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To what extent has globalisation created a 'borderless world'?

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Introduction

GLOBALISATION: COULD THE FUTURE BE BRIGHT? * INTRODUCTION * CHAPTER 1 - THE THREE WAVES OF GLOBALISATION * CHAPTER 2 - OPPORTUNITIES & RISKS GLOBALISATION * CHAPTER 3 - LOOKING TO THE FUTURE: THE WAY AHEAD * CONCLUSION To what extent has globalisation created a 'borderless world'? INTRODUCTION Globalisation is the term used to describe the growing economic integration of the world's economy. It is suggested that as globalisation takes place, national economies are becoming integrated into a single 'global economy' with similar characteristics. There are interrelationships throughout the world between businesses, between consumers and between businesses and consumers. Decisions taken in one part of the world affect other parts. The process is driven by technological advances and reductions in the costs of international transactions, as well as reductions in the costs of transportation. Certain factors have contributed to the growth of globalisation. At a national economy level, we can refer to the way that national economies are becoming more closely integrated with each other. One obvious example of this is the way that countries within Europe have become more closely integrated in recent years, both with the single market measures of 1992, and most recently the establishment of the single European currency. Tariffs and other impediments have been gradually reduced under the auspices of the General Agreement on Tariffs and Trade (GATT) in the period after the second world war. This process has been continued under the guidance of the World Trade Organisation (WTO). All these moves have meant a more integrated and interdependent global economy. Technological change has played an important role in globalising the world's economy. More powerful computers and communications technology have allowed easy transfer of data. The internet is beginning to revolutionise the way in which consumers purchase products. The cost of transportation has fallen. Between 1930 and 1990 the average revenue per mile in air transport fell from 68 cents to 11 cents (at 1990 US dollar prices). ...read more.

Middle

Another way is the improved mobility of physical and financial capital which may enable comparative advantage to be taken even further. A multi-national corporation may be able to fragment its production to take advantage of market conditions on a worldwide basis. For example, it may be able to locate the labour-intensive part of its production process in countries with a relative abundance of labour in order to minimise costs on a global scale. At the heart of the case for globalisation is the argument that there are economies of scale to be reaped by expanding production that would not necessarily be available to it if it were confined to a domestic market. Businesses with a global presence are likely to enjoy a larger scale of operations, thereby allowing them to spread costs over a larger volume of output. This allows businesses to exercise power over suppliers and unit output costs can be reduced. Global hotel chains such as Holiday Inn and Marriott are in a position to benefit from volume discounts from catering supply companies. The growth in trade between nations has contributed to lifting 3 billion people out of poverty over the past 50 years. Reducing tariff barriers, which makes it easier for nations to trade with each other, lifts the wealth of all nations by allowing them to concentrate on those where they have greatest expertise. It is true that there has been some contraction in employment in labour intensive industries such has textiles and footwear in rich countries over the past 20 years, as production has moved to countries in which labour is cheaper. For instance, with the North American Free-Trade Agreement (NAFTA), there is nothing to stop an American manufacturer closing an old factory in the United States and opening a new one in Mexico, where wage costs are more than halved. However this is part of the process of development. ...read more.

Conclusion

Governments and institutions need to work collectively to tackle the problems of conflict and corruption, boost investment in education and health, spread the benefits of technology and research, strengthen the international financial system, reduce barriers to trade, tackle environmental problems and make development assistance more effective. It is clear that openness is a necessary but not sufficient condition for prosperity. No developed country is closed. The poor countries that have been most successful in closing the gap are those which have opened up their economies to world markets in order to build strong export sectors and attract inward investment. However, the majority believes that the future of Globalisation is bright. Even September was a remarkable positive month, especially in the US. The country has recently signed new agreements with Jordan and Vietnam; and negotiations to bring China into the World Trade Organisation look close to a deal. The new trade rounds at Doha promise to deliver liberalisation of agricultural markets, allowing less developed countries the chance to gain a share of these markets and profit accordingly. A breakthrough at Doha - just as the world economy appears to be entering its worst slowdown in a generation - could be a hugely symbolic victory for those proposing further trade liberalisation. Globalisation in the future is inevitable. However, it is agreed on all accounts that in order for it to benefit as many people as possible, changes must be made. Those institutions such as the IMF and the World Bank, as well as individual governments, must all make vital changes in order to better prospects for everyone in the future. To conclude, global economic integration has supported poverty reduction and should not be reversed. But the world economy could be and should be much more inclusive. The growth of global markets must not continue to bypass 2 billion people. The rich countries can do a lot, both through aid and trade policies, to help the currently marginalised countries onto the path of integration that has already proved to effective for the new globalisers. ...read more.

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