What Is the Connection Between Economic Growth and Globalization?

Economic Globalization refers to the entire process of the global organic economy formed by world economic activities beyond national borders through foreign trade, capital flows, technology transfer, service provision, interdependence and interconnection.

Economic Globalization

The main factors leading to the rapid development of economic globalization are:

First of all, the progress of science and technology and the development of productivity. The advancement of science and technology and the development of productive forces have provided a solid foundation for economic globalization, especially the information technology revolution since the 1970s, which not only accelerated the speed of information transmission, but also greatly reduced the cost of information transmission, breaking down All kinds of geographical and even national restrictions have linked the entire world like never before and have promoted the rapid development of economic globalization.

Second, the development of multinational companies. Multinational corporations provide suitable corporate organizational forms for economic globalization. Multinational companies use the advantages of various places to organize production globally, which greatly promotes the global flow of various production factors and international division of labor, and thus greatly promotes the process of economic globalization.

Finally, the economic systems of various countries have changed. Since the 1990s, countries with traditional planned economies have abandoned their planned economic systems and have transitioned to a market economy. In order to get rid of economic stagnation, developed capitalist countries weakened their control over the economy and strengthened the spontaneous regulation of market mechanisms. In the international context, with the establishment of the World Trade Organization, its members have greatly relaxed their control over the markets in their own countries or regions, and the process of trade liberalization and investment liberalization has continued to accelerate. All these have provided a suitable physical environment and policy conditions for the flow of international capital, the expansion of international trade, and the large-scale progress of international production, and promoted the development of economic globalization. ^[2]

The process of economic globalization is a process of increasing socialization of production. In the process of economic globalization, social division of labor can be carried out on a larger scale, and production factors such as capital and technology can flow and optimize allocation in the international community, which can bring huge benefits of division of labor and promote the development of world productivity. As developed capitalist countries occupy an advantageous position in the process of economic globalization, they have a greater say in the formulation of trade and competition rules and control of some international organizations, so developed countries are the main beneficiaries of economic globalization. Economic globalization also has a positive impact on developing countries: Economic globalization is the acceleration of the flow of resources on a global scale. Developing countries can use this opportunity to introduce advanced technology and management experience in order to achieve advanced industrial structure and strengthen the economy. To reduce the gap with developed countries; developing countries can make full use of the advantages of labor resources by attracting foreign investment and expanding employment; developing countries can also use the expanding international market to solve product sales problems in order to foreign trade Drive the development of their own economies; developing countries can also use investment liberalization and comparative advantages to form large multinational companies and actively participate in the process of economic globalization in order to obtain greater benefits from economic globalization. ^[2]

Different capitalist countries

As countries around the world

Economic globalization is the product of today's world economic and technological development. To a certain extent, it has adapted to the requirements of further development of productive forces and promoted the rapid development of the economies of various countries. But at the same time, it also brings huge risks to the development of the world economy. From the positive role of economic globalization:

Optimize configuration and rational utilization

After joining the World Trade Organization, China's opening up will enter a new stage of development. China's biggest development opportunity in the 21st century is economic globalization. It is in China's best national interest to continue to open wider and actively participate in the process of economic globalization.

At least so far, many analyses have shown that the benefits of economic globalization have not been evenly distributed among countries. The gap between North and South is widening. However, judging from the development performance of market-oriented reforms, China is one of the biggest beneficiaries of economic globalization. According to the World Bank (1997). Since the 20 years of reform and opening up, the integration of China and the world economy has advanced rapidly. The links between trade, foreign direct investment and high domestic savings rates have become a key factor in China's rapid economic growth. The opportunities that economic globalization brings to China are mainly reflected in the following aspects.

1. Globalization can effectively promote economic growth and make full use of domestic and foreign funds, technologies, resources, and markets. This is the most important benefit for developing countries to open to the outside world. Trade and investment liberalization can effectively promote the economic growth of a country or region. The mechanism can be summarized as: improving the efficiency of resource allocation through the use of comparative advantages; expanding overall demand through exports to drive economic growth: making up for developing countries through foreign investment Savings gaps and foreign exchange gaps in different regions or regions; foreign capital promotes economic growth by improving the original asset stock of the investment location, and further forms high-quality assets through new businesses: increasing the original asset stock through acquisitions and mergers; It can bring advanced and practical technology from abroad; equipment and scientific management methods can obtain the so-called "breeding effect"; foreign capital accumulates human capital for economic growth through the development of human resources in the investment place. Foreign-invested enterprises have become one of the important components of the Chinese economy. According to World Bank research, foreign investment in the economy during the period 1990-1994. The contribution of China's total GDP growth rate is 0.9 percentage points. Its contribution rate is 8.6%. This contribution rate has exceeded 10%, and it is expected that this contribution will continue to grow in the future.

2. Globalization can create a large number of new jobs China's economy has shifted from a "scarce economy" type to a "structural surplus" in which supply exceeds demand

The change in type has led to the closure, cessation, consolidation, transfer, and destruction of many enterprises, prompting a sharp increase in laid-off workers during this period. However, as far as China's national conditions are concerned, "development is the last word" and it is not simply equivalent to GDP growth being the last word. No matter how large the GDP is, if there is no corresponding increase in the scale of employment, the employment problem will become prominent, and social stability cannot be guaranteed. Therefore, in the face of the most basic national conditions of abundant labor resources and relatively scarce capital resources, China must develop labor-intensive export processing industries, open the service industry, and actively attract foreign direct investment (FDI). China's surplus labor creates more jobs.

1. Globalization helps to promote the construction of a market economy. China has both a lack of development momentum and a lack of new sources of investment and technology, as well as a lack of reform momentum and a lack of competition and elimination mechanisms. Seizing the opportunities of globalization can effectively solve the problem of insufficient momentum for reform and development. The rules of international economic organizations such as the WTO are based on market mechanisms. China can use external forces to remove obstacles to market-oriented reforms. Globalization will introduce foreign competition mechanisms, bring a sense of pressure and urgency, and become a huge driving force for reform and development.

2. China must continue to integrate into the world economy. China s labor force resources are determined by China s national conditions, accounting for 26% of the world s total; agricultural resources are scarce, and both arable land and water resources only account for 7% of the world: energy shortages. Oil and natural gas reserves account for only 2.34% and 1.20% of the world's total respectively; capital shortages and domestic investment account for only 3.4% of the world's total; technology is lagging behind and international patent approvals are less than 1% of the world's. This basic national situation determines that China must effectively develop and import international resources such as agriculture, energy, and minerals, introduce foreign capital and advanced technologies, and use international markets to develop labor-intensive industries.

3. Globalization is an important way for China to narrow the gap with developed countries. The World Bank believes that if developing countries want to reduce the gap between economic development and developed countries, they must first narrow the technology gap and the knowledge gap. The main way to reduce these gaps lies in :

(1) Introduction of foreign direct investment.

(2) Expand international trade.

(3) Technology transfer and technology license. In the early 1980s, China s per capita GDP in US dollars calculated by the PPP method was only equivalent to 3% to 4% of the average American, and by 1998 it had increased to more than 10% of the average American. One of the most fundamental reasons why China can effectively implement catch-up is that China has actively participated in the process of world economic integration and actively introduced foreign capital. Promote the growth of export trade, make full use of and enjoy the benefits of international division of labor and comparative advantages, make foreign direct investment and international trade the engine of economic growth, become the main source of new employment creation and the main way to improve competitiveness.

Whether a country can successfully participate in globalization depends on how it learns to participate and take the initiative from it. As for the rules of the world economy, China is studying, acknowledging, observing, using, participating, and gradually transitioning to revising and formulating. The rules of the world economy are always changing, and China must learn to actively participate in and formulate rules during changes.

Economic globalization has become a booster for the global financial crisis

One of the costs of "economic globalization": the instability of the global economy will become a normal. In the process of "economic globalization", the interdependence of countries' economies has been unprecedentedly strengthened. Many countries' foreign trade dependence has exceeded 30%, and some countries have reached 50% -60%. In this environment, international contagion from economic fluctuations and crises is a frequent and unavoidable event. The internal imbalance of any country will be reflected as an external imbalance, which will soon affect the countries with which it has close trade and investment relations. In the end, it is very likely that all countries will be introduced into the imbalance and crisis situation to varying degrees. In 2008, the US subprime mortgage crisis quickly spread to the entire European region and Southeast Asia, thereby forming a serious regional financial crisis, and then spreading to Latin America, forming a de facto global financial turmoil.

The existence of international hot money is certainly one of the important sources of global economic instability. As a huge financial force that transcends national borders, international manufacturers have repeatedly played the role of makers or promoters of global financial turbulence, and they have played a major role in the transmission of crisis (BIS, 1997/1998). The dollar crisis of the 1960s, the collapse of the Bretton Woods system in the early 1970s, the Latin American debt crisis of the early 1980s, the crisis of the European monetary system in the early 1990s, the Mexican exchange rate crisis in 1994, and the 1997 Southeast Asian financial crisis, each time Shockingly shows the tremendous destructive power of international hot money. By 2008, the US subprime mortgage crisis and the derivative European debt crisis. Since the 1960s, although economists have been exploring ways to control and supervise international hot money, many countries that have been hit hard by hot money have also worked hard to strengthen capital controls. But overall, the results of these explorations and efforts are not obvious.

Therefore, in the context of economic globalization, economic shocks in local areas are likely to cause global financial crises. ^[3]