Economic globalization

Economic globalization is the process of increasing economic integration and interdependence among national, regional, and local economies. It involves the widespread international movement of goods, capital, services, technology, and information. This phenomenon is one of three main dimensions of globalization, alongside political and cultural globalization. By connecting different markets, economic globalization creates a system where the actions of one country can affect the economies of many others.

This global system operates through complex interconnected networks known as supply chains. A supply chain is a system of organizations, people, activities, information, and resources. Its purpose is to move a product or service from a supplier to a final customer. These chains involve the transformation of natural resources and raw materials into finished products. Corporations manage these chains to take advantage of lower production costs. They use these networks to handle and distribute goods to the public worldwide.

Economic globalization includes several distinct parts, such as the globalization of production, finance, and markets. It also involves the movement of technology, organizational regimes, and people. Labor markets, which involve workers, employers, wages, and supply and demand, are a core component. Capital markets also play a major role, especially in industries requiring vast resources. Furthermore, international governmental organizations (IGOs) help manage these systems. These are entities created by treaties between nations to work on common interests, such as the United Nations or the World Bank.

Human trade has a very long history. As early as 6500 BCE, people in Syria were trading livestock and tools. In the ancient civilization of Sumer, people used a token system as an early form of commodity money. While trade has always existed, modern globalization grew rapidly due to technological advances. The 1956 invention of containerized shipping significantly reduced costs by allowing larger ships to carry goods more efficiently. Additionally, advances in telecommunications and science have made the movement of information as important as physical goods.

Government policies have also shaped this history. The General Agreement on Tariffs and Trade (GATT) was initiated in 1947 to reduce trade barriers. This framework eventually led to the establishment of the World Trade Organization (WTO) in 1994. At its start, the WTO included 128 countries, including the Czech Republic, Slovakia, and Slovenia. In 1986, the London Stock Exchange underwent a period of deregulation known as the "Big Bang." This event enabled the global interconnection of financial markets. Later, the People's Republic of China joined the WTO in 2001, and Russia joined in 2012.

The impact of globalization on wealth is significant. It has helped accelerate economic growth and reduce poverty in many regions. For example, the poorest fifth of the population in Malaysia saw an annual income growth of 5.4 percent. In China, the poorest fifth saw a 3.8 percent annual income growth. Poverty rates also declined in China from 20 percent to 15 percent, and in Bangladesh from 43 percent to 36 percent. These changes show how newly industrialized nations like China, India, and Bangladesh are narrowing the income gap with richer nations.

However, globalization also presents serious challenges. Some critics point to a "race to the bottom." This occurs when businesses move operations to countries with the least stringent environmental and labor regulations to minimize costs. This can result in pollution and poor working conditions. In some cases, workers face significant health risks. For instance, women in agriculture may handle pesticides without protection. There have also been tragic events, such as the Rana Plaza factory collapse in Bangladesh, where over 800 people died. Following this, Bangladesh has worked to boost its safety policies to better protect workers.