Chapter 1: Introduction Chapter Organization The Globalization of World Economy We Live in a Global Economy Globalization and Economic Development (International Trade and Standard of Living) The Globalization Challenge

The Globalization of World Economy Globalization is the integration of Our economy towards the world economy . According to International Monetary Fund, which stresses the growing economic interdependence of countries worldwide through increasing volume and variety of crossborder transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology. Globalization (or globalisation) is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture.Put in simple terms, globalization refers to processes that increase world-wide exchanges of national and cultural resources. Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.

The Globalization of World Economy The term globalization has been in increasing use since the mid- 1980s and especially since the mid-1990s. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge. Further, environmental challenges such as climate change, cross- boundary water and air pollution, and over-fishing of the ocean are linked with globalization.Globalizing processes affect and are affected by business and work organization, economics, socio- cultural resources, and the natural environment.

Pros of The Globalization: Productivity grows more quickly when countries produce goods and services in which they have a comparative advantage. Living standards can go up faster. Global competition and cheap imports keep a lid on prices, so inflation is less likely to derail economic growth. An open economy spurs innovation with fresh ideas from abroad. Export jobs often pay more than other jobs. Unfettered capital flows give the U.S. access to foreign investment and keep interest rates low.

Cones of the Globalization(Why there is a anti globalization movement): Millions of workers fear losing their jobs, especially at those companies operating under competitive pressure. World wide poverty and child labour in poor countries Workers face pay-cut demands from employers, which often threaten to export jobs. Environmental pollution and climate change. Monopolistic corporate profit and inequality.

Globalization and Economic Development (International Trade and Standard of Living) Developed and Developing countries are rely crucially on international trade for their economic development recently. Small and large industrialized countries have a great deal of their high standard of living. For developing nation exports provide employment opportunities and earnings to pay for many products that they cannot produce and for advanced technology that they needs. Economic globalization has helped to decrease poverty around the world. Poverty has been reduced as evidenced by a 5.4 percent annual growth in income for the poorest fifth of the population of Malaysia.

Globalization and Economic Development (International Trade and Standard of Living) A counties ratio of imports and exports of goods and services to GDP shows the importance of international trade. The standard of living of a country heavily depends on many products that could be produced domestically but only at a higher cost than abroad. This is the major reason countries are heavily participating in international trade and rising their imports and exports. Economic Interdependence among nations has been increasing over the years ,as measured by the more rapid growth of world trade than world production.

The International flow of Goods and Services: Gravity Model The bilateral trade between two countries is proportional ,or at least positively related to the products of the two countries GDP and to be smaller the greater the distance between the two countries. The larger (more equal in size) and the closer the two countries are ,the larger the volume of trade between them is expected to be. That is US to trade more with its neibours Canada, Mexico and more with larger economies such as China, Japan etc

The International flow of Labour and Capital: The international flow of people (Migration) and capital across national boundaries is another measure of economic integration and globalization in the world economy. Most nations impose restrictions on immigration to reduce the inflow of low-skilled workers while often encouraging skilled workers) Capital flows more freely across national boundaries than people.

The International flow of Labour and Capital: Financial or portfolio capital generally move to nations and markets where interest rates are higher. FDI in plants and firms flows to nations where expected profits are high , This leads to more efficient use of Capital.

Current International Economic Problems or Challenges of Globalization Deep Financial And Economic Crisis. Trade Protectionism In Advanced Countries In A Rapidly Globalizing World. Excessive Fluctuations And Misalignment In Exchange Rates And Financial Crisis. Structural Imbalances In The United States And ,Slow Growth In Europe And Japan And Insufficient Return In Transition Economies. Deep Poverty In Many Developing Countries. Resource Scarcity, Environmental Degradation, Climate change and Unsustainable development.