Economics of Globalisation

Brandon Parent
Boise State University






06/30/2014



Economics of Globalisation 2
Economics of Globalisation
Economic globalisation, here defined as an increased volume of trade and investment
and increased mobility of capital (Shadlen 1). Economics on a global scale ties every aspect of
globalization together; it has clear benefits but also has drawbacks, it affects the political and
sociological aspects of trading, it can cause changes in the local cultural and agricultural
customs, and it is at the core of the buying and selling of technology all around the globe. I will
be focusing on the effects of the general market amongst different countries and the politics that
are affected by economic trade in this paper.
The theory of North-South economies is that the North is a highly industrialized and
manufacturing economy exporting produced goods while the South is a highly agricultural
economy, focused in labor and exporting commodities. This theory implies that the people in the
North economy have higher wages and better established trade rules. This theory also states that
if you open the economy to integrate both the North and the South, the gap between the two will
diminish and eventually disappear. This is the idea behind globalization and the World Trade
Organization.
However, this theory fails as was observed with the United States economy because the
value of commodities is slowly decreasing over time while the value of manufactured products is
increasing. The United States serves as a model for the global economy, although not a perfect
model, because it is naturally diverse in commodities and manufactured products. The United
States economy was verified to serve as a model by running tests and identifying long-standing
relationships between the United States economy and the economy of the world as a whole.
Integrating markets do not affect the value of commodities or manufactured products.
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Regionalization is where common businesses locate themselves in a common geographic
location for market share and competition. This is similar to how downtown is full of bars,
restaurants, and small shops, everything is located in a compact geographic location.
Globalization is then an integration of many regionalized markets into a combined market for
more market share and expansion of customer base. If regionalization is downtown, then
globalization is how the market of downtown is incorporated into the market of the entire state
and the benefits that are shared between downtown and the state.
Up until the period of the early 1990s the global trade market was driven primarily by
the regional forces and after the mid 1990s until around 2007 the global forces dominated the
global trade market. The first set of data studied went from 1960 to 1992 and remained
consistent, up until 1992, with the second set of data that went from 1960 to 2007. The newest
data, along with the global financial crisis, indicate that the surge in globalization after the mid
1990s may have been superficial and that de-globalization may occur, bringing us back to
regionalization. (Arestis)
This brings me to the political aspect of economic trade between countries. There is a
World Trade Organization (WTO) that sets guidelines and regulations for trading between
countries. However, countries with a larger political base, like the United States, impart regional
and bilateral trade agreements with other countries to share preference of the market. These
trade agreements can benefit the larger country more than they benefit the smaller ones because
the agreements are much more stringent than what the WTO sets. These stringent agreements
are unfavorable to some countries until there is a threat of being knocked out of the market all
together by another country that is producing the same good.
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To summarize, economic trade is the glue that holds globalization together. It
encompasses the North-South theory and how markets should equalize when they open up and
share the market. The United States can be studied as a model of the global economy because it
is diverse and shares long-standing relationships with the global economy. Integrating markets
into a global economy do not affect the value of commodities or manufactured goods.
Regionalization in the grouping together of common businesses in a geographic location, like
downtown, and globalization is the grouping together of regionalized groups, like many
downtowns into a state. The global economy was driven by regionalized forces until the early
1900s and then by globalization forces. However, this trend for globalization may be declining
and reverting back to regionalization. Countries with high political power can offer trade
agreements that benefit themselves to other countries. These countries do not have to accept the
trade agreements but they become vulnerable to being pushed out of the market altogether from
other countries.

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References
Arestis, P. (03/2012). "Trade flows revisited: Further evidence on globalisation". Cambridge
journal of economics(0309-166X), 36 (2), p. 481.
Mollick, A. V. (01/2008). "Can globalisation stop the decline in commodities' terms of
trade?". Cambridge journal of economics (0309-166X), 32 (5), p. 683.
Shadlen, Ken (01/2008). "Globalisation, power and integration: The political economy of
regional and bilateral trade agreements in the Americas". The Journal of development
studies (0022-0388), 44 (1), p. 1