What is meant by the term globalization? Sample Essay

The planetary economic system is the universe economic system. It reflects the entire sum of economic activity which can be measured by GWP ( Gross World Product ) and PPP ( buying Power Parity ) . PPP aims to acquire a more accurate method to compare the value of different currencies. This is done by concentrating on the measure of goods and services that can be purchased by one unit of the currency. For a planetary economic system to be there should be a lifting portion of economic activity in the universe between people populating in different states. This procedure is known as globalisation.

Globalization refers to the increasing integrating between states. This occurs when national boundaries are reduced or removed and universe broad alterations are taking topographic point to things such as ; trade. investing. finance. labor and engineering. Globalization means that people in different states are going progressively linked by common engineerings ( for illustration: Internet. facsimile. etc. ) and through goods and services sold on a planetary footing instead than national.

The size of the universe economic system can be measured with GWP ( Gross World Product ) . The consequence of GWP is reached by adding together the end products of the universe economic systems. In simpler footings you add all the lending states GDP ( Gross Domestic Product ) together.

The entire universe GDP is difficult to mensurate accurately because each state has different methods of measurings and units of step. The figures may change because rising prices rates vary from state to state. differences in exchange rates. fluctuations in statistical methods for ciphering plus values. authorities policies associating to revenue enhancement can change from state to state and inaccuracies in roll uping informations all contribute to the changing statistics of entire GWP.

In the tabular array on the old page. we can see a clear domination by a few economic systems. In 5 states which make up 45. 3 % of the world’s population. over half the world’s merchandises are produced by them. Australia is ranked 16th in the Earths major bring forthing states which is a great figure sing the mere 20 million population. compared to viing states.

The tabular array shows which states export goods and services compared to the entire end product of every lending state. The USA. China and Germany have been clearly the biggest exporters of the world’s goods and services. Australia’s economic system is graded twenty-fifth largest in the universe even though it is less populated than many other states in the universe. For illustration India has a population of 1080 million and is in place 29.

Economic globalisation can be identified when tendencies appear in countries such as ; trade. investing. engineering. finance. labor and concern rhythms. These tendencies involve:

* When there is an addition in trading of goods and services beyond national boundaries this is known as a planetary market.

* The addition in motions of capital. labor and engineering between states which is besides known as planetary flows of factors of production.

* The related addition in mutuality between national economic systems.

* The growing of the size and figure of multinational corporations which have concern operations in many states.

* Consumer tendencies going worldwide. E. g. : coke. fast nutrients. denims. etc.

* Need for more inter-government audiences and understandings to ease the addition in economic contacts and to cover with the ineluctable addition in differences.

* Increasing environmental harm which does non halt at national boundaries. E. g. : air pollution and H2O pollution which can flux into neighbouring states even though they didn’t cause the job.

The drivers of globalisation are the factors or grounds to why globalisation moves along. The three chief drivers are:

– Improved degrees of engineering. communications and conveyance.

– Increased customization of merchandises and services.

– Rapid addition in planetary trading environment through trade understandings ( e. g. NAFTA. TAFTA. AUSFT. APEC. etc. ) and micro economic reforms.

These forces are driving globalisation of economic activity and are really strong and by and large supported by the government’s f high. medium and low income states. However the epoch of globalisation has non led to a more even distribution of income. The spreads between the rich and the hapless states are increasing and this is a negative impact of globalisation.

The growing in planetary markets can be seen through the growing in the trade of goods and services between states. The market could be consumer goods and services. capital goods or intermediate goods and services. The world’s goods and services trade has risen from 12 % in 1964 to 24 % in 2004 as a per centum of planetary GDP. Another step of the growing in planetary markets is the extent to which a state depends on imports and exports compared to their value of production ( GDP ) . This is known as trade dependence.

There are 43 states which have a really high trade dependence in that the value of goods exports and imports totaled at least 80 % of the value of goods produced in their economic system. These economic systems import so re-export the merchandises of other states every bit good as exporting their ain green goods and importing for their ain usage. The interesting thing to observe is that these really high trade dependence economic systems are scattered around the universe which suggests that there is a high degree of trade flows in the universe.

In the tabular array we see that in 2004 trade dependence statistics are higher than the old statistics ( in most instances ) . This indicates a tendency in globalisation.

Besides in the tabular array. Australia is shown to hold a moderate-low trade dependence despite the clear addition in figures. This tabular array besides shows that Australian is the twentieth lowest state out of 146. Reasons for this could be the geographic place and trade policies which limit our trade.

Globalization affects universe trade and fiscal flows in many different ways. An addition in universe disbursement. end product and growing will take to an addition in demand for a country’s exports of goods and services. raising its GDP growing potency. A lessening in universe disbursement. end product and growing will normally take to a lessening in the demand for a country’s exports of goods and services and cut down its GDP growing potency.

If exports are increasing faster than imports. the balance of payments on current history should better and travel into a excess. If domestic growing exceeds the universe rate of growing. with imports increasing faster than exports. a county’s balance of payments on current history may diminish and do a shortage.

An addition in trade good monetary values and an increasing exchange rate is normally caused by higher universe growing for those states sing a rise in export income. On the other manus lower universe growing will most likely lead to a lessening in trade good monetary values and deprecating exchange rates for those states sing a diminution in export income.

Changes in fiscal flows can besides impact on national economic systems. For illustration. a rise in foreign investor assurance may take to increasing capital flows into a state or part. assisting to raise the domestic rate of growing by supplying foreign exchange and capital. This may impact the state by taking to a stronger exchange rate and lifting plus monetary values such as portions. existent estate and bonds. If a autumn in foreign exchange the opposite result occurs.

In decision. globalisation can profit or disfavor a state and its people. However in most instances globalisation helps people around the universe integrate with one another and in some instances introduce states to new merchandises or services. For Globalization to work successfully each state involved should hold less protective barriers or no barriers at all. As globalisation has progressed. populating conditions have improved significantly in about all states. However. the strongest additions have been made by the advanced states and merely some of the developing states.


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