Globalization: Meaning and Features

Globalization is the word used to describe the growing interdependence of the world’s economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information. Countries have built economic partnerships to facilitate these movements over many centuries. But the term gained popularity after the Cold War in the early 1990s, as these cooperative arrangements shaped modern everyday life. This guide uses the term more narrowly to refer to international trade and some of the investment flows among advanced economies, mostly focusing on the Asia and Europe.

The wide-ranging effects of globalization are complex and politically charged. As with major technological advances, globalization benefits society as a whole, while harming certain groups. Understanding the relative costs and benefits can pave the way for alleviating problems while sustaining the wider payoffs.

Globalization or globalisation is the process of interaction and integration among people, companies, and governments worldwide. As a complex and multifaceted phenomenon, globalization is considered by some as a form of capitalist expansion which entails the integration of local and national economies into a global, unregulated market economy. Globalization has grown due to advances in transportation and communication technology. With the increased global interactions comes the growth of international trade, ideas, and culture. Globalization is primarily an economic process of interaction and integration that’s associated with social and cultural aspects. However, conflicts and diplomacy are also large parts of the history of globalization, and modern globalization.

Features of Globalization

1. Liberalization

It stands for the freedom of the entrepreneurs to establish any industry or trade or business venture, within their own countries or abroad.

2. Free trade

It stands for free flow of trade relations among all the nations. It stands for keeping business and trade away from excessive and rigid regulatory and protective rules and regulations.

3. Globalization of Economic Activity

Economic activities are be governed both by the domestic markets and also the world market. It stands for the process of integrating the domestic economies with the world economy.

4. Liberalization of Import-Export System

It stands for liberalization of the import-export activity involving a free flow of goods and services across borders.

5. Privatization

Globalization stands for keeping the state away from ownership of means of production and distribution and letting the free flow of industrial, trade and economic activity among the people and their corporations.

6. Increased Collaborations

Encouraging the process of collaborations among the entrepreneurs with a view to secure rapid modernization, development and technological advancement, is a feature of Globalization.

7. Economic Reforms

Encouraging fiscal and financial reforms with a view to give strength to free trade, free enterprise and market forces of the world. Globalisation stands for integration and democratisation of the world’s culture, economy and infrastructure through global investments.

Globalization Background

The progress of industrial revolution in the 20th century was accompanied by a replacement of the police state by a welfare state. The state came to be an active actor in the economic life of the society. In the socialist states, state ownership of means of production and distribution became the rule.

State-controlled command economies were operationalised and regarded as the best means for rapid socio-economic development. In several other countries, nationalization of key industries and enterprises was undertaken with a view to provide goods and services to the people. State began performing several socio-economic functions.

India, like several other new states, adopted a mixed economic model. Ownership and control over key industries was entrusted to the public sector. It was deemed essential for securing a better mobilisation of resources and for providing better services to the people. State regulation of economy and industry was practiced and the public sector was patronised by the state. Private sector was given a lesser role in the economic system.

However, the experience with the working of command economy and mixed economy models was found to be inadequate slow and unproductive. By 1980s economies of socialist countries began collapsing. Around 1985, Indian economy also began showing big strains. Indian public sector now appeared to be a liability and foreign exchange reserves came to be in very bad shape. Industrial growth became very slow and inflation assumed alarming proportions.

In 1990s, the world witnessed the collapse of socialist economies, in particular the Soviet economy and political system. In 1991, the USSR suffered a disintegration. The weaknesses of all socialist economies became fully clear and all socialist countries began witnessing a process of overthrow of socialist systems.

Liberalization of politics and economy came to be recognised as the necessity of the day. All countries of the world began realising the merits of the market economy, free trade, privatization, liberalization, delicensing and deregulation of trade, industry and business.

In July 1991, the Government of India decided to go in for liberalization of economy. A new economic policy was formulated and implemented with an emphasis new upon economic reforms. These were governed by the principles of liberalization, privatization, market economy, free trade, deregulation and delicencing. These reforms paved the way for initiating the process of liberalization and globalization of Indian economy. Similar changes were adopted by other states.

At the international level, all the states agreed to freely develop financial, business, trade and industrial relations among their people. Adoption of new trade and tariff agreement leading to the establishment of World Trade Organisation was made. Globalization became the order of the day.