Are Smart Cities The Answer to Urbanization of the World? Examining the Pros and Cons
Urbanizing World, Social Unrest, and Urban Nightmares The world is urbanizing at an alarming pace. We used the word, alarming, as the pace of migration to the cities and the urban and metropolitan areas worldwide is making such places groan under the weight of too many people and too inadequate infrastructure. Indeed, the rate at […]
The PDSA (Plan-Do-Study-Act) Technique for Quality Improvement
What is the PDSA Technique ? The PDSA or the Plan-Do-Study-Act technique is a famous QI or Quality Improvement Tool or Initiative that helps organizations enhance the quality of their products and services. The PDSA technique hinges on the iterative process wherein each cycle begins with planning the quality improvement, actualizing the method or the […]
DMADV Methodology – Meaning and Rules for Implementing DMADV
DMADV is a six sigma methodology. It is used to design new processes or products where none exist and get it right in the first time. This is a part of the DFSS “Design For Six Sigma” concepts which place focus on creating processes right the first time. The focus of DMADV is on quantifying […]
Role of Derivatives in Causing the Global Financial Crisis
The previous articles in the module have discussed how the global financial crisis has been caused due to a combination of factors starting with the collapse of the housing market in the US and then due to the integration of the global economy rapidly spread to other parts of the world. An aspect that was […]
What is Pugh Matrix and How to Use it ?
The Pugh Matrix is one of the most widely used methods of finding out the best solution once a number of alternate solutions have been generated. The success of the Pugh Matrix is in its simplicity. The tool is not very mathematically intensive and fairly simple to use. However, it has a record of coming […]
We often hear the word globalization in many contexts and repeated frequently as a concept to denote more trade, foreign companies and even the ongoing economic crisis. Before we launch into a full-fledged review of the term and its various manifestations, it is important to consider what exactly we mean when we say globalization.
Globalization is the free movement of goods, services and people across the world in a seamless and integrated manner. Globalization can be thought of to be the result of the opening up of the global economy and the concomitant increase in trade between nations.
In other words, when countries that were hitherto closed to trade and foreign investment open up their economies and go global, the result is an increasing interconnectedness and integration of the economies of the world. This is a brief introduction to globalization.
Further, globalization can also mean that countries liberalize their import protocols and welcome foreign investment into sectors that are the mainstays of its economy. What this means is that countries become magnets for attracting global capital by opening up their economies to multinational corporations.
Further, globalization also means that countries liberalize their visa rules and procedures so as to permit the free flow of people from country to country. Moreover, globalization results in freeing up the unproductive sectors to investment and the productive sectors to export related activities resulting in a win-win situation for the economies of the world.
Globalization is grounded in the theory of comparative advantage which states that countries that are good at producing a particular good are better off exporting it to countries that are less efficient at producing that good. Conversely, the latter country can then export the goods that it produces in an efficient manner to the former country which might be deficient in the same.
The underlying assumption here is that not all countries are good at producing all sorts of goods and hence they benefit by trading with each other.
Further, because of the wage differential and the way in which different countries are endowed with different resources, countries stand to gain by trading with each other.
Globalization also means that countries of the world subscribe to the rules and procedures of the WTO or the World Trade Organization that oversees the terms and conditions of trade between countries.
There are other world bodies like the UN and several arbitration bodies where countries agree in principle to observe the policies of free trade and non-discriminatory trade policies when they open up their economies.
In succeeding articles, we look at the various dimensions of globalization and the impact it has had on the global economy as well as in the mobility of people from poverty to middle class status.
The point here is that globalization has had positive and negative effects and hence a nuanced and deep approach is needed when discussing the concept. What is undeniable is that globalization is here to stay and hence it is better for the countries in the global economy to embrace the concept and live with it.
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What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
