Globalisation is not a new phenomenon either at the firm level or at the national/world economy level. Around 1880, the process of globalisation of the economy and the firm began. This was the recognition of comparative advantage. Many firms went global. They included Ford, Singer, Gillette, National Cash Register, Otis and Western Electronics. This was because of enjoyment of scale of economies due to the advancement of technology. In the interwar period, the thrust of globalisation declined. But the post war period witnessed once again tremendous growth of globalisation. Let us learn some of the important forces of globalisations.
International trade and globalisation
International trade has grown substantially over the years. The growth experienced is in the range of 4-10 per cent per annum. In fact, international trade has grown faster than the world economy in recent years. For developing countries, trade is the primary vehicle for realising the benefits of globalisation. Growing trade has contributed to the ongoing shift of some manufacturing and service activities from industrial to developing countries, which further accelerates the process of globalisation.
The creation of World Trade Organisation in 1995 is another step toward creating an environment conducive to the exchange of goods and services. Another significant and more important indicator of globalisation is the rate of Gross Domestic Product (GDP) of the world. The world merchandise trade and the world GDP have been steadily growing since 1990. The rate of growth in merchandise exports is faster than the rate of growth in the world GDP. Look at table below which shows that world merchandise exports and world GDP have been steadily growing till the year 1997. The world merchandise trade has been growing faster than the world merchandise production. Of course, world merchandise trade, world merchandise production and world GDP have decelerated sharply in the year 1998 due to oil crisis, fall in prices of international trade of goods and services and several other factors.
Trade expansion does not confine to merchandise trade alone. Even international trade in services has grown tremendously. Trade in commercial services continued to be stronger than the merchandise trade throughout the entire 1990-1998 period.
The world merchandise exports, world merchandise production, world GDP and international trade in services have witnessed substantial growth as a result of the globalisation.
