16.2 Globalization and the economy

What is globalization?

Globalization refers to the process of integrating governments, cultures, and financial markets through international trade into a single “world market.” Often, the process begins with a single motive, such as market expansion (on the part of a corporation) or increased access to health care (on the part of a nonprofit organization). But usually there is a snowball effect, and globalization becomes a mixed bag of economic, philanthropic, entrepreneurial, and cultural efforts. Sometimes the efforts have obvious benefits, even for those who worry about cultural colonialism, such as campaigns to bring clean-water technology to rural areas without access to safe drinking water.

Other globalization efforts, however, are more complex. Let us look, for example, at the free-trade agreement known as NAFTA (North American Free Trade Agreement). The agreement is among the countries of North America, including Canada, the United States, and Mexico, allowing much freer trade opportunities without the kind of tariffs (taxes) and import laws that restrict international trade. Often, trade opportunities are misrepresented by politicians and economists, who sometimes offer them up as a panacea to economic woes. For example, trade can lead to both increases and decreases in job opportunities. This is because while easier, more lax export laws mean there is the potential for job growth in the U.S., imports can mean the exact opposite. As Americans import more goods from outside the country, jobs typically decrease, as more and more products are made overseas.

Many prominent economists believed that when NAFTA was created in 1994 it would lead to major gains in jobs. But by 2010, the evidence showed an opposite impact; the data showed 682,900 U.S. jobs lost across all states (Parks 2011). While NAFTA did increase the flow of goods and capital across the northern and southern U.S. borders, it also increased unemployment in Mexico, spurring greater amounts of illegal immigration motivated by a search for work.

There are several forces driving globalization, including the global economy and multinational corporations that control assets, sales, production, and employment (United Nations 1973). Characteristics of multinational corporations include the following: A large share of their capital is collected from a variety of different nations, their business is conducted without regard to national borders, they concentrate wealth in the hands of core nations and already wealthy individuals, and they play a key role in the global economy.

There are several components to the global economy and many changes that occur as countries grow more interdependent. First, there is an increasing number of global cities    , which