Economic globalization

Economic globalization is one of the three main dimensions of globalization commonly found in academic literature, with the two others being political globalization and cultural globalization, as well as the general term of globalization. Economic globalization refers to the widespread international movement of goods, capital, services, technology and information. It is the increasing economic integration and interdependence of national, regional, and local economies across the world through an intensification of cross-border movement of goods, services, technologies and capital. Economic globalization primarily comprises the globalization of production, finance, markets, technology, organizational regimes, institutions, corporations, and people.

While economic globalization has been expanding since the emergence of trans-national trade, it has grown at an increased rate due to improvements in the efficiency of long-distance transportation, advances in telecommunication, the importance of information rather than physical capital in the modern economy, and by developments in science and technology. The rate of globalization has also increased under the framework of the General Agreement on Tariffs and Trade and the World Trade Organization in which countries gradually cut down trade barriers and opened up their current accounts and capital accounts. This recent boom has been largely supported by developed economies integrating with developing countries through foreign direct investment, lowering costs of doing business, the reduction of trade barriers, and in many cases cross-border migration.

International commodity markets, labor markets, and capital markets make up the economy and define economic globalization.

Beginning as early as 6500 BCE, people in Syria were trading livestock, tools, and other items. In Sumer, an early civilization in Mesopotamia, a token system was one of the first forms of commodity money. Labor markets consist of workers, employers, wages, income, supply and demand. Labor markets have been around as long as commodity markets. The first labor markets supplied workers to grow crops and tend livestock for eventual sale in local markets. Capital markets developed in industries that required resources beyond the capabilities of an individual farmer.

World War I disrupted economic globalization, with countries adopting protectionist policies and trade barriers, slowing global trade. The 1956 invention of containerized shipping and larger ship sizes reduced costs, facilitating global trade.

Globalization resumed in the 1970s as governments highlighted trade benefits. Subsequent technology advancements have accelerated global trade expansion.

The follow-on advances in technology since then have played a pivotal role in the rapid expansion of global trade.

The GATT/WTO framework, which was initiated in 1947, led participating countries to reduce their tariff and non-tariff barriers to trade. Indeed, the idea of Most Favoured Nation was essential to the GATT. In order to accede, governments had to shift their economies from central planning to market driven, especially after the fall of the Soviet Union.