Explain what you understand by the economic notion of ‘globalization’. Using empirical evidence, describe how such globalization has affected the development of a country of your choice in the past decades.
Globalization refers to a multidimensional process whereby markets, firms, productions, and financial systems are integrated on a global scale. These processes can range across a wide variety of affairs, but all point to the internationalization of everyday life (Brawley, 2009). There are four main areas in which economic integration can be broken into: free trade across national boundaries of goods and services; free movement of labour between countries; free movement of capital between countries and free interchange of technology and intellectual capital across national boundaries. The term globalization is a relatively new term that became widespread amongst economists in the 1980s. These four main areas of economic integration-mentioned above- would work well in a system where the boundaries to trade in goods and services are non-existent as well as if there was perfect free movement of labour, capital and technology, however, this is far from the case today as the world is nowhere near this position (Anderton, 2008). Although globalization is not a new phenomenon it is important to recognise that events such as the fall of the berlin wall and the liberalisation of China have pushed globalization into overdrive (Wood, 2008).
China is a great example of a nation in which globalization has had a huge impact. Kim (2009) argues that China, with its rapid economic rise, holds one of the master keys to the future of globalization in the post-cold war world. Since 1978 the Chinese government has worked towards encouraging free trade, and in recent years the Chinese government has altered its policy from the administration of foreign trade by the Central Government, to giving much greater autonomy in foreign trade to provincial governments and allowing private businesses to engage in foreign trade. This has amounted to China’s total volume of trade increasing from $20.64 Billion in 1978 to $1.155 trillion in 2004, when it increased at a rate of 36%. This has led to China becoming the third largest trading company in the world behind only the USA and Germany. Presently exports from China can be found all over the world and as an importer china does provide a large market for foreign manufacturers which have led to China gaining increased economic power as a result. Furthermore China has become so economically powerful that demands for imports to China can propel the economic growth of other countries in the world (Chow, 2006).
China’s process of opening its economy to the prospect of world trade began by establishing 4 coastal special enterprise zones (SEZs) or free trade areas in 1980. In these SEZs all imports and exports were duty free; the employees working in these zones were paid relatively low wages compared to international standards however new enterprises enjoyed substantial tax holidays. International trade blossomed as the annual growth of exports rose from 6.4% in 1978 to 13.5% in 1995. Consequently the SEZs increased economic activity and the population grew to embrace 14 coastal cities by 1984 and in 1988 a 5th SEZ was established (Cleaver, 2007). The years following 1992 saw China’s development in foreign trade increase exponentially. From 1992-1997 China’s volume of foreign trade totalled US$1493.8 billion, exceeding the accumulated total from 1949-1991 (www.chinaconsulatechicago.org, 2003). In 2001 China joined the World Trade Organization (WTO) which required China to lower manufacturing tariffs as well as agricultural products. The lowering of tariffs helped increase competition for Chinese manufacturers and provide cheaper products for Chinese consumers. Chinas membership in the WTO boosted foreign trade which in turn aided China in achieving economic growth in 3 areas: International Specialisation;