Economic Globalization: Challenges and Obstacles
Defining Economic Globalization
Globalization and the economy are tied. Liberals contend that globalization has the
potential to amplify interconnectedness through market mechanisms and technological
advancements (Ritzer, 2007). The profound interdependence between globalization and the
economy is known as economic globalization, encompassing diverse economic aspects such as
processes, opportunities, and challenges across nations worldwide. Economic globalization is
divided into several periods, from the 19th century to World War I, a quarter century after World
War II, and the end of the 19th century to the present (Smelser & Baltes, 2001). This phenomenon
stands as a paramount power in shaping the post-war global landscape, facilitating greater
interconnectivity and curtailing the costs associated with cross-border communication and
transportation. Policies impleding trade and investment flows across nations are also diminishing
(Frankel, 2000).
Economic globalization consists of five main elements: international trade, foreign direct
investment (FDI), the spread of technology, labor movement, and capital market flows. High trade
dependence (export and import) across countries contributes significantly to countries' economy.
Hence, international trade is crucial. FDI also serves great importance. It refers to investment
undertaken by a company outside its domestic economy to serve its interests. FDI is categorized
into two types: portfolio investment, which encompasses short-term capital flows, such as loans,
and long-term capital flows, such as bonds. Next on, capital market flows in recent decades have
been affecting economic globalization tremendously. Capital market flows entail foreign financial
assets, including global stocks, mutual funds, international bonds, and other loans from foreign
entities. These flows additionally encompass the migration of labor. Skilled migrant workers
benefit developing countries because the knowledge and expertise gained by these individuals
from the host countries may be leveraged to establish new enterprises in their home countries.
However, this phenomenon may also entail a loss for other stakeholders, as the departure of
skilled individuals can leave a talent shortage in their countries of origin. The last element of
economic globalization is the spread of technology. It is inseparable from innovation in the
telecommunications field. The rapid advancement of technology not only confers benefits, such as
facilitating communication but may also pose a challenge for nations grappling with a
, technological disparity, as highlighted by Dowling (2011).
Economic globalization can be seen from the phenomenon in recent years, in which
countries are increasingly integrated through economic activities between countries that are
increasingly prevalent. Economic activities are carried out in various forms, such as international
trade, import and export growth, foreign investment, foreign loans and bonds, and others.
Globalization is undeniably beneficial to increase economic development and reduce poverty.
However, it also harbors a destructive aspect. Economic expansion pursued at the expense of
natural resources is not counterbalanced by endeavors toward ecological preservation, thereby
engendering a high potential for environmental complications. Moreover, activities that foster
globalization are often accompanied by exploitative practices, as evidenced by the prevalence of
outsourcing and underpaid labor (Ritzer, 2007). Transnational corporations try to gain excessive
profits through international trade and employment flows by using cheaper local resources (Gurgu
& Cociuban, 2016, pp. 28-38). Another undesirable impact that globalization has is that the
process of globalization can make society vulnerable to changes throughout the world, for
example, the dependence of a country's economy on the number of sales of that country's products
abroad. The dependency of less developed countries on developing countries often leads to
inequality. The deagrarianization and depeasantization in the South are examples of inequality
caused by globalization (Ritzer, 2007).
Views of Globalization in the Economic Dimension from Skeptics and Globalists
Globalists think that the notion of globalization originates from various processes that are
interconnected with one another, which operate in all major areas, namely social, military,
political, and cultural forces. Globalists argue that there is no historical element in the occurrence
of globalization in these fields. Various arguments about economic globalization face the opposite
problem, namely the existence of various data on various global trends, ranging from trade and
migration to investment and child employment. Argument after argument about economic
globalization has created a lot of literature. With this, the points of contention cover four main
points:
1. The extent to which the evidence indicates that economic activity is globalizing;
2. A new form of global capitalism, driven by the third industrial revolution that is taking
place around the world;
Defining Economic Globalization
Globalization and the economy are tied. Liberals contend that globalization has the
potential to amplify interconnectedness through market mechanisms and technological
advancements (Ritzer, 2007). The profound interdependence between globalization and the
economy is known as economic globalization, encompassing diverse economic aspects such as
processes, opportunities, and challenges across nations worldwide. Economic globalization is
divided into several periods, from the 19th century to World War I, a quarter century after World
War II, and the end of the 19th century to the present (Smelser & Baltes, 2001). This phenomenon
stands as a paramount power in shaping the post-war global landscape, facilitating greater
interconnectivity and curtailing the costs associated with cross-border communication and
transportation. Policies impleding trade and investment flows across nations are also diminishing
(Frankel, 2000).
Economic globalization consists of five main elements: international trade, foreign direct
investment (FDI), the spread of technology, labor movement, and capital market flows. High trade
dependence (export and import) across countries contributes significantly to countries' economy.
Hence, international trade is crucial. FDI also serves great importance. It refers to investment
undertaken by a company outside its domestic economy to serve its interests. FDI is categorized
into two types: portfolio investment, which encompasses short-term capital flows, such as loans,
and long-term capital flows, such as bonds. Next on, capital market flows in recent decades have
been affecting economic globalization tremendously. Capital market flows entail foreign financial
assets, including global stocks, mutual funds, international bonds, and other loans from foreign
entities. These flows additionally encompass the migration of labor. Skilled migrant workers
benefit developing countries because the knowledge and expertise gained by these individuals
from the host countries may be leveraged to establish new enterprises in their home countries.
However, this phenomenon may also entail a loss for other stakeholders, as the departure of
skilled individuals can leave a talent shortage in their countries of origin. The last element of
economic globalization is the spread of technology. It is inseparable from innovation in the
telecommunications field. The rapid advancement of technology not only confers benefits, such as
facilitating communication but may also pose a challenge for nations grappling with a
, technological disparity, as highlighted by Dowling (2011).
Economic globalization can be seen from the phenomenon in recent years, in which
countries are increasingly integrated through economic activities between countries that are
increasingly prevalent. Economic activities are carried out in various forms, such as international
trade, import and export growth, foreign investment, foreign loans and bonds, and others.
Globalization is undeniably beneficial to increase economic development and reduce poverty.
However, it also harbors a destructive aspect. Economic expansion pursued at the expense of
natural resources is not counterbalanced by endeavors toward ecological preservation, thereby
engendering a high potential for environmental complications. Moreover, activities that foster
globalization are often accompanied by exploitative practices, as evidenced by the prevalence of
outsourcing and underpaid labor (Ritzer, 2007). Transnational corporations try to gain excessive
profits through international trade and employment flows by using cheaper local resources (Gurgu
& Cociuban, 2016, pp. 28-38). Another undesirable impact that globalization has is that the
process of globalization can make society vulnerable to changes throughout the world, for
example, the dependence of a country's economy on the number of sales of that country's products
abroad. The dependency of less developed countries on developing countries often leads to
inequality. The deagrarianization and depeasantization in the South are examples of inequality
caused by globalization (Ritzer, 2007).
Views of Globalization in the Economic Dimension from Skeptics and Globalists
Globalists think that the notion of globalization originates from various processes that are
interconnected with one another, which operate in all major areas, namely social, military,
political, and cultural forces. Globalists argue that there is no historical element in the occurrence
of globalization in these fields. Various arguments about economic globalization face the opposite
problem, namely the existence of various data on various global trends, ranging from trade and
migration to investment and child employment. Argument after argument about economic
globalization has created a lot of literature. With this, the points of contention cover four main
points:
1. The extent to which the evidence indicates that economic activity is globalizing;
2. A new form of global capitalism, driven by the third industrial revolution that is taking
place around the world;
