Career in Business Administration

UNIVERSIDAD POLITECNICA SALESIANA

Cuenca Headquarters

Career in Business Administration

International Trade

Ing. María Gabriela Guevara Segarra

Globalization: Economy

7mo. Cycle – Group 1

Made by:

Mariana Barrera

Ruth Buestán

Nicolás Morales

Mónica Ortega

Daniela Ulloa

Merilin Velín

Cycle: September 2017 –  February 2018

Introduction

In recent decades the world has undergone a process of change; a process that has been called globalization, and its effects are manifested in different dimensions of human life as economic, social and cultural. Globalization is an economic process that promotes and develops industrial competitiveness, making it possible to promote and develop competitive advantages that are basically related to innovation and technological development, education and training of human resources and infrastructure development. (República, 2006)

Economic globalization is the integration of national economies with the international economy through different mechanisms, as: trade in goods and services; the movements of money between countries in search of financial profitability or for the creation of companies in the productive sector; the international flows of workers and people in general; the flows of technology, and finally portfolio investment, direct investment.  (República, 2006).

Therefore, the objective of this document is to analyze globalization from the economic point of view and present the challenges, advantages and disadvantages that this process implies.

Definition

Economic globalization consists of creating a global market in which all tariff barriers are removed to allow free circulation of financial, commercial and productive capital.

It has two objectives:

1. Free capital mobility

2. Creation of a global market (Marcuse, 2012)

Importance

Globalization is important because:

• Thanks to it, the borders between different countries gradually fade to disappear, establishing agreements that unify different parts of the world from an economic point of view, with commercial agreements, even from a political point of view, such as the creation of the European Union.
• Search free trade policies, while favoring mergers between companies, thus creating larger multinationals that can cover more countries.
• We find the main benefits in trade, as competition increases and monopolies decrease.
• We can also say that globalization is important for increasing international cooperation on certain problems.
• It opens competition in international markets, generating greater economic fluidity for the countries that market (Quispe Quiroz, 1997).

Characteristics

• Free trade policy
• Mobilization of goods: global trade in services has multiplied
• Mobilizing Human Resources
• Global financial system: Capital market returns a decisive factor
• Multinational Corporations
• Industrialization
• Migration: Increases employment opportunities (Quispe Quiroz, 1997).

Impellers factors of the globalization of the economy

• The growth of commercial, financial flows.
• Migration movements
• Technological Innovations
• Expansion of multinational companies (Corral & Blanco, 2011).

Advantages

• Economic Growth.
• Multinational companies significantly increase jobs.
• increases the competitiveness between businessmen and increases the quality of products.
• Discover and invent new technologies that contribute to the development of a country.
• Goods and services are more accessible to undeveloped countries that previously did not have the possibility of having it (Marcuse, 2012).

Disadvantages

• Power of Multinationals
• Less social coverage
• More external debt
• Capital is concentrated in rich countries, which increases inequality between developed and underdeveloped countries.
• Inequality within the same nation.
• Degradation of the environment due to the exploitation of resources and the excessive production of garbage (Marcuse, 2012).

Positive and negative Examples

Negative examples

• The causes of the worst result that globalization has produced in Nicaragua in the lack of competitiveness of its economy, of dynamic capital and in institutional weakness, all of them due to very weak starting conditions, led Nicaragua to join the boom in free zones with a long delay.
• It has been financial globalization, which has hit the Mexican economy worse, because it causes the vulnerability of poor and indebted countries to expand, as they increasingly rely on volatile foreign capital with which it is very difficult to renegotiate debts, due to its high degree of dispersion and fragmentation. The Mexican crisis of 1994 and the introduction of drug trafficking in the financial system to acquire shares and thus laundering money are two examples of vulnerability introduced by financial globalization (Krugman, 2008).

Positive examples

• Costa Rica and the Dominican Republic took advantage of the 1980s and early 1990s to encourage foreign investment in free trade zones that, despite their many weaknesses, created more dynamic comparative advantages
• The recovery of Japan in 2003 occurred when it grew by about 2% and unemployment fell. At that time, without signs of inflation, deflation did not affect growth, this happened because after having tried all kinds of economic measures, the real driver of Japan was the US. and is that thanks to exports managed to abandon the fateful decade. The large trade deficit presented by the United States was a consequence of the large amount of manufactured goods imported from Japan, but especially from China. But indirectly Japan also benefited from these Chinese exports as many of the Chinese manufactured goods contained Japanese components. Say here, that Japan currently has 0.1% rates so you do not have too many bullets left in the room to deal with future problems. (Krugman, 2008)

Conclusions

We can conclude that the globalization of the economy opens great opportunities to the countries and to take advantage of them it is necessary to adjust policies since this consists in the creation of a world market in which all the tariff barriers are abolished to allow the free circulation of the financial capitals, commercial and productive, causing a great distinction and accentuation at a planetary level of the concentration of wealth in the world.

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