Answer to Question #254403 in Economics for Goolie

Question

Explain how the changes in technology have contributed to the globalization of markets and production? Would the globalization of production and markets have been possible without these technological changes? Use practical examples

Answer 1

The deepening of the international division of labor is the main factor in the globalization of the economy. The growth of world trade and changes in its structure has also become a factor in globalization. Trade-in electrical and electronic equipment is growing rapidly, accounting for over 1/3 of trade-in mechanical engineering products. Trade-in knowledge-intensive goods are growing in all sectors.

   Integration of information and financial space.

   For the accelerated development of the economy, both integrated communications are needed, which provide for quick communication between companies located in different parts of the world, and financial support for their dynamic development. Today, the global banking system has 4 tiers: supranational banks and financial institutions for regulating financial markets, central banks that regulate the activities of national commercial banks, global transnational banks, and ordinary commercial banks.

   Financial globalization contributes to an increase in international capital flows and a decrease in the costs of financial intermediation. But in addition to the positive impact on the economy, the inevitable political and economic costs of globalization are also seen, the main ones of which are a) the transfer of crisis "infections" between national economies, b) complications in the development and implementation of an effective national-state economic policy.

   The world financial system has been formed as a unity of credit, currency, insurance, and stock markets, which is practically independent of national government regulation.

   The increase in international capital flows is an important factor in globalization. Global capital flows are growing at a rate that even exceeds the rate of growth in trade. The mutual movement of capital between the industrialized countries is increasing, although before the Second World War the flow of capital from the industrialized countries went to the underdeveloped ones. The main reasons for this shift are changes in the structure of the economy under the influence of the scientific and technological revolution, which lead to a deepening of the division of labor between countries and an increase in the internationalization of production. The movement of capital, and above all, direct investment, between developed countries is determined mainly by the desire of industrial companies to take control of the entire process of production and sale of goods. This movement of capital underlies the formation of TNCs and the internationalization of capital itself. The movement of capital today is influenced not only by the objective process of globalization but also by the policy of liberalization of foreign economic relations carried out by industrialized countries and imposed by them on developing countries in order to remove barriers to the movement of capital and abolish currency restrictions.

   Globalization would not have been possible without the development of international credit markets. Credit assistance is an important tool for overcoming the economic and monetary and financial crises that occasionally affect individual countries, mainly developing ones. And because of the interconnectedness, creditors are no less interested in saving countries in trouble than they are themselves. Credit relations often bind countries more firmly than trade ones, since the credit resources accumulated over many years and put into the business, consisting of household savings, pension, insurance, and other funds, depreciation deductions, and temporarily free funds of an enterprise, significantly exceed the annual volume in developed countries. GDP.

   Integration of markets and production systems on a global scale.

   Companies now act as if they were global in a huge market, ignoring external regional and national differences. Through the creation of branches abroad, through mergers and acquisitions, companies began to move around the world. If we trace the dynamics of indicators of transnational companies for 1982-2006, then the picture of the ball is as follows. During this period, the world GDP increased more than 4 times, the export of branches increased more than 7 times, the inflow of foreign direct investment - 22.15 times, capital outflow - 43.43 times, the total assets of the branches increased 23.28 times, the total volume of outward FDI increased by 18.83 times, the total volume of inward FDI increased almost 20 times. Currently, TNCs control from one-third to half of the international production, over half of the international trade, about four-fifths of the world bank of patents and licenses for new equipment, technologies, and know-how. The modern distinctive features of TNCs are a planetary vision of markets and the implementation of competition on a global scale, the division of world markets with a few of the same global corporations, the adaptability of the structure of corporations, the implementation of economic and political influence on the states in which they operate. All this is called the global strategy for the functioning of a transnational corporation.