Expanding World Economy Shrinking to Globalization

What has lead to integration of economies worldwide cannot be just a simple, single phenomenon? From the angle of ‘globalization,’ world economy cannot be bifurcated. It has to be viewed as a single market even at the macro 'global' level. This beautiful vast concept that has come to the shore after the signing of WTO in April 1990, can best be compared to a string of multi-colored beads that has incorporated different flowering economic divisions round the seven seas together. The International Monetary Fund defines globalization as a “historical process” involving “the increasing integration of economies around the world, particularly through trade and financial flows.” (“Globalization: Threat or Opportunity?” January 2002.)

“Globalization and deregulation of finance capital had happened so fast and so massively and so recklessly as well that more than stable investment for productive activity and trade, what was experienced was huge flow of destabilizing speculative capital. By 1990, it became the very force driving the world economy.” (Sundaram, N M. May 2006.)
It has become a catch-up concept to describe a range of trends and forces leading to openness, integration and interdependence of economies. In short, LPG process—liberalization, privatization and globalization—has engulfed the earth, ignoring the international boundaries to quiet an extent.

Cost- benefit estimate and discussion of policy measures to mobilize the global response is a routine for economists that can never be termed as mundane with minute-to-minute new developments. They cannot afford to ignore it as these days production area is not regional or sub-sectoral, rather it’s a set of national economies linked by trade and investment flows.

“… the convergence of technology and events that allowed India, China, and so many other countries to become part of the global supply chain for services and manufacturing, creating an explosion of wealth in the middle classes of the world's two biggest nations, giving them a huge new stake in the success of globalization? And with this 'flattening' of the globe, which requires us to run faster in order to stay in one place, has the world got too small and too fast for human beings and their political systems to adjust in a stable manner?” (Friedman, Thomas. April 2005.)

What’s important is optimal utilization of global resources including competitive sourcing of inputs for achieving cost competitiveness in production, economies of scale in operations and efficient technology utilization. Easy movement of product and factor flows across borders involving merchandise trade, services, investment, financial capital, technology and labor. Competition, production and markets become global in nature and goods and services become less distinguishable or identifiable with their country of origin.

Besides, improvements in transport, communication, e-commerce and information technology networks have led to lower cost of transactions and of doing business globally. This has created new ways to organize firms at global level. This macro-process can be narrowed at the micro level of firms. At the independent firm level LPG process means configuration and coordination of activities across national boundaries in order to maximize profit and remain competitive. That’s how the MNC (multi-national companies) culture has been popularized. What exactly has moved the economic circumstances and factors that have spurt the globalization and liberalization is enhanced efficiency in production made possible by increased specialization. In all this, “Information technology (IT) was key to the superior overall macroeconomic performance of the United States in the 1990s—high productivity, high growth, low inflation, and low unemployment. But IT also played a role in increasing earnings.” (Mann, Catherine L; (assisted by) Kirkegaard, Jacob Funk. June 2006.) Easy movement of factors of production across the globe has facilitated MNC firms to locate different parts of their production process in various countries that has made possible the increase in production levels due to better exploitation of economies of scale.

It has resulted in greater worldwide acceptance and commitment to the free trade principle and market economy along with dismantling of planned economies. Though the economic field has increased but the polarizations of organized and unorganized has worsened the scene, increasing the disparity between the two. The idea of “Global Development Network, a global network of research and policy institutes working together to address the problems of national and regional development, was conceived and launched by the World Bank in 1999 at its first annual conference in Bonn.” (http://www.worldbank.org/ieg/gppp/case_studies/information_knowledge/gdn.html.)
As John Nichols has observed (“One Dead, Eighty Injured in Genoa,” The Nation, July 2001.) “The economic policies promoted by the [G8] leaders...are now so unpopular that gatherings must be 'protected' with deadly police violence... .If the croupiers of corporate capital really believe that restructuring the global economy to limit protections for workers, the environment, and human rights represents a positive development, why must they employ deadly force to defend the meetings at which they plot their warped vision of ‘progress’?”

The requirement is of handshake between the global giants to carry forward the small-scale industries in the developing countries, while on the other end, most developed and transitional countries face daunting economic and social problems ranging from persistent unemployment to massive public deficits to unregulated immigration. The problem is as big as the magnitude of globalization demanding immediate attention and consensus of the global community.


Biblography:
· Sundaram, N M. May 28, 2006. FROM UNCTAD TO GATT TO WTO—II: Hopes Of The South Betrayed, People’s Democracy, Vol. XXX No. 22. Weekly Organ of the Communist Party of India (Marxist). India.
· Friedman, Thomas. April 2005. The World is Flat: A Brief History of the Globalized World in the 21st Century. Penguin Group. United Kingdom.
· Mann, Catherine L; (assisted by) Kirkegaard, Jacob Funk. June 2006. Accelerating the Globalization of America: The Role for Information Technology. Institute for International Economics. Washington, DC.
· Case Studies for Selected Global Programs. Global Development Network, http://www.worldbank.org/ieg/gppp/case_studies/information_knowledge/gdn.html.
· Facing the Challenges of Globalization: Equity, Justice and Diversity http://www.globalpolicy.org/ngos/role/globalact/challeng.htm#wh