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Globalization is the integration of world economy, which is comprised of free trade between interdependent nations.

While globalization has it's benefits, it can often find ways to get in the way of progress but with a little structure the world economy would shift.

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What Is Globalization?

Globalization refers to the spread of the flow of financial products, goods, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade.

Key Takeaways

Understanding Globalization

Corporations gain a competitive advantage on multiple fronts through globalization. They can reduce operating costs by manufacturing abroad, buy raw materials more cheaply because of the reduction or removal of tariffs, and most of all, they gain access to millions of new consumers.

Globalization is a social, cultural, political, and legal phenomenon.

Socially, it leads to greater interaction among various populations.

Culturally, globalization represents the exchange of ideas, values, and artistic expression among cultures.

Globalization also represents a trend toward the development of a single world culture.

Politically, globalization has shifted attention to intergovernmental organizations like the United Nations (UN) and the World Trade Organization (WTO).

Legally, globalization has altered how international law is created and enforced.

On one hand, globalization has created new jobs and economic growth through the cross-border flow of goods, capital, and labor. On the other hand, this growth and job creation are not distributed evenly across industries or countries.

Specific industries in certain countries, such as textile manufacturing in the U.S. or corn farming in Mexico, have suffered severe disruption or outright collapse as a result of increased international competition.

Globalization's motives are idealistic, as well as opportunistic, but the development of a global free market has benefited large corporations based in the Western world. Its impact remains mixed for workers, cultures, and small businesses around the globe, in both developed and emerging nations.

The History of Globalization

Globalization is not a new concept. Traders traveled vast distances in ancient times to buy commodities that were rare and expensive for sale in their homelands. The Industrial Revolution brought advances in transportation and communication in the 19th century that eased trade across borders.

The think tank, Peterson Institute for International Economics (PIIE), states globalization stalled after World War I, and nations' moved toward protectionism as they launched import taxes to more closely guard their industries in the aftermath of the conflict. This trend continued through the Great Depression and World War II until the U.S. took on an instrumental role in reviving international trade.

One of the critical steps in the path to globalization came with the North American Free Trade Agreement (NAFTA), signed in 1993. One of NAFTA's many effects was to give American auto manufacturers the incentive to relocate a portion of their manufacturing to Mexico where they could save on the costs of labor. NAFTA was replaced in 2020 by the United States-Mexico-Canada Agreement (USMC).

Governments worldwide have integrated a free market economic system through fiscal policies and trade agreements over the last 20 years. The core of most trade agreements is the removal or reduction of tariffs.

This evolution of economic systems has increased industrialization and financial opportunities in many nations. Governments now focus on removing barriers to trade and promoting international commerce.

Pros and Cons of Globalization

Proponents of globalization believe it allows developing countries to catch up to industrialized nations through increased manufacturing, diversification, economic expansion, and improvements in standards of living.

Outsourcing by companies brings jobs and technology to developing countries, which helps them to grow their economies. Trade initiatives increase cross-border trading by removing supply-side and trade-related constraints.

Globalization has advanced social justice on an international scale as well, and advocates report that it has focused attention on human rights worldwide that might have otherwise been ignored on a large scale.

One clear result of globalization is that an economic downturn in one country can create a domino effect through its trade partners. For example, the 2008 financial crisis had a severe impact on Portugal, Ireland, Greece, and Spain. All these countries were members of the European Union, which had to step in to bail out debt-laden nations, which were thereafter known by the acronym PIIGS.

Globalization detractors argue that it has created a concentration of wealth and power in the hands of a small corporate elite that can gobble up smaller competitors around the globe.

Globalization has become a polarizing issue in the U.S. with the disappearance of entire industries to new locations abroad. It's seen as a major factor in the economic squeeze on the middle class.

For better and worse, globalization has also increased homogenization. Starbucks, Nike, and Gap dominate commercial space in many nations. The sheer size and reach of the U.S. have made the cultural exchange among nations largely a one-sided affair.

What Is Globalization and Why Is it Important?

In essence, globalization is about the world becoming increasingly interconnected. Countries today are more connected than ever before, due to factors such as air travel, containerized sea shipping, international trade agreements and legal treaties, and the Internet. In the world of business, globalization is associated with trends such as outsourcing, free trade, and international supply chains. Globalization is important as it increases the size of the global market, and allows more and different goods to be produced and sold for cheaper prices.

Globalization is also important because it is one of the most powerful forces affecting the modern world, so much so that it can be difficult to make sense of the world without understanding globalization. For example, many of the largest and most successful corporations in the world are in effect truly multinational organizations, with offices and supply chains stretched right across the world. These companies would not be able to exist if not for the complex network of trade routes, international legal agreements, and telecommunications infrastructure that were made possible through globalization. Important political developments, such as the ongoing trade conflict between the United States and China, are also directly related to globalization.

Is Globalization Good or Bad?

It depends. Proponents of globalization will point to the dramatic decline in poverty that has taken place throughout the world over the past several decades, which many economists attribute in part to increased trade and investment between nations. Similarly, they will argue that globalization has allowed products and services such as cellphones, airplanes, and information technology to be spread far more widely throughout the world. On the other hand, critics of globalization will point to the negative impact it has had on specific nations' industries, which might face increased competition from international firms. Globalization can also have negative environmental impacts due to economic development, industrialization, and international travel.

How Does Globalization Impact Society?

Globalization has had a large impact on societies around the world, leading to massive migrations from rural to industrial or urban areas, leading to the rapid growth of cities and trade hubs. While this has led to an overall increase in incomes and a higher standard of living in general, it has also led to problems of urbanization including crime, domestic violence, homelessness, and poverty. Concepts of national identity, culture, and consumption patterns also change as goods from around the world become increasingly available and at low prices. The competitiveness of global capitalism may also lead to more individualistic ideals that contradict the cultural orientations of certain, more collectivist societies.

What Is an Example of Globalization?

A simple example of globalization would be a car manufactured in the U.S. that sources parts from China, Japan, S. Korea, Sri Lanka, and South Africa. The car is then exported to Europe, where it is sold to a driver who fills the car's gas tank with gasoline refined from Saudi oil.

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Globalization in Business With History and Pros and Cons

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Globalization is the spread of products, investment, and technology across national borders and cultures.

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Slight downward pressure on the Canadian dollar

The United States is one of the few developed countries where GDP has fully recovered to pre-crisis levels. The American government's extraordinary fiscal measures supported consumption, but there is still a long way to go in terms of employment. Demand for labour is expected to continue to recover while fiscal measures are reduced and as COVID-19 concerns ease.

Increases in commodity prices, including oil, supported the Canadian dollar in 2021 at around US$0.80. Expected commodity market movements in 2022 will exert slight downward pressure-especially in the second half of the year.

However, the divergence between U.S. and Canadian interest rates should help keep the Canadian dollar close to US$0.77 despite the risk of a more urgent change of course from the Federal Reserve.

Effects of the pandemic still felt in Canada

In Canada, the pandemic appears to be largely under control for the moment.

The number of new daily cases is rising but remains fairly low. Public health mesures are being relaxed across the provinces thanks to high vaccination rates-75% of the adult population is fully vaccinated.

Despite this rather enviable situation, Canadian economic activity is still facing the adverse consequences of the pandemic, which will continue well into 2022 and consequently moderate growth in the country.

The Canadian economy is expected to continue to grow, but the gains will be more modest than could be expected at this point in the business cycle.

Consumer demand: main engine of growth in Canada

Canadian households will remain the key to economic recovery in 2022. The savings they accumulated during the pandemic positions them well to support the economy and has provided them with a small cushion to absorb inflation. However, their consumption habits are expected to return to normal as restrictions on the services sectors gradually ease.

Residential investment will contribute positively to growth again in 2022. Despite tight inventories, the resale market could experience a wave of transactions at the beginning of the year. Some buyers who anticipate higher interest rates may be more aggressive in order to lock in lower rates.

The frenzy will slow as the Bank of Canada raises rates. That will be the case for housing starts as well.

The momentum of early 2021 continues to fade for the residential sector, but demand remains strong and housing starts will remain at high levels.

A powerful impetus from commodities

Canada's growth will benefit from strong global demand for commodities. Commodity prices skyrocketed during the COVID-19 pandemic and are expected to remain at high levels for most of 2022, but a downtrend is emerging amid a Chinese industrial slowdown. A shift from goods spending to services spending will further temper demand.

Oil is expected to remain high in early 2022. Once the northern hemisphere winter is over and thanks to the continuous but gradual increase in supply by producing countries, prices are expected to fall slightly and return to levels similar to those seen before the pandemic.

Shortages: a bottleneck for growth

The rapid rebound in demand for raw materials, intermediate goods and various logistics services has been hampered by limited supply. This has hit several markets and is translating into exceptional price increases and late deliveries that are putting pressure on many supply chains.

The problems created by these bottlenecks will persist for much of 2022. Unable to obtain the productive capital and inputs needed for their operations, many companies have slowed or stopped production altogether.

Global supply chains have become so complex that it is difficult for them to recover from a disruption. As we saw with the blockage of the Suez Canal for 10 days in 2021, a seemingly limited disruption can have an infinitely larger impact on the system as a whole. This includes when a port shuts down due to a COVID-19 outbreak or when a plant shuts down to ration energy.

When bottlenecks affect upstream products, such as energy products and metals, the scarcity of these products will lead to greater spillover effects by restricting the production of other goods.

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The United States is one of the few developed countries where GDP has fully recovered to pre-crisis levels. The American government's extraordinary fiscal measures supported consumption, but there is still a long way to go in terms of employment. Demand for labour is expected to continue to recover while fiscal measures are reduced and as COVID-19 concerns ease.

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The latest forecast for the global economy shows a grim outlook of the world torn by the COVID-19 pandemic and Russia's war against Ukraine.

Almost all countries are expected to experience slower growth in 2022-23 due to the ongoing Russia-Ukraine war, according to a recent report by the Organization for Economic Cooperation and Development (OECD).

With the ongoing Russia-Ukraine war, OECD recently lowered its estimates for global growth, slashing it to 3 per cent in 2022 from 4.5 per cent projected last year.

In 2023, the global growth is estimated to decline further to 2.75 per cent.

Current inflation across OECD countries in 2022 is 9 per cent, twice its earlier projections. The organization said that with the ongoing humanitarian crisis, high inflation could persist in rich countries and create food shortages for poorer ones. It called for global cooperation to prevent a food crisis by avoiding mistakes similar to those that led to the inequity in vaccine distribution.

"The price of this war is high and will need to be shared," said Laurence Boone, the OECD's chief economist.

The report said if the war continues to escalate, European economies relying heavily on Russian fuel may worsen, because alternative energy sources may not be enough or easy to ramp up.

"Governments also have to play a role through support targeted to those most vulnerable to rising food and energy inflation," Ms. Boone said.

SO, WHERE DOES CANADA STAND?

Canada's economy has largely recovered from the pandemic but the OECD report said the Bank of Canada should continue to raise its policy rate and shrink its balance sheet in order to return to its target inflation.

Along with income from high resource prices, a large part of the recovery, the report said, is due to its limited trade ties with economies that have been hit hard by the war in Ukraine.

Current inflation in Canada is 6.8 per cent- the highest since 1991 - but the country could follow the same path of the U.S. Federal Reserve's aggressive rate hike last week, the largest since 1994.

OECD expects the Bank of Canada to move towards a faster policy tightening so that the domestic productive capacity is not strained by the rising demand.

The Bank of Canada has been raising interest rates to curb the impact of inflation.

In a recent speech in Montrea l, Bank of Canada deputy governor Toni Gravelle said, "sharp rebound in global demand for goods, along with pandemic-related restrictions and some weather-related events, created the perfect storm."

With growing demand, the federal and provincial governments should focus on strong resource revenues to reduce the public debt, while targeting temporary income support for households facing living-cost pressures, the report said.

In its recent Financial System Review, the Bank of Canada said the share of highly indebted households had risen.

"In Canada, elevated levels of household debt and high house prices remain two key interconnected vulnerabilities," the bank said in its annual Financial System Review.

INCREASE IN THE POLICY RATE

Following the relaxation of containment measures in late January, Canada has seen large output gains in contact-intensive services and strong contributions from resources sectors, construction, and manufacturing.

But the report has warned about the supply chain disruptions, exacerbated by labour shortages and high inflation. The food and energy price rises are already reducing an average Canadian household's purchasing power and will negatively impact private spending, even as saving rates return to more normal levels, according to OECD.

OECD said more rate rises from the Bank of Canada could help tame the price pressures and "bring the monetary policy to neutral settings, where it neither stimulates nor weighs on the economy."

According to the OECD, Canada's policy rate is projected to increase to 2.5 per cent by early 2023. In case of continuing inflation, the organization forecasted an additional increase in rates.

In June, a second increase of 50-basis points by the Bank of Canada brought the benchmark interest rate to 1.5 per cent.

"We are taking these large steps because inflation has been persistently high, the economy is overheating, and the risk that elevated inflation will become entrenched has increased," Bank of Canada's Deputy Governor Paul Beaudry said in his remarks.

STRONG GROWTH TO CONTINUE AMID EXTERNAL SHOCKS

OECD projects Canada's real GDP is to grow by 3.8 per cent in 2022 and said the country can withstand the economic shocks from the Russia-Ukraine war since it has limited trade links with hard-hit economies.

OECD reported that most economies are relatively tight and are now experiencing labour shortages with a sharp rise in vacancies. Recent data from Statistics Canada showed that the job vacancies climbed to 957,500 in the first quarter, the highest quarterly number on record.

The pandemic resulted in huge declines in international migration which contributed to the labour shortages in some countries.

For Canada, OECD said higher immigration in the country will help ease these labour shortages and the wage pressures in supply-constrained industries.

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Polymer bank notes are shown during a news conference at the Bank of Canada in Ottawa on April 30, 2013. (THE CANADIAN PRESS/Sean Kilpatrick)

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Where Canada stands in the world if the global economy weakens

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The latest forecast for the global economy shows a grim outlook of the world torn by the COVID-19 pandemic and Russia's war against Ukraine. Almost all countries are expected to experience slower growth in 2022-23 due to the ongoing Russia-Ukraine war, according to a recent report by the Organization for Economic Cooperation and Development (OECD).

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1.What did you learn about your topic that surprised you the most?
A. Learning about the effect of the interconnections of countries and how they affect each other. Every country is designed for their own benefit by doing things like fixing exchange rates for example.

2. Provide a real-life example of how this topic is relevant or interesting for you.
A. I moved countries and noticed the value of currency i used at the time to be worth different at different times.  Being in a global economy and wanting goods, every piece in a completed assembled products is changing value every day depending on the markets.

3. If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?
A. The most important thing to pass on would be to teach compound interest and which markets to focus on if global sustainability is a personal goal.

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The West Block: Oct. 23, 2022 | Tough economic times ahead and Canadian Forces’ recruitment crisis

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Global National: Nov. 3, 2022 | Inflation will chart Canada’s economic fate, fiscal update shows

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Canadian expert: Disruption to globalization causing high inflation

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A professor of Economics from McMaster University, Atif Kubursi speaks about international economic and trade developments surrounding concerns about globalization.

Though there are many disadvantages, the main advantage is that countries were not forced to buy goods and services produced in their own countries. By doing so it gave the companies the chance to shop for those services at other countries to save money.
The security of a secure supply comes with a cost of higher inflation. Buying from more expensive producers, raises the inflation level in the long term.
The main current factor for inflation is COVID-19, soaring international energy prices and U.S.'s high tariffs to undermine globalization on the grounds of so-called national security.

Atif Kubursi of McMaster University hopes to have an optimistic future for all with a balanced economy, but globalization takes a while to balance out the unpleasantness.

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Globalization and price gouging has caused businesses to inflate their prices. Factors such as greed-flation, shrink-flation and price discriminations had led to steep rises on every product.
This video focuses on the fact that simple household goods for example the cost of cheesecake has gone up 27% since 2022.
In brazil shoppers are informed about about packaging improvements or price changes and they do not have to guess which product is more beneficial and financially smart.

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Globalization's effect on Canada's Economy

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Globalization's effect on Canada's Economy

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Being connected to the global economy, Canada will be feeling the ricochet of it all. The recession predicted in the video by the reporter is mentioned to be short lived and a shallow one. Even with high hopes a scenario can sometimes fail to get under control.
Bank of England in United Kingdom has reported an increase in their recession from 2.25% to 3% since 1989. Avoiding recession is possible but it is always harder to make an early move based on speculations.
Loss in the global market can also be seen in the reduction of sales in general. In a recent trend among some companies, it was found that there was an increase in profits even though there is a decrease in sales. In BC, produce is one of the top 3 best sellers that made the highest profit for Loblaws. Loblaws had a profit of a million dollars more than their recorded number.

I chose this video because it highlights the fact of how different sections in Canada are affected by the world economic changes. There has always been a cost for higher healthier living but when greed-flation becomes a norm, it benefits corporations more than volunteering consumers.

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This video focuses on tough economic choices Canadians come across. The president and founder of a leading global research group, the Eurasia Group, Ian Bremmer, is a guest on the show.
He focuses on how globalization has put Canada and the world at rest and states that 2023 will be a tough year with evolving changes happening in the background. The reason for this global unrest is the fact that we went through two major global crisis, first was the pandemic and second are the stimulus checks given out to the people.

I chose this video because it shows how we as a society prefer to sustain a balanced lifestyle, that benefits the economy and community as a whole. During the pandemic we briefly went from recession to depression and big pieces of the global economy started to crumple. Even under pressure the fiscal stimulus seemed like too much but was great for the time as it helped keep major sectors from shutting down completely.

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Globalization has allowed us all to compete and be a part of the economy. In this image they mention a relation between average hourly wages and consumer prices.
Consumer prices have been recorded to stay close to the average population's wage which speculates that with every company making profit, the employees get to have bigger cheques to spend.
I chose this image because I also think there is healthy competition in the market

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Globalization has always played a role in determining the cost of goods. The article states that in the latest forecast of the global economy report by the Organization for Economic Cooperation and Development (OECD), the global growth is estimated to decline to 2.75% by 2023.

The war in Ukraine and COVID-19 has put a massive strain on the global economy. Canada has however as stated in the article has mostly recovered from the pandemic but the Bank of Canada insists on raising its policy rate to have a better shot at managing inflation. Currently Canada is at 6.8%, which is the highest it's been since 1991.

I chose this article because it is relevant to the times and it shares a lot of data from Statistics Canada about Canada's position in the global economy post pandemic.

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Moving into 2023, the Canadian economy will continue to recover from it's pandemic era in 2020.

Supply chain issues and rising costs post COVID-19 has put every entrepreneur on edge , causing them to learn to adapt. Shortages has been seen across several markets and it's seen translated directly into the final cost. With many companies stopping production of raw materials because of lack of goods and situations like shutting down the Suez Canal in 2021 for 10 days, plays a massive impact on  the global supply chain as goods are not delivered to locations on time. Delays cause a massive disruption in the chain and losses all around.

I chose this article because it brings together the world as a whole and compares Canada's economy among the rest.  While Canada had a good recovery in 2021 because of effective vaccination efforts, the economic activity in the country is still improving slowly. Pressure on the supply chain could desynchronize the market and affect labor shortages and inflation, the article however states that the outlook for Canada in 2022 and moving forward is slow but bright.

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Globalization is necessity required to promote connectivity and care for the community. The article mentions how globalization has a massive impact on societies, that lead to many factors. While globalization has led some to make more money, others have been forced to urban or lower income area.

I chose this article because while globalization might have it's negatives, it has provided a lot of good and equality to the consumers. Having a choice in deciding how much to contribute to the economy, lets the consumers save and direct their funds wisely, which will result in Bank of Canada to fix rates to benefit the economy.

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This image is a representation of the global economy since the 1870's. The article with the image states that reversing the damage of the losing economy will be difficult but it is likely it can recover over years, as seen in the image as example.

I chose this image because it shows that the economy was doing bad before because of situational circumstances, but over time as goods were sourced smartly and effectively, the economy started to see a shift.