GLOBALIZATION

Globalization”  refers to the growing interdependence of countries resulting from the increasing integration of trade,finance, people, and ideas in one globalmarketplace. International trade andcross-border investmentflows are themain elements of this integration. Globalization started after World War II but has accelerated considerably sincethe mid-1980s, driven by two main fac-tors. One involves technological advances that have lowered the costs of transportation, communication, and computation to the extent that it is often economically feasible for a firm to locate different phases of production in different countries. The other factor has to dowith the increasing liberalizationoftrade and capital markets: more andmore governments are refusing to pro-tect their economies from foreign com-petition or influence through importtariffs and nontariff barriers such asimport quotas, export restraints, andlegal prohibitions. A number of interna-tional institutions established in thewake of World War II—including theWorld Bank, International MonetaryFund (IMF), and General Agreementon Tariffs and Trade (GATT), suc-ceeded in 1995 by the World TradeOrganization (WTO)—have played animportant role in promoting free tradein place of protectionism.Empirical evidence suggests that global-ization has significantly boosted eco-nomic growthin East Asian economiessuch as Hong Kong (China), theRepublic of Korea, and Singapore. Butnot all developing countriesare equallyengaged in globalization or in a positionto benefit from it. In fact, except formost countries in East Asia and some inLatin America, developing countrieshave been rather slow to integrate withthe world economy. The share of Sub-Saharan Africa in world trade hasdeclined continuously since the late1960s, and the share of major oilexporters fell sharply with the drop in oilprices in the early 1980s. Moreover, forcountries that are actively engaged inglobalization, the benefits come withnew risks and challenges. The balance ofglobalization's costs and benefits for dif-ferent groups of countries and the worldeconomy is one of the hottest topics indevelopment debates

           By Shayo Issa