Economic globalization is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology, and capital. Whereas globalization is centered around the rapid development of science and technology and increasing cross-border division of labor, economic globalization is propelled by the rapid growing significance of information in all types of productive activities and marketization, and the advance of science and technologies. Depending on the paradigm, economic globalization can be viewed as either a positive or a negative phenomenon.
Economic globalization comprises the globalization of production, markets, competition, technology, and corporations and industries. While economic globalization has been occurring for the last several hundred years (since the emergence of trans-national trade), it has begun to occur at an increased rate over the last 20–30 years under the framework of General Agreement on Tariffs and Trade and World Trade Organization which made countries to gradually cut down trade barriers and open up their current accounts and capital accounts. This recent boom has been largely accounted by developed economies integrating with less developed economies, by means of foreign direct investment, the reduction of trade barriers, and in many cases cross border immigration.
It can be argued that economic globalization may or may not be an irreversible trend. There are several significant effects of economic globalization. There is statistical evidence for positive financial effects as well as proposals that there is a power imbalance between developing and developed countries in the global economy. Furthermore, economic globalization has an impact on world cultures.
The Economic Commission for Latin America and the Caribbean (ECLAC) has proposed an agenda to support conditions for developing countries to improve their standing in the global economy. Economists have theories on how to combat the disadvantages faced by developing countries. However, the advantaged countries continue to control the economic agenda. In order to rectify the social injustice dilemma, international economic institutions (such as the World Bank and the International Monetary Fund) must give voice to developing countries. A solution is to issue global rules that protect developing countries. It is still difficult for leaders of developing nations to influence these global rules.
In his article, Gao Shangquan elaborates this point saying that economic globalization has in fact expanded rather than reduced the gap between the North and South. He is referring to some UN report in 1999, in order to show that the number of developing countries that have benefited from economic globalization is smaller than 20, that the average trade deficit of developing countries in 1990’s increased by 3% as compared with that in 1970s, and that over 80% of the capital is flowing among US, Western European and East Asian countries.
The influx of international corporations not only brings positive advantages regarding global financial transactions. Some may emphasize that the multinational corporations may raise education levels as well as the financial health in developing countries, but that only applies to the long term effects of economic globalization. In the short term, poor countries will become poorer and unemployment rates may soar. Automation in the manufacturing and agricultural sectors always follows the appearance of multinational corporations. This lessens the need for unskilled and uneducated workers thus raising unemployment levels. Also, in the developing countries where this phenomenon occurs, infrastructure to re educate these unskilled workers are not properly established which means a redirection of the government’s focus from social services to education.