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Republic of the Philippines

Region IV
CAPIZ STATE UNIVERSITY
Main, Campus
Roxas, City
College of Education

What is Economic Globalization?

According to Karl Thompson,

Economic Globalization involves the global expansion of international capitalism, free


markets and the increase in international trade, a process which has accelerated since
the 1950s. Nearly every country on earth now imports and exports more from and to
other countries than it did immediately after World War Two, and even ex-communist
countries are now part of the global capitalist economy.

For example, Britain imports around 60% of its food, with only 40% of the food supply
being grown in Britain, and if you take a look around any class room, or any living room,
and you will probably find that the majority of products were imported from
somewhere else.

2 Factors That Have Contributed to Globalization

"CONTAINERISATION"

The costs of ocean shipping have come down, due to containerisation, bulk shipping, and
other efficiencies. The lower unit cost of shipping products around the global economy
helps to bring prices in the country of manufacture closer to those in export markets,
and it makes markets more contestable globally.

"TECHNOLOGICAL CHANGE"

Rapid and sustained technological change has reduced the cost of transmitting and
communicating information – sometimes known as “the death of distance” – a key factor
behind trade in knowledge products using web technology.

What Are the Pros of Free Trade?

1. Economic growth is encouraged.


Even when taxes, tariffs, and other restrictions on trade are highly regulated instead of
being fully eliminated, there is an economic benefit to all parties involved. Because of
NAFTA (North American Free Trade Agreement), the US Trade Representative Office
estimates that economic growth has been 0.5% higher annually than it would be if the
free trade agreement was not active.

2. Lower taxes and barriers to entry increases business opportunities.


Protections are put into trade agreements as an effort to protect local businesses. When
these protections are removed, the result tends to favor the consumer because more
competition from global entities can occur at the local level. This reduces stagnation
within markets, though at the risk of eliminating smaller businesses from the equation.
Lower taxation and fewer barriers to entry can also reduce pricing for customers.

3. It creates opportunities for foreign direct investment.


When there are fewer barriers to trade agreements in place, foreign businesses form
partnerships, make investments, and even directly enter new markets because there is
the chance for higher profits. This helps isolated countries can develop their economic
infrastructure. Nations like the US and Canada use agreements to maintain economic
benefits for both through shared values and vision, promoting a better standard of living
for everyone.

4. More expertise is brought into the process.


Global companies generally have more expertise within their field that local companies
that operate on a domestically regional level. This means specialty work can be
completed for a lower price, more efficiencies can be built into the systems of operation,
and fewer resources are required to produce goods or services. Local companies can
even learn from global companies to improve their best practices by direct observation.

5. It reduces government expenditures.


Local industry segments, such as agriculture, are often subsidized by local governments.
By introducing new best practices and building new efficiencies into distribution
systems, less money needs to be provided by the government to keep prices affordable
at the local level. This means tax revenues can be funneled toward infrastructure, social
programs, defense, or other needs that a society may have.

6. Resources transfer to the best possible people and organizations.


The people who are the best at what they do will have the most opportunities to succeed
in an environment of free trade. It also means anyone can change their stars and achieve
their dreams because of the desire to work with those who are the best. Companies
follow this principle by being able to develop or access new technologies or better best
practices to help local economies grow. When that growth occurs, more employment
opportunities can be realized as well.

What Are the Cons of Free Trade?

1. It causes employment opportunities to be outsourced.


Global companies may bring more expertise and better practices to a local industry, but
who gets those jobs? Free trade causes jobs to be outsourced because international
workers are either more experienced, cheaper to hire, or are willing to work with fewer
safety protections. Tariffs and taxation policies help to reduce labor outsourcing because
it keeps product pricing at competitive levels.

2. There are reduced IP protections.


Intellectual property rights may not be taken as seriously by foreign governments or
competitors as they are domestically. Inventions, patents, and processes may be copied
in an environment of free trade and that reduces the potential of a company being able
to create good jobs at fair wages. Even when these protections are in place, there is no
guarantee that a foreign government will enforce the laws with the same rigor as a
domestic government.

3. It encourages urbanization.
There are two farms. One is a small family operation, while the other is a factory farm
operation. The factory farm receives the same subsidies as the family operation, but
because they produce many more products, they receive much more help from the
government. This allows them to sell products at lower prices, which stores like because
it generates more sales. Eventually, the family farm must either find its own niche to
compete or the workers must look for employment elsewhere. That is why free trade
often encourages urbanization.

4. There are often sub-standard working conditions.


Emerging markets and developing countries do not usually have the same laws in place
that guard worker salaries and working conditions. Some markets even allow for
children to be hired for heavy labor and factory positions that are sub-standard at best.
Because free trade puts a point of emphasis on the lack of restrictions, it can promote
poor working conditions that people are forced to endure if they wish to earn a living for
their family.

5. It does not usually protect the environment.


Many free trade opportunities are based on the availability of natural resources. This
causes the fastest harvesting methods possible to be used, such as clear-cutting or strip
mining, and that can create long-term damage for local environments. It also means that
natural resources are quickly depleted for the local population. An economy that is built
on this process will often fail because once the resources are gone, there is nothing left
to trade.

6. Free trade reduces revenues.


When free market principles can operate without being checked, revenues typically
reduce because of high competition levels. This helps large countries, organizations, and
entities because they are already priced into an economy of scale. Smaller countries,
companies, and entities must find ways to replace the revenues they lose and this is not
always possible.

The Modern World-System

According to Immanuel Wallerstein,

A world-system is a social system, one that has boundaries, structures, member groups,
rules of legitimation, and coherence. Its life is made up of the conflicting forces which
hold it together by tension and tear it apart as each group seeks eternally to remold it to
its advantage. It has the characteristics of an organism, in that it has a life-span over
which its characteristics change in some respects and remain stable in others. One can
define its structures as being at different times strong or weak in terms of the internal
logic of its functioning.

What is 'Economic Integration'?

Economic integration is an arrangement between different regions that often includes


the reduction or elimination of trade barriers, and the coordination of monetary
and fiscal policies. The aim of economic integration is to reduce costs for both
consumers and producers and to increase trade between the countries involved in the
agreement.