Globalization in Economic Context

Globalization in Economic Context

Globalization in Economic Context

Introduction

The term Globalization is broadly used as the process through which an ever-expanding free flow of goods, services, capital, peoples, and social customs leads to further integration of economies and societies worldwide. This phenomenon is hardly novel, albeit the process of integration has dramatically accelerated over the past few decades (Dollar and Collier, 2004). The world has experienced successive waves of globalization. Today, almost all national economies are integrated into a single global marketplace through trade, finance, production networks, and a dense web of international treaties and institutions. Global trade liberalization boosts the demand for exports of goods that intensively use unskilled labor and, as a consequence, boosts unskilled wages relative to skilled wages and capital earnings. The speed and intensity of global integration has provoked fierce debates about the consequences, implications, and future trajectory of globalization. Drawing on a vast and growing body of research, the following sections elucidate the complexity of the phenomenon called globalization (Dollar and Collier, 2004).

Discussion

Research confirms that a well-functioning market economy is indispensable in this era of globalization and that there are no viable alternatives to free markets. However, it is also recognized that to function effectively markets require transparent rules and institutions (Maurice and Alan, 2005). A market economy supported by strong institutions and operating in a free democratic society is demonstrably the most effective form of economic organization. Yet, even the staunchest advocates of economic globalization realize that it is no magic bullet (Maurice and Alan, 2005). Equally important, emerging market economies should avoid overvalued exchange rates to avoid potential currency mismatches and should even use capital controls during periods of large-scale capital outflows. It may also be necessary to provide assistance to the “losers” from trade liberalization. For example, after recognizing ...