Type: Analysis
Pages: 4 | Words: 1028
Reading Time: 5 Minutes

The European Commission has provided definition of globalization as the process by which production and markets in diverse countries are becoming more interdependent because of the dynamics of trade in goods and services as well as movements of capital and technology. Globalization is not a new concept developed but rather a continued improvement over some considerable time (Held 2000, p. 92). In this essay we examine the concept of globalization so as to understand its development as well as its effects on the world economies.

The definition of the globalization emphasizes on two aspects of economic globalization. The first is related to the production and market that is increasingly becoming interdependence caused by increasing trade and flow of capital and technology. The second aspect has is that it is that globalization is not a new phenomenon rather a continuous development over some considerable time. The trade has caused the interdependence whereas the flows of capital and technology have caused increasing integrations among the involved countries. The globalization concentrates on overseas trade and foreign capital flows because these trade and investments are the basis to augmentation of the economic processes’ capacity to produce. The production is the key to international economic growth (Held 2000, p. 92 & 94).

The extent of globalization is measured by looking at the openness of economies in respond to the international trade. The more the interdependence between countries in terms of trade will mean that the level of globalization is advancing. Moreover, the level of foreign capital and technology flows between countries is another measure of the extent of globalization. This means that the higher the borrowing, lending and technology transfers between nations will imply that the level of globalization has developed as measured (Held 2000, p. 94 & 94). This is the ability of one country to carry out foreign direct investment (FDI) in other countries as well as attract other countries to invest in its resources.

According to United Nations Staff (2002, p. 13), globalization opens opportunities for development in many countries. With greater integration of world economy brought about by globalization the nations are able to develop strategies that take the advantage of opening markets in different countries. This is because several countries have different potentials and requirements that have to be identified by a country so as to benefit from the international trade and foreign borrowings as well as investments.

Moreover, the globalization brings a win-win scenario for all involved countries. This means that the globalization results in a profit obtained by the involved national economies. Thus the welfare effects of globalization have been universal as supported by classical theories of international trade, evolutionism and new political economy (Gavrilenkov, Welfens & Wiegert 2004, p. 232).

In addition, the consumers benefit from the process of globalization. This is because it enables consumers to access better quality and more modern products at low prices than previous levels. Therefore globalization influences consumption and quality which contributes to technology advancement which basically comes out from finished manufactured goods utilized directly by the consumers (Bo%u017Cyk 2006, p. 4). The changing demands of customers encourage more innovation and creativity in the global productivity.

Furthermore, globalization causes a multiform influence on those involved in the process by giving preference to those nations which are economically strong while eliminating the weak countries. This is out of the concept of free market which is the foundation of globalization where competitive enterprises equipped with modern technologies as well as efficient operations management reap the biggest benefits. They are in a position to offer top-quality and relatively cheap products and services. For those other enterprises with outdated management systems and technologies they lack competitiveness and end up being ranked poor in the global environment (Bo%u017Cyk 2006, p. 3 & 4).

The other benefit of globalization is that it accelerates the international movement of factors of production. The most accelerated factors include technology, knowledge, modern production management processes, marketing as well as advertising. With the expansion of modern financial and banking services has accelerated the whole concept of globalization (Bo%u017Cyk 2006, p. 4). The globalization has caused creation of large multinational companies which have expanded to other countries through subsidiaries and with that causes the technology and skills to be transferred from developed countries to those which are still developing.

However, increased globalization processes bring risks associated. There is a risk which is mainly brought about by the instability in trade flows especially finance. The other risk is affecting those countries that may not be well prepared to maintain competitive production and may be driven out of the global market. These risks are caused by the bias in the current form of globalization which is created by the mobility of capital as well as goods and services along several restrictions on the labour mobility (United Nations Staff 2000, p. 13 & 14).

The globalization has also caused mass migration of experts to those countries that offer favourable employment terms. This is an advantage to the developed countries to access excellent expertise but a negative influence on the developing countries because they will lack well qualified personnel to carry out their national agendas. This is because qualified technical and research personnel, computer scientists, doctors and engineers tend to migrate to get jobs meeting their qualifications and professional ambitions (Bo%u017Cyk 2006, p. 5).

There is also a problem of high mobility of speculative capital associated with globalization in terms of capital flows. The particular case of concern is banks held by foreign capital which reports more speculative investments on globalization. The growth of speculative investments in peripheral nations undermines the growth of local economies. Moreover, the speculative capital may cause a threat if it suddenly decides to shift to abroad (Bo%u017Cyk 2006, p. 5).


The globalization is an important aspect for the world economic growth because it allows specialization in countries so as to produce excellent quality products as well as services. They are also able to receive quality services from other countries as well as access foreign lending and borrowings. Therefore we can conclude that globalization has more positive influence on the global economies as compared to its negative effects. The globalization has enabled world integration and westernization (Westerfield & Abbink 2004, p. 2).

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