Globalization
From an economics point of view, globalizaiton is the convergence of prices, products, wages, rates of interest and profits. Within this definition, globalization denotes to perfectly competitive economy, the benefits of such an environment are well known, and are summarized briefly in the following section.
Globalization can only be achieved in a competitive environment where labor, product and capital markets will integrate. This will trigger and strengthen worldwide competition thereby improve the living standards of people as discussed below.
• It is known that price in imperfect markets is higher than marginal cost in contrast to perfectly competitive markets, where price is equal to marginal cost. Thus, a perfectly competitive environment achieved through globalization, will lead to a decrease in the input prices, which in return will result on decreased prices of goods and services. Consumers will enjoy lower prices.
• Free flow of labor will eventually lead unskilled labor to improve their skills and enjoy higher salaries.
• In a global environment where international trade activities can take place under free trade principals, specializaiton in production activities can be achived, which will further improve productivity. Under these conditions, countries will produce goods where they have comparative advantage over others. For example China, with its cheap labor capacity, can specialize in labor intensive production activites and can sell the goods it produces in the international markets, which will increase employment opportunities.
• Free flow of capital in a global environment will lead to more intense investment activities that will result in new technological developments and employment opportunities. International mergers, multinational companies, hedge funds and such actitvities that enable nations to finance their investment activities. This results in increased research and development activities,...
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