Free Globalization Of The Economy Research Paper Example

Type of paper: Research Paper

Topic: Finance, Globalization, Economics, Capital, Business, Politics, Labor, Market

Pages: 8

Words: 2200

Published: 2020/11/11


Globalization refers to the growing interdependence of countries as a result of increase in international trade and the expansion of its scope, covering not only the exchange of goods but also services and capital. The benefits of globalization are well known - it allows to deepen the international division of labor more efficiently allocate resources and ultimately contributes to the average standard of living and increase the life prospects of the population (at lower cost for it).
Globalization enables countries to mobilize more significant amount of financial resources, since investors may use the broader financial instruments on the growing number of markets. In addition, advanced technology dramatically reduces transport, telecommunications and settlement costs, and generally facilitates the global integration of national markets.
However, the world community is experiencing concern with the scope and speed of globalization, believing that there is a risk to the familiar life. Globalization brings with it not only positive but also negative effects, but there is no alternative to it. Adequate response should be to adapt to new conditions.


Despite the fact that globalization brings economy and the US population more pros than cons, nevertheless raises a number of new challenges.


One of the phenomena that have an increasing influence on the socio-economic development of the United States is globalization. We can say that this process, gradually increasing and mutual interdependence of national economies, has reached a level where its quantitative growth has led to a noticeable qualitative consequences for the US and for interacting with it economies.
Globalization is manifested in the growth of the scope and importance of foreign trade and international capital movements, the expansion of cross-country movement of labor, greater economic integration and cooperation at the international level as well as at the level of individual companies, increasing cross-national information exchange. In the US, in particular, the share of foreign trade in relation to the national GDP by the end of the twentieth century reached a record level in the history of the country - 25%. Thus, in 1987 - 1997 US exports increased by 140%, which contributed to the growth in the amount of 30% of the total increase.
US trade with almost all countries of the world. Canada is a major trading partner, in 1998 accounted for 21% of the total foreign trade turnover. Second place in US foreign trade takes EU, followed by Japan and Mexico. The share of developing countries together account for 31% of US foreign trade and the share of the 48 least developed countries - less than 1%. At a time, there is an increase in the scale of capital flows. Thus, by the early twenty-first century volume moving through the US border (in both directions) of securities (stocks and bonds) reached 223% of US GDP, while in 1980 it accounted for only 9% of GDP. Increased and the amount of the net balance of capital flows from the United States and back - at the end of the 90s inflows exceeded outflows at $ 200 billion. In 1998, foreign assets in the country exceeded US assets abroad by 1.2 trillion dollars (14 % of GDP). By the end of the twentieth century US assets abroad accounted for 56% of GDP; 100 years ago, they were equal to only 5% of GDP. In 2000, foreign investment in the US amounted to 6.5 trillion dollars. The cost of government and corporate bonds and equity owned by foreigners reached $ 4 trillion. The share of foreign owners accounted for 35% of the market for government securities, 20% of the corporate bonds and 7% of the market share. On the other hand, 40% of world stock market with a share of world GDP to 30% is in the US.
All migration flows to the United States become more and more diversified. Only in 1990-1996 7.6 million people received residence, i.e. on average of 1.1 million people per year, which is twice more than 80 years, and 75% more than in the 70s. The main reason for immigration into the country is a higher standard of living, employment opportunities and professional growth. In accordance with the laws of the market, the labor force is looking for the most beneficial use of itself and high labor costs. As the globalization of the world economy, the abolition of many restrictions on the movement of labor is usually strictly in force in the national economy, is spreading to the level of bilateral relations.
It is reasonable to argue that the main driving forces of economic globalization are technological progress and national economic policy aimed at the liberalization of international economic relations. Technological innovations, particularly in the areas of transport, communications, information processing and transmission, significantly reduced the cost of doing international business, thereby expanding opportunities for trade and investment.
In addition to technological progress, a significant role in the globalization policy of the state plays. United States, with a competitive advantage over counterparts since the mid '70s has began to actively support the idea of a free trade and movement of capital and labor. Considerable efforts of the US government were aimed at reducing their own trade tariffs, and to encourage to such measures in other countries.
Among the benefits of globalization can be identified more effective use of various resources (labor, capital, minerals), the introduction of innovation, technology transfer and scientific and technical resources from abroad, lower production costs with the help of translation companies in the country with cheap labor and its involvement in the US (often illegal immigrants) and, ultimately, economic growth and improving living standards.
In the United States plays an important role trade between parent companies and their subsidiaries abroad. In particular, more than 1/3 of total merchandise exports and 2/3 of merchandise imports account for such inter-company supplies. This simplifies the control of the flow of goods and allows for more flexibility to respond to changes in demand domestically and in foreign markets.

However, the processes of globalization generate a lot of problems and require appropriate measures state and society to address them.

This applies to the three spheres of social and economic life of the country. Firstly, the consequence for employment, particularly in some sectors of the economy where international competition is particularly strong or export production abroad is very noticeable. There is also the issue of providing international labor standards for American companies abroad and on those American companies within the country where the foreign (often illegal) labor. For example, millions of Americans are losing jobs due to the transfer of production abroad and scale imports (US have a large negative trade balance - nearly $ 350 billion only in 2001). The first threat due to globalization caused by the fact that its benefits are clear that people will, however, unevenly distributed. In the short term, as we know, the changes in the manufacturing industry, the service sector leads to the fact that the industries benefiting from foreign trade, and industries related to exports, experiencing a greater flow of capital and skilled labor. At the same time, a number of industries significantly lose from globalization processes, losing its competitive edge because of the increased market openness. Such industries are forced to make additional efforts to adapt to change not in their favor economic conditions.
This means the possibility of an outflow of capital and labor in these sectors, which will serve as the main reason for the adoption of adaptation measures, coupled with a very high cost. Adaptation measures are fraught for people losing their jobs, the need to find another job, retraining, which leads not only to family problems, but also requires large social costs, and in a short time. In the end, a redistribution of the labor force, but at first the social costs are very high.
Second, the real is the threat of sudden large changes in capital flows, as in the case of, for example, with the flight of capital from the countries of Southeast Asia and the former socialist countries in 1997-1998., Which can significantly destabilize the world markets, as well as the economy USA.
Third, the US globalization manifested in the growing trade deficit, which has not only positive effects in the form of cheap imports, but increases the balance of payments deficit and growing external debt.
Fourth threat associated with labor mobility. Today it’s being talking a lot about the free exchange of goods, services and capital, and much less - on freedom of movement of labor. The negative consequences of its already long been recognized as a potential hazard, and today in many countries it is considered to be quite real. Therefore, almost all states have introduced some form of control over the free movement of labor, especially as it can be in many different ways.
It should be noted that the most prepared and is highly valuable workforce is more mobile and able to effectively find its market niche. With globalization, all countries try to attract talented professionals and skilled workers, willingly giving visas and admitting to its market. The emergence of cross-country flow of labor will lead to a global increase in productivity, as will be reached in the optimum allocation of labor resources.
Fifth threat posed by globalization, is associated with a marked increase in the gap between the wages of skilled and less-skilled workers, as well as rising unemployment among the latter. Today, however, this is not necessarily a consequence of the intensification of international trade. More important is the fact that the demand for skilled workers in industries and enterprises.
This is due to the fact that competition from labor-intensive goods produced in low-wage and low skilled workers, entails a reduction in the price of similar products of European companies and reduce their profits. In such circumstances, European companies discontinue unprofitable products and the transition to the production of goods that require highly skilled personnel. As a result, workers with lower qualifications remain unclaimed, their incomes fall.
Finally, we consider the question of capital flows in the context of globalization. I would like to focus on two aspects. Firstly, it is necessary to find out whether increasing global integration of capital markets threatens the economic policies of individual countries. Secondly, there is a need to say a few words about the relationship between globalization and the possibility of financial crises.
It is clear that the observed today in the world capital flows have increased dramatically over the last fifteen years. Foreign capital in the form of direct or portfolio investment is fraught with a threat to the national economy, as the country could disappear just as quickly as it had appeared. It complains leaders of several countries around the world, noting a lot of damage done to the departure of capital raised from the outside. In principle, it is free, no associated capital.
However, we must recognize that large-scale capital flows require States to observe a certain extent macro-discipline. This means that if the finance ministers and political leaders of any country realize that their policies, such as too risky or not flexible, threatening the stability of the national currency or the economy as a whole, they should be aware that there will be punished for it from international capital markets (which, for example, would deprive them of the necessary funds). Such steps can be regarded as a form of critical attitude of foreign investors to the country's policy, expressed in the refusal to provide it with the necessary funds.
In general, it should be recognized that global capital flows are, in a sense, the biggest advantage of globalization, although countries impose some discipline and rules of the game.
Considering the question of whether threatens Europe and the United States increased danger due to the negative impact of globalization of capital markets and cross-border price movements, it should be emphasized that the activities at the international level may limit this impact.
At the same time it is possible to agree with one of the members of the Board of Governors of the Federal Reserve System, believes that globalization of financial markets means that the management of a large error "player" in the world market could lead to a real loss, not only of the organization or country, but and other participants, including banking systems of entire countries.
Hence the need for more effective protection regulation, but this is a difficult step. Clearly, the level of technology and ingenuity of those who produce financial product will help them to find workarounds. Therefore, it is important that large financial institutions adhered fair rules of the game while respecting the respective control.


How to counter such threats? Need for a more robust financial system and mechanism for combating financial crises is vital not only for developing economies, but also for developed countries, particularly the United States. Financial crises of 90s blow to the economy of Southeast Asia, Russia and Latin America, have reduced their imports possibly reduce US exports to these countries (particularly affected the manufacturing industry and agriculture). In addition, there was nominal and actual depreciation of currencies of these countries against the dollar (there was virtually a revaluation of the dollar), which made foreign goods more competitive in relation to the US in the international markets as well as within the country.
In general, it is obvious that economic globalization, bringing the US economy and the population more pros than cons, nevertheless put the country a number of new challenges, has become largely a new challenge in the United States in the twenty-first century.


Carpenter, John. "Puritan Missions as Globalization," Fides et Historia. 31:2, 1999 pp. 103–123.
James, Paul; Gills, Barry (2007). Globalization and Economy, Vol. 1: Global Markets and Capitalism. London: Sage Publications.
Panitch, Leo and Sam Gindin (2012). The Making of Global Capitalism: the Political Economy of American Empire. London: Verso. ISBN 978-1-84467-742-9
Smith, Charles (2007). International Trade and Globalization, 3rd edition. Stocksfield: Anforme. ISBN 1-905504-10-1.

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