Reading 4: “What is the relation between economics and globalization?”. WANGYIZHE

 Relationship between economy and globalization

Economic globalization refers to the process by which the world economy becomes increasingly interdependent through the expansion of cross-border trade, investment and financial flows. The relationship between the economy and globalization is complex and diverse, involving multiple factors that collectively shape the way businesses, markets and national economies interact on a global scale.

1. Role of multinational corporations (TNCs)

Multinational corporations (TNCs) are key players in economic globalization. Operating in multiple countries, these companies coordinate production, sales and service, transcending national boundaries and reflecting the interconnectedness of global markets.

As early as the 15th century, trade empires such as the East India Company had begun to trade internationally. However, it was not until the 19th and 20th centuries that companies began to set up manufacturing bases outside their home countries, thus driving the rise of multinational companies in .

Multinational corporations contribute significantly to global GDP and exports, and they build production networks in multiple countries. Multinational companies control cross-border operations through foreign direct investment (FDI), further promoting the integration of  into the global economy.

2. The main drivers of economic globalization

Foreign direct investment (FDI):

FDI refers to cross-border investment to control foreign companies or set up production facilities. FDI has been growing faster than global trade, indicating that multinational companies are playing an increasingly important role in integrating the global economy in .

Market-oriented investments:

When the domestic market is saturated, multinationals often expand their operations by entering foreign markets and establish a local presence to avoid trade barriers such as tariffs.

Asset-oriented investments:

Many companies invest in countries with abundant resources or high labour skills to establish transnational production networks. For example, East Asia's emergence as a manufacturing hub shows the impact of labor costs and technological expertise on decision-making by multinational corporations in .

3. Positive and Negative Effects of Economic Globalization

Positive impact:

 Accelerating economic growth: Global trade and investment promote efficient allocation of resources and productivity, driving economic growth.

Technology transfer: Globalization drives the cross-border spread of technology and innovation and promotes the development of emerging economies.

Consumers benefit: Globalization enables consumers to access a wider range of goods and services at more competitive prices.

Negative effects:

Labour exploitation and inequality: Transnational corporations' pursuit of cheap labour can lead to poor working conditions and widening wage gaps.

 Weakening of national regulatory capacity: States may struggle to effectively regulate strong TNCs, especially when firms exploit policy differences from country to country through "regulatory arbitrage"

Environmental costs: The expansion of global production could lead to loose environmental regulations in some countries, triggering environmental damage.

4. Challenges of economic globalization

Asymmetry of power:

There is asymmetry of power between transnational corporations and States. Although the state tries to regulate the operation of multinational companies, companies can fight for favorable conditions by moving production to 

Complex production networks:

Multinational companies have extensive production networks in multiple countries, which makes it more difficult to ensure environmental and labor standards compliance in the supply chain.

Impact on the local economy:

While globalization presents opportunities, local industries may struggle to compete with global businesses, leading to unemployment and social unrest.

Conclusions

Economic globalization has fundamentally changed the way countries interact with each other, bringing opportunities for growth, innovation and cooperation. However, it also poses serious challenges, such as labour exploitation, environmental risks and regulatory challenges. As globalization continues to evolve, governments, businesses and civil society must work together to ensure that the benefits of global integration are shared equitably while minimizing its negative effects.

Comments

Post a Comment

Popular posts from this blog

What is the relation between politics and globalization? QU HONGYU

  The Political Impact of Globalization With the accelerated development of globalization, international relations have become more and more close, and the political system has more and more significant influence on international relations. The political system is the organization and functioning mechanism within a country, while international relations are the interaction and interaction between countries. First, the impact of the political system on international relations can be seen in two ways. On the one hand, the stability and effectiveness of the political system play an important role in the stability and harmony of international relations. A country with a stable political system, reasonable distribution of power, impartiality and transparency can better maintain domestic stability and social order, thus providing a reliable partner for the international community. For example, countries under democratic systems tend to pay more attention to human rights and the rule of l...
Read more

What is the relation between economy and globalization? QU HONGYU

 Impact of globalization on the world economy With the continuous development of globalization, the world economy is undergoing tremendous changes. The impact and changes brought about by globalization are multifaceted and involve various fields such as economy, trade, investment, science and technology, culture and so on. 1.Globalization promotes the development of international trade Globalization has made international trade an important part of the world economy. By lowering tariffs, removing trade barriers and promoting trade liberalization, globalization has contributed to the growth of international trade. Increased trade flows between countries and significant increases in the mobility of goods and services have contributed to the optimal allocation and efficiency of global resources. At the same time, globalization has also promoted the formation of global supply chains, and various countries have formed close cooperative relationships in production, processing, and distri...
Read more

What is the relation between economy and globalization? SHENZIHE

 The economy and globalization are closely intertwined, mutually promoting and influencing each other. Globalization promotes economic development • Market expansion: Globalization has broken down trade barriers among countries, enabling enterprises to enter the global market. For example, many multinational corporations can sell their products all over the world, greatly expanding the market scope. The Coca - Cola Company, for instance, whose products are sold in more than 200 countries and regions, benefits from the market opening brought about by globalization. • Optimal allocation of resources: Each country can obtain resources on a global scale. Resource - rich countries can export resources, while countries with developed manufacturing industries can import resources for production. For example, the oil in the Middle East is exported all over the world, providing power support for the industrial production of oil - importing countries. • Technology and knowledge dissemination...
Read more