. As members of the global economy, countries gain from comparative advantage by specialising in what they do well and manufacturing more items at cheaper costs that lower-income people can purchase, boosting their quality of living.

Although the word "globalisation" became increasingly popular in the 1980s, it is not a 20th century concept.This reference list provides resources for researching the long-standing history of globalisation.

Theodor Horydczak, photographer. Globe of the world. Asia and Africa III, ca. 1920-ca. 1950. 

History of Globalisation

Although many people think of globalisation as a twentieth-century phenomena, it has really been occurring for thousands of years. Several examples are as follows:

• The Empire of Rome.

         The Roman Empire, which dates back to 600 B.C., conquered a sizable section of the ancient globe                   throughout its long reign.

• Silk Road commerce.

         From 130 B.C. until 1453 A.D., these trade routes marked a further phase of globalisation. Through                     Central Asia and the Middle East, they transported traders, products, and tourists from China to Europe.

• prior to World War I.

         In the years leading up to World War I, European nations made large investments abroad. The era known           as the "golden age of globalisation" ran from 1870 to 1914.         

• Post-World War II.

         The development of a global economic order with a set of widely regarded international norms was                      spearheaded by the United States. International cooperation and free trade are promoted by multilateral              institutions like the World Trade Organisation (WTO), International Monetary Fund (IMF), and United                    Nations (UN).

The 1980s saw the rise of the word "globalisation" as it is used today, reflecting a number of technology              developments that boosted cross-border connections. The 1981 release of the personal computer by                  IBM  and the following development of the contemporary internet are two instances of how technology                has aided in promoting globalisation, trade, and worldwide communication.

Throughout history, there have been ups and downs in terms of globalisation, with periods of expansion and contraction. The twenty-first century has seen both. After the terrorist events of September 11, 2001, in the United States, the world's financial markets fell, although they later rose.

Nationalist political groups have accelerated trade protectionism, restricted borders, and restrained immigration more lately. Similar impacts on borders, immigration, and supply chains have been caused by the epidemic. Overall, nevertheless, the speed of global integration has dramatically accelerated in the first decade of the twenty-first century. Much of this transformation is a result of the quick development of technology and telecommunications.

What is the G20?

By tackling global economic challenges including financial stability and climate change, the G20, or Group of Twenty, is an international conference that seeks to promote international collaboration. The majority of the world's greatest economies are represented in the G20, which is made up of 19 nations plus the European Union.

The engaged countries control 80% of global commerce, 60% of world GDP, and 60% of the world's population. It was established in 1999 in the wake of the financial crisis of 1997, and since then, it has had annual meetings.

Since 2008, the G20 has convened a summit every year when leaders of state meet to address crucial economic concerns. The summit is held in the president of the G20's home nation, who is chosen yearly on a rotating basis.

The summit took place in Osaka, Japan, in 2019 and included topics including climate change, artificial intelligence, and women's empowerment. Due of the epidemic, the 2020 meeting, which was scheduled to take place in Riyadh, Saudi Arabia, was only convened digitally. Empowering people, particularly women and young people, protecting the environment, and developing long-term plans to spread the advantages of innovation and technological progress were three of the major topics discussed. The recovery from the pandemic and climate change will be the main topics of discussion at the Rome, Italy, summit in 2021.

Argentina, Australia, Brazil, Canada, China, France, Germany, Greece, Italy, Mexico, Russia, South Africa, Saudi Arabia, South Korea, Turkey, United Kingdom, United States, and the European Union are the other members of the G20. Spain is a frequent visitor to the company.

Three instances of Globalisation

Globalisation examples include:

1. Organisations of governments.

International organisations may now be established by agreements between several nations thanks to globalisation. The World Bank, the World Trade Organisation (WTO), the European Union, the United Nations, and the International Monetary Fund (IMF) are a few examples.

2. Agreements between nations.

To facilitate international commerce and investment, several nations have signed treaties or adopted trade regulations. The North American Free Trade Agreement (NAFTA) and the Comprehensive Economic and Trade Agreement (CETA) are examples of these accords, which are also known as free-trade agreements.

3. International businesses.

An organisation that conducts business in several nations is known as a multinational corporation. Multinational corporations exist due to globalisation. Globalisation, for instance, enables major US businesses will export their goods to China, Mexico, and Europe. 

What Advantages Does Globalisation Offer?

The economy of a nation can gain from globalisation in various ways:

• Stimulates economic expansion.

         Globalisation accelerates economic development in every nation involved in the global economy by                     expanding the interchange of commodities, innovations, and knowledge on a worldwide scale. A country's           general well-being, or improved living standards, greater earnings, increased wealth, and, frequently,                   reduced poverty, are all indicators of economic progress.

• Enables more cheap manufacture.

          Because firms have more access to customers and production possibilities because to a global market,              more products are accessible at more affordable price points.

• Fosters collaboration.

         They grow interconnected and frequently start to rely on one another for certain commodities and                          services  when various nations come together to trade and invest in a global financial market.

• Provides impoverished nations with opportunity.

         Due to globalisation, businesses may relocate their manufacturing from high-cost regions to less                         expensive ones overseas, which creates employment possibilities, access to information technology, and           other economic benefits for nations with limited resources.

What Consequences of Globalisation Are There?

Globalisation has a number of drawbacks in addition to its positive benefits on countries. The drawbacks             of  globalisation include:

• Uneven economic expansion.

         Even while many nations see faster economic development as a result of globalisation, wealthy countries           frequently gain more from this growth than underdeveloped countries.

• Lack of nearby establishments.

         A local New York hamburger joint may find it difficult to compete with the prices of a multinational                        corporation that produces hamburgers because policies promoting globalisation tend to favour businesses          that have the infrastructure and resources to operate their supply chains or distribution in a number of                  different countries.

• Possibility for worldwide recessions rises.

         Because if one country's economy starts to struggle, this might start a chain reaction that can effect many           other countries at once, triggering a global financial crisis, the probability of a global recession rises                     drastically as more and more countries' economic systems become intertwined.

• Using less expensive labour markets.

         Businesses may expand employment and economic prospects in emerging nations, where the cost of                 labour is frequently lower, thanks to globalisation. However, these nations' overall economic development           may be sluggish or stagnant.

• Causes the loss of jobs.

         Instead of creating more employment, globalisation redistributes existing ones by shifting production from           high-cost to low-cost nations. This means that when production shifts elsewhere, high-cost nations                       frequently experience employment losses as a result of globalisation.