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Humans have interacted over long distances for thousands of years. The overland Silk Road that connected Asia, Africa, and Europe is a good example of the transformative power of translocal exchange that existed in the "Old World". Philosophy, religion, language, the arts, and other aspects of culture spread and mixed as nations exchanged products and ideas. In both the 15th and 16th centuries, Europeans made important discoveries in their exploration of the oceans, including the start of transatlantic travel to the "New World" of the Americas. Global movement of people, goods, and ideas expanded significantly in the following centuries. Early on in the 19th century, the development of new forms of transportation (such as the steamship and railroads) and telecommunications that "compressed" time and space allowed for increasingly rapid rates of global interchange.[9] In the 20th century, road vehicles, intermodal transport, and airlines made transportation even faster. The advent of electronic communications, most notably mobile phones and the Internet, connected billions of people in new ways by the year 2010. Eastern Telegraph Company 1901 chart of undersea telegraph cabling, an example of modern globalizing technology in the beginning of the 20th century. Airline personnel from the "Jet set" age, circa 1960. Etymology and usage The term globalization is derived from the word globalize, which refers to the emergence of an international network of economic systems.[10] One of the earliest known usages of the term as a noun was in a 1930 publication entitled, Towards New Education, where it denoted a holistic view of human experience in education.[11] A related term, corporate giants, was coined by Charles Taze Russell in 1897[12] to refer to the largely national trusts and other large enterprises of the time. By the 1960s, both terms began to be used as synonyms by economists and other social scientists. Economist Theodore Levitt is widely credited with coining the term in an article entitled "Globalization of Markets", which appeared in the May–June 1983 issue of Harvard Business Review. However, the term 'globalization' was in use well before (at least as early as 1944) and had been used by other scholars as early as 1981.[13] Levitt can be credited with popularizing the term and bringing it into the mainstream business audience in the later half of the 1980s. Since its inception, the concept of globalization has inspired competing definitions and interpretations, with antecedents dating back to the great movements of trade and empire across Asia and the Indian Ocean from the 15th century onwards.[14][15] Due to the complexity of the concept, research projects, articles, and discussions often remain focused on a single aspect of globalization.[1] Roland Robertson, professor of sociology at University of Aberdeen, an early writer in the field, defined globalization in 1992 as: ...the compression of the world and the intensification of the consciousness of the world as a whole.[16] Sociologists Martin Albrow and Elizabeth King define globalization as: ...all those processes by which the peoples of the world are incorporated into a single world society.[2] In The Consequences of Modernity, Anthony Giddens uses the following definition: Globalization can thus be defined as the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa.[17] In Global Transformations David Held, et al., study the definition of globalization: Although in its simplistic sense globalization refers to the widening, deepening and speeding up of global interconnection, such a definition begs further elaboration. ... Globalization can be located on a continuum with the local, national and regional. At one end of the continuum lie social and economic relations and networks which are organized on a local and/or national basis; at the other end lie social and economic relations and networks which crystallize on the wider scale of regional and global interactions. Globalization can refer to those spatial-temporal processes of change which underpin a transformation in the organization of human affairs by linking together and expanding human activity across regions and continents. Without reference to such expansive spatial connections, there can be no clear or coherent formulation of this term. ... A satisfactory definition of globalization must capture each of these elements: extensity (stretching), intensity, velocity and impact.[18] Swedish journalist Thomas Larsson, in his book The Race to the Top: The Real Story of Globalization, states that globalization: is the process of world shrinkage, of distances getting shorter, things moving closer. It pertains to the increasing ease with which somebody on one side of the world can interact, to mutual benefit, with somebody on the other side of the world.[19] Responding to the many problems with existing definitions of globalization, including the tendencies to give the impression that spatial distance is being overcome, the world is getting smaller or globalization has always been the same kind of process across human history, Paul James defines globalization with a more direct and historically contextualized emphasis: Globalization is the extension of social relations across world-space, defining that world-space in terms of the historically variable ways that it has been practised and socially understood through changing world-time.[20] The journalist Thomas L. Friedman popularized the term "flat world", arguing that globalized trade, outsourcing, supply-chaining, and political forces had permanently changed the world, for better and worse. He asserted that the pace of globalization was quickening and that its impact on business organization and practice would continue to grow.[21] Economist Takis Fotopoulos defined "economic globalization" as the opening and deregulation of commodity, capital and labor markets that led toward present neoliberal globalization. He used "political globalization" to refer to the emergence of a transnational elite and a phasing out of the nation-state. "Cultural globalization", he used to reference the worldwide homogenization of culture. Other of his usages included "ideological globalization", "technological globalization" and "social globalization".[22] Manfred Steger, professor of Global Studies and research leader in the Global Cities Institute at RMIT University, identifies four main empirical dimensions of globalization: economic, political, cultural, and ecological, with a fifth dimension - the ideological - cutting across the other four. The ideological dimension, according to Steger, is filled with a range of norms, claims, beliefs, and narratives about the phenomenon itself.[23] In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge.[7] With regards to trade and transactions, developing countries increased their share of world trade, from 19 percent in 1971 to 29 percent in 1999. However, there is great variation among the major regions. For instance, the newly industrialized economies (NIEs) of Asia prospered, while African countries as a whole performed poorly. The makeup of a country's exports is an important indicator for success. Manufactured goods exports soared, dominated by developed countries and NIEs. Commodity exports, such as food and raw materials were often produced by developing countries: commodities' share of total exports declined over the period. Paul James argues that four different forms of globalization can also be distinguished that complement and cut across the solely empirical dimensions.[24] According to James, the oldest dominant form of globalization is embodied globalization, the movement of people. A second form is agency-extended globalization, the circulation of agents of different institutions, organizations, and polities, including imperial agents. Object-extended globalization, a third form, is the movement of commodities and other objects of exchange. The transmission of ideas, images, knowledge and information across world-space he calls disembodied globalization, maintaining that it is currently the dominant form of globalization. James holds that this series of distinctions allows for an understanding of how, today, the most embodied forms of globalization such as the movement of refugees and migrants are increasingly restricted, while the most disembodied forms such as the circulation of financial instruments and codes are the most deregulated.[25] Globophobia has been used incorrectly to refer to the fear of globalization.[26][27][28] History Main article: History of globalization See also: Timeline of international trade There are both distal and proximate causes which can be traced in the historical factors affecting globalization. Large-scale globalization began in the 19th century.[9] Archaic 1st century CE Map of Silk Road Main article: Archaic globalization Archaic globalization is seen as a phase in the history of globalization conventionally referring to globalizing events and developments from the time of the earliest civilizations until roughly the 1600s. This term is used to describe the relationships between communities and states and how they were created by the geographical spread of ideas and social norms at both local and regional levels.[29] In this schema, three main prerequisites are posited for globalization to occur. The first is the idea of Eastern Origins, which shows how Western states have adapted and implemented learned principals from the East.[29] Without the traditional ideas from the East, Western globalization would not have emerged the way it did. The second is distance. The interactions amongst states were not on a global scale and most often were confined to Asia, North Africa, the Middle East and certain parts of Europe.[29] With early globalization it was difficult for states to interact with others that were not within close proximity. Eventually, technological advances allowed states to learn of others existence and another phase of globalization was able to occur. The third has to do with interdependency, stability and regularity. If a state is not depended on another then there is no way for them to be mutually affected by one another. This is one of the driving forces behind global connections and trade; without either globalization would not have emerged the way it did and states would still be dependent on their own production and resources to function. This is one of the arguments surrounding the idea of early globalization. It is argued that archaic globalization did not function in a similar manner to modern globalization because states were not as interdependent on others as they are today.[29] Also posited is a 'multi-polar' nature to archaic globalization, which involved the active participation of non-Europeans. Because it predated the Great Divergence of the nineteenth century, in which Western Europe pulled ahead of the rest of the world in terms of industrial production and economic output, archaic globalization was a phenomenon that was driven not only by Europe but also by other economically developed Old World centers such as Gujurat, Bengal, coastal China and Japan.[30] Portuguese carrack in Nagasaki, 17th-century Japanese Nanban art The German historical economist and sociologist Andre Gunder Frank argues that a form of globalization began with the rise of trade links between Sumer and the Indus Valley Civilization in the third millennium B.C.E. This archaic globalization existed during the Hellenistic Age, when commercialized urban centers enveloped the axis of Greek culture that reached from India to Spain, including Alexandria and the other Alexandrine cities. Early on, the geographic position of Greece and the necessity of importing wheat forced the Greeks to engage in maritime trade. Trade in ancient Greece was largely unrestricted: the state controlled only the supply of grain.[4] Native New World crops exchanged globally: Maize, tomato, potato, vanilla, rubber, cacao, tobacco Trade on the Silk Road was a significant factor in the development of the civilizations of China, the Indian subcontinent, Persia, Europe, and Arabia, opening long-distance, political and economic interactions between the civilizations.[31] Though silk was certainly the major trade item from China, many other goods were traded, and religions, syncretic philosophies, and various technologies, as well as diseases, also travelled along the Silk Routes. In addition to economic trade, the Silk Road served as a means of carrying out cultural trade among the civilizations along its network.[32] Early modern Main article: Proto-globalization 'Early modern-' or 'proto-globalization' covers a period of the history of globalization roughly spanning the years between 1600 and 1800. The concept of 'proto-globalization' was first introduced by historians A. G. Hopkins and Christopher Bayly. The term describes the phase of increasing trade links and cultural exchange that characterized the period immediately preceding the advent of high 'modern globalization' in the late 19th century.[33] This phase of globalization was characterized by the rise of maritime European empires, in the 16th and 17th centuries, first the Portuguese and Spanish Empires, and later the Dutch and British Empires. In the 17th century, world trade developed further when chartered companies like the British East India Company (founded in 1600) and the Dutch East India Company (founded in 1602, often described as the first multinational corporation in which stock was offered) were established.[34] Early modern globalization is distinguished from modern globalization on the basis of expansionism, the method of managing global trade, and the level of information exchange. The period is marked by such trade arrangements as the East India Company, the shift of hegemony to Western Europe, the rise of larger-scale conflicts between powerful nations such as the Thirty Year War, and a rise of new commodities – most particularly slave trade. The Triangular Trade made it possible for Europe to take advantage of resources within the western hemisphere. The transfer of animal stocks, plant crops and epidemic diseases associated with Alfred Crosby's concept of The Columbian Exchange also played a central role in this process. Early modern trade and communications involved a vast group including European, Muslim, Indian, Southeast Asian and Chinese merchants, particularly in the Indian Ocean region. 19th century Great Britain was an early global superpower. Modern Main article: History of globalization During the 19th century, globalization approached its modern form as a direct result of the industrial revolution. Industrialization allowed standardized production of household items using economies of scale while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by nineteenth-century imperialism. In the 19th century, steamships reduced the cost of international transport significantly and railroads made inland transport cheaper. The transport revolution occurred some time between 1820 and 1850.[9] More nations embraced international trade.[9] Globalization in this period was decisively shaped by nineteenth-century imperialism such as in Africa and Asia. The invention of shipping containers in 1956 helped advance the globalization of commerce.[35][36] After the Second World War, work by politicians led to the Bretton Woods conference, an agreement by major governments to lay down the framework for international monetary policy, commerce and finance, and the founding of several international institutions intended to facilitate economic growth multiple rounds of trade opening simplified and lowered trade barriers. Initially, the General Agreement on Tariffs and Trade (GATT), led to a series of agreements to remove trade restrictions. GATT's successor was the World Trade Organization (WTO), which provided a framework for negotiating and formalizing trade agreements and a dispute resolution process. Exports nearly doubled from 8.5% of total gross world product in 1970 to 16.2% in 2001.[37] The approach of using global agreements to advance trade stumbled with the failure of the Doha round of trade negotiation. Many countries then shifted to bilateral or smaller multilateral agreements, such as the 2011 South Korea–United States Free Trade Agreement. Since the 1970s, aviation has become increasingly affordable to middle classes in developed countries. Open skies policies and low-cost carriers have helped to bring competition to the market. In the 1990s, the growth of low-cost communication networks cut the cost of communicating between different countries. More work can be performed using a computer without regard to location. This included accounting, software development, and engineering design. In the late 19th and early 20th century, the connectedness of the world's economies and cultures grew very quickly. This slowed down from the 1910s onward due to the World Wars and the Cold War[38] but picked up again in the 1980s and 1990s.[39] The revolutions of 1989 and subsequent liberalisation in many parts of the world resulted in a significant expansion of global interconnectedness. The migration and movement of people can also be highlighted as a prominent feature of the globalization process. In the period between 1965–90, the proportion of the labor force migrating approximately doubled. Most migration occurred between the developing countries and least developed countries (LDCs).[40] The Internet has become influential in connecting people across the world. As of June 2012, more than 2.4 billion people—over a third of the world's human population—have used the services of the Internet.[41][42] Growth of globalization has never been smooth. One influential event was the late 2000s recession, which was associated with lower growth (such as cross-border phone calls and Skype usage) or even temporarily negative growth (such as trade) of global interconnectedness.[43][44] The DHL Global Connectedness Index studies four main types of cross-border flow: trade (in both goods and services), information, people (including tourists, students and migrants) and capital. It shows that the depth of global integration fell by about one-tenth after 2008, but by 2013 had recovered well above its pre-crash peak.[45][46] Globalized society offers a complex web of forces and factors that bring people, cultures, markets, beliefs and practices into increasingly greater proximity to one another.[47] Global business organization Main article: International business Global Competitiveness Index (2008–2009): competitiveness is an important determinant for the well-being of nation-states in an international environment With improvements in transportation and communication, international business grew rapidly after the beginning of the 20th century. International business includes all commercial transactions (private sales, investments, logistics, and transportation) that take place between two or more regions, countries and nations beyond their political boundaries. Such international diversification is tied with firm performance and innovation, positively in the case of the former and often negatively in the case of the latter.[48] Usually, private companies undertake such transactions for profit.[49] These business transactions involve economic resources such as capital, natural and human resources used for international production of physical goods and services such as finance, banking, insurance, construction and other productive activities.[50] International business arrangements have led to the formation of multinational enterprises (MNE), companies that have a worldwide approach to markets and production or one with operations in more than one country. A MNE may also be called a multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such as McDonald's and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple national markets. Businesses generally argue that survival in the new global marketplace requires companies to source goods, services, labor and materials overseas to continuously upgrade their products and technology in order to survive increased competition.[51] According to a recent McKinsey Global Institute report, flows of goods, services, and finance reached $26 trillion in 2012, or 36 percent of global GDP, 1.5 times the level in 1990.[52] International trade Main article: International trade Singapore skyline Singapore, the top country in the Enabling Trade Index, embraced globalization and became a highly developed country International trade is the exchange of capital, goods, and services across international borders or territories.[53] In most countries, such trade represents a significant share of gross domestic product (GDP). Industrialization, advanced transportation, multinational corporations, offshoring and outsourcing all have a major impact on world trade. The growth of international trade is a fundamental component of globalization. An absolute trade advantage exists when countries can produce a commodity with less costs per unit produced than could its trading partner. By the same reasoning, it should import commodities in which it has an absolute disadvantage.[54] While there are possible gains from trade with absolute advantage, comparative advantage – that is, the ability to offer goods and services at a lower marginal and opportunity cost – extends the range of possible mutually beneficial exchanges. In a globalized business environment, companies argue that the comparative advantages offered by international trade have become essential to remaining competitive. Trade agreements, economic blocs and special trade zones Gross domestic product in 2011 US dollars per capita, adjusted for inflation and purchasing power parity (log scale) from 1860 to 2011, with population (disk area) for the US (yellow), UK (orange), Japan (red), China (red), and India (blue).[55] Establishment of free trade areas has become an essential feature of modern governments to handle preferential trading arrangements with foreign and multinational entities.[56] A Special Economic Zone (SEZ) is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws. "Nationwide" laws may be suspended inside these special zones. The category 'SEZ' covers many areas, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial parks or Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC). These are designated areas in which companies are taxed very lightly or not at all in order to encourage economic activity. Free ports have historically been endowed with favorable customs regulations, e.g., the free port of Trieste. Very often free ports constitute a part of free economic zones. A FTZ is an area within which goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties. Free trade zones are organized around major seaports, international airports, and national frontiers – areas with many geographic advantages for trade.[57] It is a region where a group of countries has agreed to reduce or eliminate trade barriers.[58] A Billboard in Jakarta welcoming ASEAN Summit 2011 delegates. A free trade area is a trade bloc whose member countries have signed a free-trade agreement, which eliminates tariffs, import quotas, and preferences on most (if not all) goods and services traded between them. If people are also free to move between the countries, in addition to a free-trade area, it would also be considered an open border. The European Union, for example, a confederation of 27 member states, provides both a free trade area and an open border. Qualifying Industrial Zones (QIZ) are industrial parks that house manufacturing operations in Jordan and Egypt. They are a special free trade zones established in collaboration with neighboring Israel to take advantage of the free trade agreements between the United States and Israel. Under the trade agreements with Jordan as laid down by the United States, goods produced in QIZ-notified areas can directly access US markets without tariff or quota restrictions, subject to certain conditions. To qualify, goods produced in these zones must contain a small portion of Israeli input. In addition, a minimum 35% value to the goods must be added to the finished product. The brainchild of Jordanian businessman Omar Salah, the first QIZ was authorized by the United States Congress in 1997. The Asia-Pacific has been described as "the most integrated trading region on the planet" because its intra-regional trade accounts probably for as much as 50-60% of the region's total imports and exports.[59] It has also extra-regional trade: consumer goods exports such as televisions, radios, bicycles, and textiles into the United States, Europe, and Japan fueled the economic expansion.[60] The ASEAN Free Trade Area[61] is a trade bloc agreement by the Association of Southeast Asian Nations supporting local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore. When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997 and Cambodia in 1999. Tax havens The ratio of German assets in tax havens in relation to the total German GDP.[62] The "Big 7" shown are Hong Kong, Ireland, Lebanon, Liberia, Panama, Singapore, and Switzerland. Main article: Tax haven A tax haven is a state, country or territory where certain taxes are levied at a low rate or not at all, which are used by businesses for tax avoidance and tax evasion.[63] Individuals and/or corporate entities can find it attractive to establish shell subsidiaries or move themselves to areas with reduced or nil taxation levels. This creates a situation of tax competition among governments. Different jurisdictions tend to be havens for different types of taxes and for different categories of people and companies.[64] The central feature of a tax haven is that its laws and other measures can be used to evade or avoid the tax laws or regulations of other jurisdictions.[65] A 2012 report from the Tax Justice Network estimated that between USD $21 trillion and $32 trillion is sheltered from taxes in unreported tax havens worldwide.[66] Tax havens have been criticized because they often result in the accumulation of idle cash[67] that is expensive and inefficient for companies to repatriate.[68] The tax shelter benefits result in a tax incidence disadvantaging the poor.[69] Many tax havens are thought to have connections to "fraud, money laundering and terrorism."[70][71] While investigations of illegal tax haven abuse have been ongoing, there have been few convictions.[72][73] International tourism Main article: Tourism Tourism is a form of travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".[74] There are many forms of tourism such as agritourism, birth tourism, culinary tourism, cultural tourism, eco-tourism, extreme tourism, geotourism, heritage tourism, LGBT tourism, medical tourism, nautical tourism, pop-culture tourism, religious tourism, slum tourism, war tourism, and wildlife tourism. Globalization has made tourism a popular global leisure activity. The World Health Organization (WHO) estimates that up to 500,000 people are in flight at any one time.[75] Modern aviation has made it possible to travel long distances quickly. As a result of the late-2000s recession, international travel demand suffered a strong slowdown from the second half of 2008 through the end of 2009. After a 5% increase in the first half of 2008, growth in international tourist arrivals moved into negative territory in the second half of 2008, and ended up only 2% for the year, compared to a 7% increase in 2007.[76] This negative trend intensified during 2009, exacerbated in some countries due to the outbreak of the H1N1 influenza virus, resulting in a worldwide decline of 4.2% in 2009 to 880 million international tourists arrivals, and a 5.7% decline in international tourism receipts.[77] One notable exception to more free travel is travel from the United States to bordering countries Canada and Mexico, which had been semi-open borders. Now, by US law, travel to these countries requires a passport.[78] In 2010, international tourism reached US$919B, growing 6.5% over 2009, corresponding to an increase in real terms of 4.7%.[79] In 2010, there were over 940 million international tourist arrivals worldwide.[80] International sports wheelchair basketball Wheelchair basketball teams playing in the 2008 Summer Paralympics Main articles: Olympic Games and List of world championships Modern international sports events can be big business for as well as influencing the political, economical, and other cultural aspects of countries around the world. Especially with politics and sports, sports can affect countries, their identities, and in consequence, the world. The ancient Olympic Games were a series of competitions held between representatives of several city-states and kingdoms from Ancient Greece, which featured mainly athletic but also combat and chariot racing events. During the Olympic games all struggles against the participating city-states were postponed until the games were finished.[81] The origin of these Olympics is shrouded in mystery and legend.[82] During the 19th century Olympic Games became a popular global event. While some economists are skeptical about the economic benefits of hosting the Olympic Games, emphasizing that such "mega-events" often have large costs, hosting (or even bidding for) the Olympics appears to increase the host country's exports, as the host or candidate country sends a signal about trade openness when bidding to host the Games.[83] Moreover, research suggests that hosting the Summer Olympics has a strong positive effect on the philanthropic contributions of corporations headquartered in the host city, which seems to benefit the local nonprofit sector. This positive effect begins in the years leading up to the Games and might persist for several years afterwards, although not permanently. This finding suggests that hosting the Olympics might create opportunities for cities to influence local corporations in ways that benefit the local nonprofit sector and civil society.[84] The Games have also had significant negative effects on host communities; for example, the Centre on Housing Rights and Evictions reports that the Olympics displaced more than two million people over two decades, often disproportionately affecting disadvantaged groups.[85] Globalization has continually increased international competition in sports. The FIFA World Cup, for example, is the world's most widely viewed sporting event; an estimated 700 million people watched the final match of the 2010 FIFA World Cup held in South Africa.[86] According to a 2011 A.T. Kearney study of sports teams, leagues and federations, the global sports industry is worth between €350 billion and €450 billion (US$480-$620 billion).[87] This includes infrastructure construction, sporting goods, licensed products and live sports events. Illicit international trade Main articles: Black market and Transnational organized crime The black market in rhinoceros horn reduced the world's rhino population by more than 90 percent over the past 40 years.[88] "Black markets" and organized crime often operate on a transnational basis, with global sales totaling almost US$2 trillion annually as of 2013.[89] In 2010, the United Nations Office on Drugs and Crime (UNODC) reported that the global drug trade generated more than US$320 billion a year in revenues.[90] The UN estimated that as of 2000 there were more than 50 million regular users of heroin, cocaine, and synthetic drugs worldwide.[91] The international trade of endangered species was second only to drug trafficking among smuggling "industries".[92] Traditional Chinese medicine often incorporates ingredients from all parts of plants, the leaf, stem, flower, root, and also ingredients from animals and minerals. The use of parts of endangered species (such as seahorses, rhinoceros horns, saiga antelope horns, and tiger bones and claws) resulted in a black market of poachers who hunt restricted animals.[93][94] Economic globalization Main article: Economic globalization Shanghai has become a symbol of the recent economic boom of China. In 2011, China had 960,000 millionaires.[95] 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.[96] Whereas the globalization of business is centered around the diminution of international trade regulations as well as tariffs, taxes, and other impediments that suppresses global trade, economic globalization is the process of increasing economic integration between countries, leading to the emergence of a global marketplace or a single world market.[97] 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.[96] Current globalization trends can be largely accounted for by developed economies integrating with less developed economies by means of foreign direct investment, the reduction of trade barriers as well as other economic reforms and, in many cases, immigration. In 1944, 44 nations attended the Bretton Woods Conference with a purpose of stabilizing world currencies and establishing credit for international trade in the post World War II era. While the international economic order envisioned by the conference gave way to the neo-liberal economic order prevalent today, the conference established many of the organizations essential to advancement towards a close-knit global economy and global financial system, such as the World Bank, the International Monetary Fund, and the International Trade Organization. As an example, Chinese economic reform began to open China to globalization in the 1980s. Scholars find that China has attained a degree of openness that is unprecedented among large and populous nations, with competition from foreign goods in almost every sector of the economy. Foreign investment helped to greatly increase product quality and knowledge and standards, especially in heavy industry. China's experience supports the assertion that globalization greatly increases wealth for poor countries.[98] As of 2005–2007, the Port of Shanghai holds the title as the world's busiest port.[99][100][101][102] In India, business process outsourcing has been described as the "primary engine of the country's development over the next few decades, contributing broadly to GDP growth, employment growth, and poverty alleviation".[103][104] Red: U.S. corporate profits after tax. Blue: U.S. nonresidential business investment, both as fractions of GDP, 1989–2012. Wealth concentration of corporate profits in global tax havens due to tax avoidance spurred by imposition of austerity measures can stall investment, inhibiting further growth.[105] Global financial system Main article: Global financial system By the early 21st century, a worldwide framework of legal agreements, institutions, and both formal and informal economic actors came together to facilitate international flows of financial capital for purposes of investment and trade financing. This global financial system emerged during the first modern wave of economic globalization, marked by the establishment of central banks, multilateral treaties, and intergovernmental organizations aimed at improving the transparency, regulation, and effectiveness of international markets.[106] The world economy became increasingly financially integrated throughout the 20th century as nations liberalized capital accounts and deregulated financial sectors. With greater exposure to volatile capital flows, a series of financial crises in Europe, Asia, and Latin America had contagious effects on other countries. By the early 21st century, financial institutions had become increasingly large with a more sophisticated and interconnected range of investment activities. Thus, when the United States experienced a financial crisis early in that century, it quickly propagated among other nations. It became known as the global financial crisis and is recognized as the catalyst for the worldwide Great Recession. Inequality Main articles: Economic inequality and International inequality Increasing international commerce with high barriers to entry, corporate consolidation, tax havens and other methods of tax avoidance, and political corruption have all caused increases in income inequality and wealth concentration: the increasingly unequal distribution of economic assets (wealth) and income within or between global populations, countries, and individuals. Economic inequality varies between societies, historical periods, economic structures or systems (for example, capitalism or socialism), ongoing or past wars, between genders, and between differences in individuals' abilities to create wealth.[107] There are various numerical indices for measuring economic inequality. A prominent one is the Gini coefficient, but there are also many other methods. While within-country income inequality has increased throughout the globalization period, globally inequality has lessened as developing countries have experienced much more rapid growth.[108] Economic inequality varies between societies, historical periods, economic structures or economic systems, ongoing or past wars, between genders, and between differences in individuals' abilities to create wealth.[109] Among the various numerical indices for measuring economic inequality, the Gini coefficient is most often-cited. Of the factors influencing the duration of economic growth in both developed and developing countries, income equality has a more beneficial impact than trade openness, sound political institutions, and foreign investment.[110] Economic inequality affects equity, equality of outcome and subsequent equality of opportunity. Although earlier studies considered economic inequality as necessary and beneficial,[111] some economists see it as an important social problem.[112] Early studies suggesting that greater equality inhibits economic growth did not account for lags between inequality changes and growth changes.[113] Later studies claimed that one of the most robust determinants of sustained economic growth is the level of income inequality.[110] International inequality is inequality between countries. Income differences between rich and poor countries are very large, although they are changing rapidly. Per capita incomes in China and India doubled in the prior twenty years, a feat that required 150 years in the US.[114] According to the United Nations Human Development Report for 2013, for countries at varying levels of the UN Human Development Index the GNP per capita grew between 2004 and 2013 from 24,806 to 33,391 or 35% (very high human development), 4,269 to 5,428 or 27% (medium) and 1,184 to 1,633 or 38% (low) PPP$, respectively (PPP$ = purchasing power parity measured in United States dollars).[115] Certain demographic changes in the developing world after active economic liberalization and international integration resulted in rising welfare and hence, reduced inequality. According to Martin Wolf, in the developing world as a whole, life expectancy rose by four months each year after 1970 and infant mortality rate declined from 107 per thousand in 1970 to 58 in 2000 due to improvements in standards of living and health conditions. Also, adult literacy in developing countries rose from 53% in 1970 to 74% in 1998 and much lower illiteracy rate among the young guarantees that rates will continue to fall as time passes. Furthermore, the reduction in fertility rates in the developing world as a whole from 4.1 births per woman in 1980 to 2.8 in 2000 indicates improved education level of women on fertility, and control of fewer children with more parental attention and investment.[116] Consequentially, more prosperous and educated parents with fewer children have chosen to withdraw their children from the labor force to give them opportunities to be educated at school improving the issue of child labor. Thus, despite seemingly unequal distribution of income within these developing countries, their economic growth and development have brought about improved standards of living and welfare for the population as a whole. Capital flight Main articles: Capital flight and Liquidity crisis See also: Sudden stop (economics), Tax exporting, Capital strike and Illicit financial flows Capital flight occurs when assets or money rapidly flow out of a country because of that country's recent increase in taxes, tariffs, labor costs, or other unfavorable financial conditions such as government debt defaulting, which disturb investors. This leads to a sometimes very rapid disappearance of wealth and is usually accompanied by a sharp drop in the exchange rate of the affected country, leading in turn to depreciation in a variable currency exchange rate regime or a forced devaluation under fixed exchange rates. This can be particularly damaging when the capital belongs to the people of the affected country, because not only are the citizens now burdened by the loss of faith in the economy and devaluation of their currency, but probably also their assets have lost much of their nominal value. This leads to dramatic decreases in the purchasing power of the country's assets and makes it increasingly expensive to import goods. The Argentine economic crisis of 2001 caused in a currency devaluation and capital flight which resulted in a sharp drop in imports. Capital flight can cause liquidity crises in the affected countries from which capital is flowing, the countries in which investors are trying to liquidate their assets, and other countries involved in international commerce such as shipping and finance. A 2008 paper published by Global Financial Integrity estimated capital flight or illicit financial flows out of developing countries to be at a rate of "some US$850 billion to $1 trillion a year."[117] Market participants in need of cash find it hard to locate potential trading partners to sell their assets. This may result as a consequence of limited market participation or because of a decrease in cash held by financial market participants. Thus, asset holders may be forced to sell their assets at a price below the long term fundamental price. Borrowers typically face higher loan costs and collateral requirements, compared to periods of ample liquidity, and unsecured debt is nearly impossible to obtain. Typically, during a liquidity crisis, the interbank lending market does not function smoothly either. Capital flight affects advanced economies, as well. A 2009 article in The Times reported that hundreds of wealthy financiers and entrepreneurs had recently fled the United Kingdom in response to recent tax increases, relocating in low tax destinations such as Jersey, Guernsey, the Isle of Man, and the British Virgin Islands.[118] In May 2012 the scale of Greek capital flight in the wake of the first "undecided" legislative election was estimated at €4 billion a week[119] and later that month the Spanish Central Bank revealed €97 billion in capital flight from the Spanish economy for the first quarter of 2012.[120] Measuring globalization Indices Globalization Index Main article: Globalization Index Measurement of economic globalization focuses on variables such as trade, Foreign Direct Investment (FDI), portfolio investment, and income. However, newer indices attempt to measure globalization in more general terms, including variables related to political, social, cultural, and even environmental aspects of globalization.[121] One index of globalization is the KOF Index, which measures three important dimensions of globalization: economic, social, and political.[122] Another is the A.T. Kearney / Foreign Policy Magazine Globalization Index.[123] 2014 KOF Index of Globalization Rank Country 1 Ireland 2 Belgium 3 Netherlands 4 Austria 5 Singapore 6 Denmark 7 Sweden 8 Portugal 9 Hungary 10 Finland 2006 A.T. Kearney / Foreign Policy Magazine Globalization Index Rank Country 1 Singapore 2 Switzerland 3 United States 4 Ireland 5 Denmark 6 Canada 7 Netherlands 8 Australia 9 Austria 10 Sweden The Good Country Index Main article: Good Country Index The Index is a composite statistic of 35 data points which are mostly generated by the United Nations. These data points are combined into a common measure which gives an overall ranking and a ranking in seven categories such as Science and Technology, Culture, International Peace and Security, World Order, Planet and Climate, Prosperity and Equality, Health and Wellbeing. 2014 Top 10 Overall Rank 2014 Rank Country or territory 1 Ireland 2 Finland 3 Switzerland 4 Netherlands 5 New Zealand 6 Sweden 7 United Kingdom 8 Norway 9 Denmark 10 Belgium Free trade policies Main article: Global Enabling Trade Report The Enabling Trade Index measures the factors, policies and services that facilitate the trade in goods across borders and to destinations. It is made up of four sub-indexes: market access; border administration; transport and communications infrastructure; and business environment. The top 20 countries are listed below. Global Enabling Trade Report 2010[124] Singapore 6.06 Hong Kong 5.70 Denmark 5.41 Sweden 5.41 Switzerland 5.37 New Zealand 5.33 Norway 5.32 Canada 5.29 Luxembourg 5.28 Netherlands 5.26 Iceland 5.26 Finland 5.25 Germany 5.20 Austria 5.17 Australia 5.13 United Arab Emirates 5.12 United Kingdom 5.06 Chile 5.06 United States 5.03 France 5.02 Global Enabling Trade Report 2014[125] Singapore 5.9 Hong Kong 5.5 Netherlands 5.3 New Zealand 5.2 Finland 5.2 United Kingdom 5.2 Switzerland 5.2 Chile 5.1 Sweden 5.1 Germany 5.1 Luxembourg 5.1 Norway 5.1 Japan 5.1 Canada 5.0 United States 5.0 United Arab Emirates 5.0 Denmark 5.0 Austria 4.9 Qatar 4.9 Belgium 4.9 Globalization (or globalisation) is the process of international integration arising from the interchange of world views, products, ideas and other aspects of culture.[1][2] Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.[3] Though scholars place the origins of globalization in modern times, others trace its history long before the European age of discovery and voyages to the New World. Some even trace the origins to the third millennium BCE.[4][5] In the late 19th century and early 20th century, the connectedness of the world's economies and cultures grew very quickly. The term globalization has been increasingly used since the mid-1980s and especially since the mid-1990s.[6] In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people, and the dissemination of knowledge.[7] Further, environmental challenges such as climate change, cross-boundary water and air pollution, and over-fishing of the ocean are linked with globalization.[8] Globalizing processes affect and are affected by business and work organization, economics, socio-cultural resources, and the natural environment. |
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