The increasing economic integration of the world is having profound effects on rich and poor countries alike. BBC News has initiated a major examination of the subject. For some, their business is at brisk but for some, their business is not booming well. Globalization is condemned for many of the ills of the modern world, but it is also acclaimed for bringing unprecedented prosperity.
Many economists have opinion, that globalization may be the explanation for the key trends in the world economy such as:
- Lower wages for workers, and higher profits, in Western economies.
- The flood of migrants to cities in poor countries.
- Low inflation and low interest rates despite strong growth.
Trade has been the engine of globalization, Since 1960, increased trade has been made easier by international agreements to lower tariff and non-tariff obstacles on the export of manufactured goods, particularly to rich countries. Countries which have managed to increase their role in the world trading system have seen substantial increase in their standard of living.
It is not only the Western manufacturing industry which is under the threat of globalization. Many service sector jobs are now under the threat from outsourcing and offshoring, as global companies attempt to save money by shifting many functions that were once done internally.
The dizzying pace of change in the new world of globalization is unprecedented, and can be an awful risk. A recent poll by Deloitte in November 2006 showed a sharp increase in worries about outsourcing of white collar jobs in the UK.
Meanwhile in the US, the Democratic victory in the November Congressional elections had a lot to do with worries about the effect of globalization on wages and jobs.
The speed and scale of economic change has made it increasingly intricate for governments to keep their economic destiny in their own hands. And what is most dismaying for many people is that no-one seems to be in charge, or be able to agree with fair rules for the new global economic order.
The international institutions meant to deal with the globalizing world which is all in trouble. For example, the World Trade Organization (WTO) is now under the fire for failing to take into account labor standards or the environmental impact of trade. And its efforts to break down global trade barriers are faltering. And the IMF has found it increasingly difficult to influence the world’s capital market to correct the huge global imbalances that arise from trade. It has come under criticism for not giving a bigger role to emerging market countries like India and China.
The moot question is whether the growing globalization of the world economy will lead to a parallel increase in global regulation or not; and whether it would be good or bad for world economic growth and equality.