Causes of Globalization| Class 12 Political Science Notes

Globalization refers to the integration/ linking of the economy of a nation with the world economy; Simply put globalization is a method of interaction and union among people, corporations, and governments universally. It is a multifaceted concept, that need not always be positive, it can also have negative consequences for the people. As a concept, globalization mainly deals with flows, with the most important element being worldwide inter-connectedness.

This article provides important notes on the topic of Causes of Globalization based on the chapter on Globalization as per the Class 12 Political Science NCERT textbook. Students are advised to go through this article for further details.

What is Globalization?

• Globalization refers to the flow, of ideas, capital, commodities and people across the globe.
• It has political, economic, and cultural manifestations and these must be adequately distinguished.
• Globalization deals with ‘flows’, which can be interpreted as ideas moving from one part of the world to another, commodity trading across borders, etc.
• It includes the creation of networks and pursuits, that can change social, economic, and geographical barriers.
• Globalization may not always be positive. It can have negative consequences for the people as well.

Causes of Globalization

Globalization is not the result of a single factor, but rather a consequence of multiple reasons. Cross-border trade and inter and intra-regional exchanges were always taking place from the earliest periods around the globe, however industrial and technological advancement has given a major boom to the globalization process; Technology remains a critical element. The various causes for globalization have been listed below:

1. Improved Technology and Communications

Rapid advancement in communication technologies like mobile phones, internet, emails etc. have made it easier for the companies and people to connect across borders, without any hindrances; This has made it easier for many companies to trade and employ people across different nations. Improved communication technology also helps in reducing labor costs for MNCs because cheaper labor is now easily accessible in developing countries , which is highly profitable for the companies. Development of Satellite TV has also helped in providing worldwide marketing avenue, insight into audience preferences etc. for different products of globalization. Technology has removed the concept of ‘border restrictions’ and has made information and communication flow easier, which has further helped in easing the flow of ideas and commodities across the globe.

2. Improved Transport

Global travel has become far more convenient and easier, after the introduction and rapid growth of different modern modes of travel, especially Air travel, enabling greater movement of people and commodities across the globe, in a very short span of time. Development of Refrigerated container transport, bulk shipping, has made it easier to trade in bulk, even the commodities with short expiry period. Earlier, time constraints used to hinder trade practices across regions, because it used to take months to travel from one place to another; Now thanks to air travel, any part of the globe can be reached within a day, saving a lot of time and making it easier for people to execute flow of commodities. Improved transportation hence has greatly aided the process of globalization by making interconnectivity easier.

3. Containerisation

The costs of ocean shipping have reduced due to containerisation, bulk shipping, and other advancements in shipping. The lower unit cost of shipping products around the global economy has helped to bring prices in the manufacturing countries closer to those in export markets, and it makes markets more contestable globally. The rapid adoption of the steel transport container, especially in ocean shipping, has reduced the costs of inter-modal transport, making trade cheaper and more efficient.

4. Free Trade Agreements

Many countries have been signing free trade agreements with each other that offer benefits to both parties, when certain terms of trade are met and such free trade agreements act as a great incentive to different MNCs and rich capitalist countries to expand their business in other countries, in order to increase their wealth and influence. International Organizations like World Trade Organization, and IMF promote and encourage Free Trade as well. Hence Free Trade Agreements, aid globalization by making cross border trade attractive.

5. Growth of Multinational Companies (MNCs)

Rapid growth of Multinational Companies like Microsoft, Nike etc. is a cause as well as consequence of globalization. Globalization has led to MNCs to sell their products on a massive scale across the globe. In fact MNCs also invest in farms, mines, factories across the globe and help the economy expand further. MNCs are driven by their aim to increase their revenue and profit growth, therefore they try and invest/ expand in faster-growing economies fueled by increasing numbers of middle class consumers. A good example in this case are fashion brands that we see all around us in various countries.

6. Globalization of Banking System and Financial Markets

Banking and Financial systems are becoming increasingly global in nature. There has been a general reduction in capital barriers, in the past few decades making it easier for capital to flow between different economies. This has increased the ability for firms to receive finance. It has also increased the global interconnectedness of financial markets. Best example to show the global connection in financial markets are banking systems is when US banks were suffering losses due to the sub-prime mortgage crisis, it affected all major banks in other countries who had bought financial derivatives from US banks and mortgage companies. Instant and free flow of vast amount of capital throughout the world, thanks to increasing interconnections among global banks has greatly sped up and impacted globalization.

7. Differences in Tax Systems

Benefits of lower unit labor costs and other favorable production factors abroad, which attract businesses, has encouraged countries to adjust their tax systems to attract foreign direct investment (FDI). Many countries have become engaged in tax competition between each other in a bid to win lucrative foreign investment projects and have reduced tariff barriers as well in order to encourage global trade.

8. Less Protectionism

Old forms of trade restrictions such as import licensing and foreign exchange controls have gradually been dismantled. Borders have opened, a lot of restrictions have been removed and average import tariff levels have fallen. However we find that, there has been a rise in non-tariff barriers such as import quotas as countries have struggled to achieve real economic growth and as a response to persistent trade and current account deficits.

9. Increased Mobility of Labor

People are more willing to move between different countries in search for work. Rich capitalist countries are also offering many incentives to incoming workers from other developing countries to attract cheap labor. Global trade remittances now play a large role in transfers from developed countries to developing countries.

10. Cultural Exchange and Information Flow

Cultural Exchange aided by travel, migration, media and the internet has led to global exchange of values, ideas and cultural practices. Accessibility to information and communication has resulted in individuals and communities connecting globally to share knowledge and perspectives.

Evaluation of Globalization

• The term ‘Globalization’ is difficult to define as there are various interpretations of what people actually refer to, therefore, there are different causes that explain it.
• Improved technology is without a doubt very crucial in helping globalization; without modern technologies such as the internet and global communication, the increased interdependence of companies and countries, would not have taken place.
• There are various trade barriers still in existence and this has not stopped the growth of globalization.
• Economic policies of a nation also greatly assist in increasing globalization process.

Conclusion

There is not one single factor that is responsible for causing globalization. A combination of multiple factors has led to the rapid rise of the globalization process; Advancement in technology and communications is at the core of all the causes, coupled with liberalization of financial systems, increased mobility of labors, improvement in transportation, smoother flow of capital across economies etc. The financial and physical barriers that existed in the earlier periods have all been mostly dismantled and what lies in front of us today is one big ‘Global Village’ interconnected very closely to each other. This is not to say that there are no restrictions around the globe, the restrictions have been slightly modified in keeping up with the current times.

Causes of Globalization- FAQs

What are the positive impacts of Globalization?

The four positive impacts of globalization are as follows:

• Creates efficient markets
• Increases competition
• Stabilizes security
• Increases wealth equality across the world

What are factors of globalization?

The following are the various factors of globalization:

• Containerisation
• Technological change
• Economies of scale
• Differences in tax systems
• Less protectionism
• Growth Strategies of Transnational and Multinational Companies.

How does globalization affect society?

Due to globalization, people can purchase cheaper goods, communicate with individuals from all over the world, and work in any country. Globalization has also opened our eyes to various cultures, which has increased people’s understanding of one another.

What is the biggest cause of globalization?

The advancement in technology and communications;, international economic integration, socio-cultural convergence, cross-border political influence, financial liberalization and the need for economies of scale are all causes of globalization.

What is the importance of Globalization?

Globalization is important to expand the markets and enable a business to make a sensible utilization of the available resources. Globalization boosts exports, discourages import, and uplifts foreign exchange and helps integrate the world economy.