Is Economic Globalization a Positive Trend? Term Paper

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Economic Globalization

a positive trend?

In order to fully understand the complexities of economic globalization, one must first sufficiently define the term in regards to how it is viewed in today's world. Thomas L. Friedman defines globalization as a system or a paradigm, "an approximate set of rules by which to conduct life," yet he also points out that globalization itself presently serves as a replacement for the old system begun and fostered during the Cold War which came to a close when the Soviet Union collapsed in 1991 (Sjursen, 3).

However, others have countered that globalization is defined by trends related to third-world countries that economically become stable as a result of re-defining their old national standards. For example, Juan Enriquez argues that the global trade market "allows a small region to break its dependency on a larger nation state," whereby "protection is no longer necessary," with the result being free trade (Sjursen, 3).

Of course, economic globalization is a very hot topic at this time in American and world history, and is advocated by many nations and leaders for its potential, yet at the same time, it is viewed as a negative entity, due to its ability to destroy old systems and drastically change the face of old economic structures, such as those found in the United States and especially in Europe. Whether or not economic globalization is a positive trend can only be determined by exploring specific traits related to the science of economics and the economic aspects of the present world.

In a global system, economic growth is usually defined and measured in two ways. First, economic growth is related to the increase in real GNP (gross national product) which occurs over a long period of time and to the increase in real GNP per capita which also occurs over a certain length of time. Both of these definitions are quite useful for determining a nation's economic growth within a specific time frame. Per capita output, however, is clearly the best for comparisons of living standards among various nations or geographical regions.

One example has to do with India's GNP which is almost 70% larger than that of Switzerland, yet this European country has a standard of living some 60 times as great as that of India, the reason being that Switzerland's population is much more educated and well-to-do financially than the population of India which despite its huge economic growth within the last fifty years or so still has millions of its citizens living in extreme poverty.

Thus, economic growth is a very important goal for any nation, for the growth of total output in relation to population results in a higher standard of living for its citizens. Economic growth, in relation to total output, also represents greater material abundance in the form of commodities and other goods which can be traded with other nations.

As to the sources of economic growth, most economists agree that there are four basic ingredients necessary for the growth of any national economy. First, the quantity and quality of natural resources plays a major role in economic growth in the form of naturally-occurring minerals, lumber, coal and other resources needed to create and maintain goods and services for export. Second, the quantity and quality of a nation's human resources, being an educated population with the means to foster and maintain its economic growth. Third, the supply or stock of capital goods, and lastly, the existence of technology which enables a nation to produce various goods and commodities.

But the ability to grow and the actual reality of growth are very different entities, and most contend that two additional requirements greatly contribute to economic growth, namely, the demand factor and the allocative factor. With the first term, in order to realize growing productive potential, a nation or region must make full use of its supplies or resources possible via expenditures, and with the second term, in order to achieve its productive potential, a nation or region must provide not only the full use of its resources but also the full production which comes about as a result of utilizing them.

For example, in many Third-World countries which are now only beginning to take part in economic globalization, the ability to expand production is not sufficient, due to many important factors such as demographics, geographical limitations and the existence or non-existence of abundant natural resources. Yet within this paradigm, technology plays a great role, for it enables a nation to create and export its various products to other countries, thereby expanding its economic growth while giving its citizens a higher standard of living in the form of higher wages and better living conditions.

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However, in some instances, economic growth can play havoc with the economies of other nations in the form of very stiff competition for certain goods and commodities which can often result in slower economic growth for some nations and greater growth in others. All in all, one nation may economically win out over another which forces its competition to lower prices, thus affecting the standard of living for its citizens.

Of course, all economic growth is heavily dependent on population. In the so-called "advanced" nations of the world, such as the United States, Canada, the countries of Western Europe, Australia and Japan, the citizens enjoy and prosper from continually rising standards of living despite an expansion in their populations. In contrast, most of the people in India live in abject poverty and do not enjoy a rising standard of living even while the population increases. Thus, it is clear that a nation can only improve its standard of living and thereby profit from economic globalization if it reduces the size of its population and labor force while increasing the productivity of its labor. If the economy in such a nation exists at the poverty level, the standard of living can be increased by reducing the size of the labor force and thus move toward an optimum population growth. But such a thing can be extremely difficult to control via governmental or state policies, a fact that has been experienced by many underdeveloped or Third-World countries in the last fifty years.

One may ask exactly how labor productivity can be increased under such conditions. Logically speaking, it appears that labor productivity can be expanded by wholly immersing underdeveloped and Third-World countries into the global economy which in essence would gradually increase their ability to produce goods and services for other nations, due to the demand for certain products that cannot be manufactured by competing nations. One prime example is China which currently is experiencing massive growth in its ability to manufacture goods for export to such countries as the United States. Technologically, China is labor-intensive when it comes to producing electronics for home use, such as televisions, audio equipment and even computers. Thus, the labor productivity of China is due to not only population growth (although presently not as high as in the 1980's) but also to education which the people of China, especially the young and urbanized Chinese, view as a mandatory adjunct to success and prosperity in a global economy.

Obviously, the forces for growth in a global economy will make vast changes necessary in order for certain nations to compete. But if these changes do not occur with reasonable speed and efficiency, the economies of many nations will fail to fully realize their capacity for growth and global expansion. On the supply side of the overall picture, if the economic growth of a nation became focused on particular industries or services, the productive capacities of these industries and services would expand rapidly while the capacities of others would slow or even diminish to the point of actually contracting instead of expanding. One important question results from this scenario, namely, where would expanding industries obtain the resources required for continual expansion? Obviously, one answer lies in increasing the labor force via immigrants that have the needed skills to perform the various tasks related to specific industries and services.

Also, additional labor could be incorporated from those industries that are declining. Either way, some kind of mechanism would be required in order to move resources into their most productive modes. One method would be to shift low-productivity to high-productivity applications. In other words, changes in technology and in the abundance of resources would make it possible for all industries and services to compete on a level playing field while helping each economy to prosper and realize its potential in a global marketplace.

In today's economic sphere, the underdeveloped nations of the world share one very important trait related to economic globalization, namely, poverty, based for the most part on low per capita incomes as compared to industrially-advanced nations such as the United States, Canada, Germany, France, Italy and Japan. Roughly speaking, the underdeveloped nations can be placed in three categories-those with per capita incomes of $5,000 or more (i.e. developed), those with a per capita income between $1,500….....

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