Your shirt was bought in the UK but made in China. You can invite your friends to watch British movies in Italy. You can even travel to another country very easily. Today, goods are made, sold and bought all over the world, thanks to globalisation.
Globalisation is the process of international integration and the interchange of ideas, cultures, goods and human capital. The development of transports and technology consist of the major factors of globalisation. Adam Smith first introduced the idea of absolute advantage, the ability of a company or country to produce greater quantities of products than its competitors with the same amount of resources. This principle was applied when Adam Smith talked about international trade. But later, he argued that it was impossible for all nations to become rich through trade. Afterwards, in 1817, David Ricardo proposed the theory of comparative advantage in his book. And on the basis of the idea of comparative advantage, Eli Heckscher and Bertil Ohlin developed a general equilibrium mathematical model regarding international trade, known as H-O model. This model essentially stated that countries could export products that used their abundant and cheap factors of production and import those that would use the countries’ scarce factors in order to lower costs. It can be applied to the exchange of goods as well as human capital between countries.
This closely linked integrated global economy started from the late 19th century, which marked a time of international trade, capital flows as well as human capital migration. From both the economic and political perspectives, globalisation has given rise to cross-cultural awareness and provided the access to ‘a variety of low-cost goods from across the globe that has raised the standard of living for consumers (Boundless. com).
However, the pace of globalisation seems to have slowed down since the financial crisis. This might be due to various reasons. According to the news on BBC (Weldon, D., 2015), ‘the changing nature of global supply chains, a lack of trade liberalization, the rising protectionism and banks and financial services firms choosing to pull back from international operations.’ These can all be seen as the causes of the slowdown of globalisation.
As a result, deglobalisation is proposed, and the nature of globalisation may begin to change. Some may ask, “Will globalisation die out?” The answer, of course, is no. It will not die out or stop completely, but its pace will slow down. So regionalisation will be preferred in comparison with the word ‘deglobalisation’. Take the development of China as an example. In the 1980s, the Chinese economy only represented 2% of the world economy and the US represented about 23%. But according to the statistics last year, both of these countries amounted to 16% each. Moreover, the UK’s withdrawal from the EU, known as Brexit, took place this year and it will lead to changes in the global power of the world economy. The new geography of global economics will be formed soon.
Specifically, a market that consists of multiple economic powers would have less strict rule enforcement and greater volatility than before. More importantly, with the UK’s Brexit and the new US president elected, new trading policies will be introduced soon and the development of economy may be much more regionalised. But it still remains unclear what effects regionalisation may bring.
References
Boundless.com, ‘Benefits of Globalisation’ (2016), Accessed at: https://www.boundless.com/management/textbooks/boundless-management-textbook/globalization-and-business-14/globalization-101/benefits-of-globalization-470-3958/.
Weldon, D., (2015) ‘Is deglobalisation on the way?’, BBC News, Accessed at: http://www.bbc.co.uk/news/32783365.
