Globalisation, the integration of world economies in terms of trade, finance, investment, labour and technology, is indeed an important force at work in the world today, and there is indeed much evidence to support such a statement: the integration of national labour markets, the increase in cross boarder trade and investment, and the development of a 'world economy' with measured GDP growth all suggest that globalism has become the dominant force in the world today.
However, this blind acceptance of globalism that has become all to apparent in modern times is sometimes unjustified; in the past century there have been many contentious issue that dominate the global agenda, most recently terrorism and the growing conflicts between Islamic fundamentalism and Western Culture, and dating further back this century warfare and international conflicts, that have essentially proved themselves to be as, if not more dominant that globalisation as a dominant force on the global agenda.
The first, and inherently most obvious indicator to suggest the globalism is the dominant force that it is commonly perceived as, is the massive growth in world trade that the world has experienced in the past fifty years. In 1950, the volume of world trade to world Gross Domestic Product ration was around 8%, and yet in 2001, that same ratio was at 31%, a massive increase in the volume of goods and services traded between countries with respect to world GDP output.
These figures indicate that, through the means of trade, national economies have integrated – a process that still continues today. However, these figures still indicate that world output is still 70% larger than annual world trade, indicating that although globalism has developed into a significant force, domestic produce and output still dominate levels of trade vastly in terms of amounts produce and consumed. Furthermore, in the past twenty years the world has experienced vast growth in international finance growth; that is cross boarder financial flows.
The main driver behind this growth is financial deregulation that has occurred within individual countries – the floating of currencies, removal of capital controls and the removal of interest rate controls mean that there has been a great increase in investment in overseas sharemarkets. Trans national corporations (TNCs) such as Merryl Lynch have facilitated the growth of interest in foreign investment, and with technology taken into account, since 1987 the volume of foreign, exchange traded derivatives has increase by a factor of twenty.
This is not to say, however, that this is a telling figure on its own – even though this cross boarder finance has grown at such astounding rates, the amount invested in foreign derivatives is still dwarfed by that invested domestically – in fact international finance still represents only about one fiftieth of its domestic counterpart, which suggests that although there has been massive growth in the area, globalisation has not yet developed into the force that it is perhaps made out to be.
Foreign investment, both direct investment (FDI) and portfolio investment, mainly oriented around foreign exchange markets, has also experienced this similar trend of growth particularly in recent times. From 1991 to 2000, FDI flows increased by 600%, resulting in aggregate trade of over $US 1. 2 trillion. Portfolio investment, too, has grown by spectacular amounts, clocking 400% growth rates between these two years, an aggregate of over $US 3 trillion.
These figures indeed suggest the investment integration of the domestic economies – such large growth rates and aggregates indeed indicate that the global economy, driven by 60 000 TNCs and their 800 000 affiliates world wide, is becoming increasingly an omnipotent force on the international agenda. The international business cycle, too, is a sure indicator of the presence and magnitude of the force of globalism in the world today.
The global business cycle is simply the ebb and flow of world economic growth, and is indicated primarily by through similar GDP growth movements within countries. This, as Ross Gittins points out in his article When the US economy says jump, why does ours listen? , is a result of domestic and foreign financial markets being closely integrated, and co-ordinated movements that occur between domestic monetary policy. A classic example of this is the correlation of the Australian and United States economies, which Gittins suggests are so closely related for the reasons preciously outlined.
This international business cycle, which essentially is represented by similar patterns of economic growth between nations, is an important aspect and indicator of globalisation as it represents the integration that has taken place – a strong indicator contributing to the argument that globalisation is indeed the important force in the world today. This is not to say, however, that globalisation is the only important force in the world today, or indeed in history.
Today, terrorism has become a major issue, with Islamic fundamentalism terrorising Western countries for intervening in their affairs. This, though, is arguably an offshoot of globalisation. The process has not only integrated the Western nations, but has indeed reached all parts of the Earth including Middle Eastern, Islamic nations that believe that the West is forcing it's culture upon them – Coca Cola, McDonalds and so forth are seen as representing American idealism, and the terrorism is arguably a backlash against this.
War, too, has been a deciding force in history. From the very start of mankind conflict has been part of our society, yet it was only this century that saw war on the scale that in which millions of people can die in half a year of combat. The First and Second World Wars, to mention but the most significant, have indeed changed many perspectives on the world today, and still play an important part in everyday life. Thus, although globalism is indeed a very important force in the world today, it is definitely not the most important force in history.
Huge growth rates have been experienced in the indicators of globalisation – trade, foreign investment and international finance, in combination with the emergence of a truly global economy, and these figures indeed indicate that globalism is a very important and dominant force in the world today. However, war, driven by human greed and self interest, has certainly dominated international affairs over the past century, and thus globalism, although an important force, is certainly not the most important force in history.