In theory, globalization provides an opportunity to raise incomes through increased specialization and trade. This opportunity is conditioned by the size of the
markets in question, which in turn depends on geography, transportation costs, communication networks, and the institutions that underpin markets. We experienced rapid changes in the global economy. Barriers to the free flow of goods, services, and
capital came down. The volume of cross border
trade and investment grew more rapidly than global output, indicating that national economies were becoming more closely integrated into a single, interdependent, global economic system. As their economies advanced, more nations joined the ranks of the developed world. There were four concepts of globalization (1) technological innovation and information revolution; (2) trade liberalization; (3) internationalization of capital; and the (4) new international division of labor. Trade
liberalization is defined as the opening up of borders so
goods and
services can move freely across border without any restrictions from tariffs and non tariffs barriers. Trade liberalization has aggravated the gap between rich and poor countries. The internationalization of capital on the other hand, focuses on the growth of international capital movements and the merging of capitals. There is flow of capital to profitable opportunities, in the form of monopoly capital with its defining characteristics—imperialism. The existence of free trading was believed by influential economists, politicians, and business leaders that prices for goods and services will be lowered and this will stimulates economic growth. Incomes of consumers raise. This will also helps create jobs in all countries that participate global trading system. Its existence will benefit outweigh the costs. Countries specializing in the production of goods and services produce more efficiently. Goods not specialized are imported. Say for example: US purchases low cost China textiles, Americans will have more money to buy other products in this case Chinese will have more money to buy American products. Giant investors move to less developed countries that lack adequate regulations to protect
labor and the environment, though they might increase pollution and exploit the labor force. Improving the investment climate in developing countries, encouraging investment and creating jobs requires good economic governance, the enactment of measures to combat corruption, better-functioning bureaucracies, better regulation, contract enforcement, provide social protection to a changing labor markets, and structural reform to encourage domestic competition, improve delivery of education and health services are the new global deal.
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