Introduction to Globalisation

1. Definition of the term 'globalisation'

Globalization, as a dominant phenomenon in the world economy of the last decades, can be defined as "a continuous decline of economic importance of national politic borders and an unprecedented intensification of economical relations and interactions, up to the point where the difference between domestic and foreign transactions becomes insignificant or even non-existent.

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2. Short history of economical globalisation

The main ways in which globalization manifests itself are: internationalization of technology and production, globalization of commodity markets, internationalization of services market and integration of financial markets. The most used indexes of global economic integration are: the growth in world trade, reported to the growth in world production, and the growing access to world capital markets, illustrated by foreign investments, especially direct ones.

There are two phenomena, which determine the growing integration of world economy. One is technological and consists in an explosive progress in speed and efficiency of international communications and transport, concomitant with the decrease in their real costs. The other one is economical and represents the decrease or removal of national borders from the way of international fluxes of goods, services, technology and capital.

In the perspective of life and economic activity's globalization, which will determine a new international economic order (where great corporations will rule starting from force and competitive relations appeared among world's great powers), the problem is whether economic globalization is beneficial for humanity or not and whether there is a way to avoid or control such a process.

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2.a. Causes for globalisation

The main causes of economic integration are:

- the appearance and manifestation in more and more emphatic forms (starting from the second half of the 20th century) of the contradiction between the possibilities of production increase and the restricted capacity of national markets;
- the high standard of production concentration and capital centralization;
- the limits and restrictions of free movement of capital and working capacity;
- the necessity of capitals from countries situated in a certain area to promote and defend their interests when threatened by powerful international contestants;
- the existence of large companies which, by their activity, exceed national borders;
- the common interests of economically-developed countries in maintaining and extending their relations with ex-colonial countries, which have become independent.

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2.b. Stages of integration

There are five stages or types of economical integration, which represent increasing grades of union:

a) The lowest level of integration means creating an area of preferential trade. In such a system, the participating countries accept to reduce commercial barriers, which appear in the relations with nearby countries and prefer to relate with countries that are involved rather than with those which are not. Each state continues to determine their own policies, but their commercial policies include a preferential treatment for every participating country.

b) The second step of integration means creating a free-trade area, which must eliminate any barriers that might appear in trading with nearby countries, maintaining though, all barriers that have been settled by a national decision, in case of trading with non-participating countries. A free-trade area can refer either to any possible merchandise, or to a specific list of merchandise. The advantage of such an area is that it requires the same opinion of all involved states over a small number of issues. The disadvantage of this integration form is the appearance of a problem in transitional transport. If there were a world consisting of 3 countries, where A and B formed a free-trade area, then C would be put out. "A" country keeps a tariff of 10% over imports from C, and "B" country - 20%. This situation determines "C" country to send its merchandise to "B" country, passing it through "A" country, where the tariff is only 10%, then from A to B charge-free, avoiding thus, the 20% customs tariff.

c) A boarder union means eliminating any barriers which appear in trading with participating countries and establishing a common foreign tariff in trading with non-participating countries. If A and B (from the previous example) created a boarder union, the tariff on imports from "C" country would uniformly be 10, 20 or 15 %. This common tariff eliminates the problem of transitional transport.

d) The common market extends the free trade between participating countries, from merchandise and services also to production factors (labour capacity and capital fluxes). In addition to this, the members of a common market maintain settled exchange rates between their national currency. This level of unification is best illustrated by the status of the European Economic Community.

e) The most developed form of economic integration is the economic union, which implies common economic policies, as well as a common currency. Creating an economic union is extremely difficult, as it means the same opinion of all participating countries over a large variety of issues, including micro and macroeconomic politics. In the past, countries didn't want to give up their right to exert their national sovereignty in the interest of an economic union. The European Union intends, relying on the Maastricht Treaty, to create an economic and political union, and the introduction of a single currency (Euro), starting from July 2002, is a step forward.

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