The Main Drivers Stimulating Globalisation

Topics: International trade, Economics, Globalization Pages: 6 (2067 words) Published: October 9, 2008
The following essay looks at the main drivers stimulating globalisation and how they impact on global strategies.
Globalisation is about the increased interaction and linking of world societies and there economies. The world economy is now more closely linked than ever through global markets and the global organisation of the production of goods and services.

“Globalisation is a process in which the world appears to be converging economically, politically and culturally. Globalisation is seen by many as a fundamental change where national borders become irrelevant, a process accelerated by development in information and communications technology.” (Needle, 2004)

The first and probably the most important driver stimulating globalisation is the triumph of economic neo-liberalism with regards to changes in government policies. Neo liberalism is a set of economic policies that have become widespread over the past 25 years or so. These economic policies have on the whole been looking at reducing barriers to the movement of goods, services and capital across national borders. Many people believe the most important being the reduction of government created barriers to trade such as tariffs and quotas(GATT/WTO) which in the past would have minimised and stifled international trade. These changes in government policy interventions saw an increase in the moving from government controlled systems/business’s to privately run business’s that are run for profit which really kick started competition within the market.

Due to these reductions in barriers to trade and tariffs business’s can look at the world as one big global market, they can export and import goods for a minimum cost, they can base production at a location to optimise production and therefore lowering costs(greater economies of scale) and they also have a greater access to cheaper raw materials in order to become more cost efficient.

Another driver is the vast and growing spread of international governance and regulations, this being vaster regulations across many countries . This move from shallow to deep integration has seen regulations become more standardised across a variety of countries, has lowered barriers and resulted in more cross border activity.

A linked world economy has been made much easier by the agreement on global standards , there are many global and regional organisations such as the UN,WTO and the EU that have contributed to this process of standardisation. If we take the EU this is a political economic community of 27 member states located in Europe. The EU has created a single market through the standardisation of systems and laws which apply in all member states, this guarantees the freedom of movement of people, goods services and capital. These type of policies and regulations have really drove globalisation as it is now easier to trade in different countries, source materials, get funding and recruit people from these countries as workers. This can lead to companies maximising production as they have a greater amount of skilled labour to choose from. They can also cut costs as they can recruit and pay foreign workers at minimum levels. The regulation of laws on things such as product quality has also had a great effect. Organisations can now buy materials from certain countries cheaply knowing they have to be of a certain quality dictated by EU law, this makes the market more accessible and global.

The emergence of worldwide financial markets and better access to external financing has had an impact on globalisation. The additional trade and investment generated by globalisation required a greater financial mobility which was helped by the removal of restrictions on the movement of capital through banking, stock markets and the WTO. This made it easier for companies to source financial backing anywhere in the world making the idea of trading internationally far more appealing to many organisations. In addition to consumer goods...
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