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Nowadays, globalization is present in many dimensions of human life. Tendencies towards globalization are observed in political, cultural and economic spheres. From a purely political point of view, globalization is the process of unification of sovereign states in order to create bigger organizations (such as the European Union) on the voluntary basis, aimed at protection, development and coordination of common actions. Despite many advantages of political globalization, the main disadvantage is the partial loss of countries' freedom. From a cultural perspective, globalization is the intercultural exchange of values and knowledge between and among people all over the world. Finally, globalization in the sphere of economy is defined by the European Commission (1997) as:
The process by which markets and production in different countries are becoming increasingly interdependent due to the dynamics of trade in goods and services and flows of capital and technology. It is not a new phenomenon but the continuation of developments that have been in train for some considerable time. (p. 35)
The term “globalization” as we now understand it first came into usage in the 1970s. The rationale for globalization was intensive development in the sphere of science and technologies that amplified world tendency towards an increasingly integrated, open, and borderless international economy. Technological advances decreased travel, transportation and communication costs, at the same time increasing their quality. This resulted in the fact that international cooperation and trade started gathering momentum. Such process of economic liberalization required the foundation of international organizations, which would set and control rules common for all members. The need for control and regulation of the process lead to the implementation of certain laws such as General Agreement on Tariffs and Trade on the basis of which World Trade Organization was founded. As a result, companies gained the possibility to extend their influence from local markets to national, international or global reach. Whether globalization is perceived as a negative or positive process, its influence on the world structure is evident and could be observed nowadays.
Most of benefits gained from economic globalization were received by developing countries; though industrialized countries did not suffer any loss. First of all, with trade becoming free of taxes and expanding on a global level, markets in developing countries received new high-quality products and offered consumers better and bigger choice. Furthermore, national companies gained access to new markets, generating more profit and improving its production technologies. In addition, the level of competition between companies to capture bigger market sectors was much higher, which resulted in constant implementation of innovations, better understanding of customers’ needs, reduction of production costs and increase in production rate.
On the other hand, national companies from developing countries may not withstand the competition with companies from industrial countries, which have better technological and manufacturing possibilities and higher corporate capital. In order to survive, local companies have to agree on mergers or takeovers with international corporations, often on unfavorable terms. This may lead to the decrease of the country’s GDP with more serious ramifications in the long run, if certain steps will not be taken. It forces the government to reconsider its economic policy and strategy by investing money into modernization of national economics and by attracting foreign investors.
Participation in the process of economic globalization also gives an opportunity for countries to use help from international organizations to implement national policies aimed at increasing standards of living in a particular country. It is particularly helpful when a country suffers from the economic recession. By giving loans, organizations like International Monetary Fund or World Bank saved countries such as Italy or Greece from the total economic collapse.
However, alongside with the help from international organizations the country loses its economic independence. In other words, the country is obliged to obey the law and rules of those organizations and in case of any conflicts a wide range of sanctions may be imposed against the country.
Economic globalization intensifies inward and outward migration of workers. By creating attractive working environment, there is a possibility to employ highly-skilled workers from abroad. For companies working on the international or global market it is crucial to have best workers in order to stay competitive. On the other hand, workers are seeking for positions with competitive salaries and good career prospects and often leave their country for the sake of better career prospects. The negative effect is that it may cause the brain drain and the country is left without professionals.
Appearance of foreign companies on local markets opens new and often better job opportunities, available for highly-skilled workers. However, those companies usually bring innovative and more efficient technologies that make the process of manufacturing more automated. Consequently, the need for unskilled workers decreases and the overall unemployment rate grows. Ramifications might be more serious if social and educational policies in the country are not well considered and flexible to face the challenges of economic globalization.
Economic globalization is anticipated to spread on a grand scale in the foreseeable future. It will be realized through the creation of a single economic center that will coordinate economic processes and policies all over the world and through the introduction of a single global currency. Partially, this process has already started. The appearance of international organizations such as UNO, IMF, WBG and multinational currencies such as euro or dollar are clear evidences that tendency towards more integrated economy continues. However, currently we can only predict the influence it will have on us.