In discussing globalisation, the term can be described as the convergence of markets, economies and ways of life across the world. A broad overview definition here is that globalisation is the worldwide process of homogenising prices, products, wages, rates of interest and profits. The important point to note here is globalisation as a process (a series of actions, changes or functions) rather than as a static stage of development. So as a ‘process’ of development, globalisation processes will rely on three forces for development at various scales (e.g. individual, household, urban spaces, national boundaries). The three forces for development in the process of globalisation are as follows:
- the role of human migration;
- international trade;
- rapid movements of capital and the integration of financial markets.
First, the role of human migration in globalisation is the way in which humans are, in general, freer to move between different jobs, spaces and nations. For instance, people can more quickly move to overseas jobs or encounter quicker commutes with the expansion of air travel (post-Covid-19) and the internet (for virtual and remote working). Migratory forces enable globalisation to develop as a more mobile workforce will mean a more efficient workforce and the ability to make economic gains.
The second force of international trade has had an impact on globalisation in that it is now easier than ever before to trade internationally. For example, the relaxation of employment regulations and the expansion of free(r) trading areas (such as the EU) has meant that a greater number of employees are able to work within different countries without having to spend time getting work permits.
The force of individuals and organisations wanting to trade internally is certainly a force that has encouraged globalisation, as greater trade will undoubtedly generate greater added value and thus economic satisfaction of wants. Thirdly, the rapid movement of capital and the integration of financial markets have had a significant influence as a force for globalisation.
The forces enacted by trading buyers and sellers of capital goods are to try to make such trading easier and more efficient. As such, this trading in capital goods and flows can be encouraged to flow without barriers between national frameworks. The force in this area is therefore the greater returns that can be extracted by traders in various global locations where capital has not previously had the opportunity to flourish.
As well as forces that have encouraged globalisation processes to intensify, there are other reasons or enablers that have made this intensification happen. Three key enablers for globalisation are:
• financial markets around the world becoming more integrated;
• technology and electronic trading in the value of commodities;
• money markets in one country not being independent of world financial markets.
The integration of financial markets around the world has played a significant role in enabling globalisation to intensify. The ability of, say, HSBC (Hongkong Shanghai Banking Corporation) to provide banking and financial services around the world is a case in point. HSBC is, for instance, the second-largest banking and financial services group and second-largest public company. As such it is listed on the London Stock Exchange and a constituent of the FTSE 100 index. As well as being integrated into the global financial system, it has managed to extend its reach by acquiring various banks in different countries. This acquisition is one of many integrations that enabled such a financial reach for HSBC and many other global financial organisations that operate in the global financial market. To get a sense of scale in this global financial reach, HSBC has around 7,500 offices in 87 countries and territories across Africa, Asia, Europe, North America and South America and around 100 million customers.
With respect to advances in technology and electronic trading, they have enabled globalisation to flourish, for instance, web technologies and the internet have made possible the processing of information more efficient across the globe. The creation of a virtual space in which people work and share information has meant that activities can take place over geography without people having to physically be in proximity.
As a third enabler, money markets have become more integrated with world financial markets to enable globalisation to occur. For instance, the trading of pounds, dollars, yen etc. as more liquid assets (money that can be exchanged for goods now rather than, say, bonds that can be redeemed in a few years) plays a larger role in the financial markets as a whole if finance is hard to come by as seen in the financial crisis of 2007–08. The high demand for short-term borrowing and lending in money markets (one year or less), such as treasury bills, will mean that it has an effect on the global financial market of which money markets are a part.
What is of importance to globalisation is that this greater inter-connectedness of money and financial markets mean that investments (in say property development for cities) can more quickly and easily be financed during economic growth over a global spread; but also, liquidity for credit in buying construction materials or property assets can quickly contract following wider global financial market falls (e.g. stock market crash). That in turn can quickly slow down or halt the economic development of many cities across the globe. As for a global pandemic, this is more a short term crisis of people rather than financial capital, and thus it can be argued that globalisation will prevail.
Summary
- Globalisation can be described as the convergence of markets, economies and ways of life across the world. A broad overview definition is that globalisation is the worldwide process of homogenising prices, products, wages, rates of interest and profits.
- Globalisation is a process (a series of actions, changes or functions) rather than a static stage of development. So as a ‘process’ of development, globalisation will rely on three forces for development at various scales (e.g. individual, household, urban spaces and national boundaries).
- The three forces for development in the process of globalisation are: (1) the role of human migration; (2) the level of international trade; and (3) the rapid movements of capital and integration of financial markets.
- Three key enablers for globalisation are: (1) financial markets around the world that have become more integrated; (2) technology and electronic trading in the value of commodities; and (3) money markets in one country not being independent of world financial markets.
This is an updated excerpt from my original text; please cite as Squires, G. (2013) ‘Chapter 9: Macroeconomic considerations’ in Squires, G. (2013). Urban and Environmental Economics. Routledge.