Globalisation is the process by which an activity or undertaking becomes worldwide in scope. It refers to the absence of borders and barriers to trade between nations.
Globalisation is defined as, “increased permeability of traditional boundaries of almost every kind, including physical borders, such as, time and space, nation states and economies, industries and organisations and less tangible borders, such as, cultural norms”. As a consequence of increased global operation, the global economy is becoming more integrated than ever before. This gradual integration leads to the emergence of global village.
UNCTAD defines globalisation at the macro level as follows: “The concept of globalisation refers to both an increasing flow of goods and services and resources across national borders and to the emergence of complementary set of organisational structure to manage expanding network of international economic activity and transaction”. Strictly speaking, a global economy is one where firm and financial institutions operate in transnational manner, i.e., beyond the confines of national boundaries.
In such a world, goods, factors of production and financial assets would be almost perfectly substitutes everywhere and it would no longer be possible to consider nation states as distinct economic identities with autonomous decision making power in the pursuit of national objectives. The public goods that are needed to maintain an open market system, such as, secure property rights and stable monetary system would become a global responsibility.
However, the world economy has not reached this level. Although, the nation state is having less control as the forces regulating trade, finance and technology, it has still not given way to a new set of institutions with global responsibility. Hence, some term the current situation as ‘global interdependence’.
