Globalization is a diffuse term but is generally used to describe the advancing integration, interdependence, and homogenization of the world, trends very often measured in economic terms. Social and economic development is essential for many nations to emerge from situations of persistent poverty and societal distress.
What is globalization?
Globalization has been invoked to explain everything from call-centers in India to rising income inequality in the United States, to the Arab Spring. Yet defining this ubiquitous term is more difficult than one might expect. Broadly, it has to do with the increased global interconnectedness of people and economies, but there are at least five distinct ways in which it is commonly understood. Likewise, it has a broad range of effects on the world and local economies, politics, culture, the environment, and, perhaps most tellingly, on the daily lives of almost everyone, no matter where they are in the world.
What Are the Benefits of Globalization?
Globalization impacts businesses in many different ways. But those who decide to take on international expansion find several benefits, including:
- Access to New Cultures
- The Spread of Technology and Innovation
- Lower Costs for Products
- Higher Standards of Living Across the Globe
- Access to New Markets
- Access to New Talent
Impact of globalization
Understand the macroeconomic impacts. At the level of global and national economics, globalization has produced significant changes that reflect a more integrated world economy.
- World trade rates (the ratio of world imports to gross world product) have grown from 7% in 1938, to 10% in 1970, to 18% in 1996, to almost 25% in 2013.
- Foreign direct investment in developing countries has gone from $2.2 billion in 1970 to $154 billion in 1997 to $778 billion in 2013.
- The foreign exchange market has grown from $1 trillion per day in 1992 to over $3.5 trillion per day in 2014.
Seeing Globalization in Your Life
Look at your network of relationships. Globalization is partly defined by the interaction of people across the globe. How many people do you know that are from another country, or who have lived or traveled in one? How many people do you know who live in foreign countries now or frequently travel to one for work? How many of those people do you stay in touch with via email or phone?
Take a close look at the things you own. Walk around your home, and everywhere you look you will likely see the result of the global flow of goods. Your IKEA couch might be designed in Sweden and produced in China. Your Samsung TV might have been designed in South Korea and assembled in Malaysia. Your clothes likely hail from all over the world: China, Sri Lanka, Mexico, India, Bangladesh, Vietnam, and a dozen other countries. Your refrigerator, which might be made in Hungary or China or South Africa, probably contains foods produced around the world.
