Globalization

From Thermal-FluidsPedia

Globalization, in the broadest terms, refers to the integration of world economies through increased trade and knowledge and the free movement of material, labor, and capital across international borders in search of new markets and investment opportunities. Although globalization is not new and existed at some level centuries ago, the technological advances of the past few decades have made it easier and quicker to complete transactions and the trend toward globalization has accelerated. Whether globalization benefits or harms a particular country has been the topic of many debates. Some consider globalization and free market economy to be the keys to future world economic development. They foster competition and improve efficiency by making the flow of technological innovations, skilled labor, and free flow of capital easier. They also help developing and underdeveloped countries make progress towards democracy and a cleaner environment as their living standards rise.

Critics of globalization argue that markets do not necessarily ensure that the benefits of increased efficiency are shared by all. Furthermore, these policies, written primarily by large corporations and western governments, require such agencies as the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) to oversee trade and investment agreements negotiated between member states. These organizations often impose regulations that put industrialized nations at an unfair advantage and at the same time increase their access to natural resources of the developing countries. According to these rules, all resources, no matter where they lie, must be available for sale to the highest bidder, but the technologies used to discover, extract, and process these resources are regarded as proprietary, or “intellectual property” of the developers.

The role of energy is particularly important in shaping this debate. Certain types of energy such as wind and solar are inherently decentralized. Others, such as fossil and especially nuclear, are controlled by large corporations and governments; therefore the control over these resources and supply routes brings about economic as well as political power. As we have seen by now, the world is divided into two groups: those who have vast fossil resources and those who have not. The countries that are endowed with these resources are mainly developing countries, mostly in the Middle East. Western and other industrialized countries are by far the greatest consumers of energy. To secure the flow of petroleum and other natural resources to industrialized countries, through a twin strategy of military intervention and economic globalization, governments are required to open their borders to international trade and investment without the imposition of taxes, tariffs, and other regulatory barriers.

So far, the result of globalization has been mixed as best. Rich countries have in large benefited from international trades, although many of their citizens (especially those hired in low-tech industries such as textile, agriculture, and some electronic products) have suffered from losing jobs to lower-paid foreign workers. During the past century, the average per capita GDP of many industrial countries increased by as much as six-fold, although the income gap between rich and poor countries has been widening(1). In the last three decades, some developing countries, especially in Asia, have been able to benefit from globalization by increasing their share of world trade. Other countries, notably in Africa and in South America, have not been able to integrate with the world economy and their per capita income has actually declined. What is clear is that globalization is here to stay and if they are to benefit, individual countries must embrace globalization on their own terms, taking into account their own history, culture, and traditions.

The two most populous countries in the world, China and India, are growing rapidly to become world’s new economic powerhouses. This means that not only their demand for energy and fossil fuel will accelerate, but also their ecological footprints, the strain on natural resources, release of carbon into the atmosphere, and higher level of environmental pollution. Unless drastic effort in finding new alternative resources and implementing innovative conservational measures are made, the competition for control of these resources and potential for additional regional conflicts will increase (2).

References

(1) World Economic Outlook,” International Monetary Fund, Washington D.C., May 2000, (http://www.imf.org/external/pubs/ft/weo/2000/01/index.htm).

(2) Stiglitz, J.E., Globalization and its Discontent, Norton Publishers, New York, 2002.

(3) Toossi Reza, "Energy and the Environment:Sources, technologies, and impacts", Verve Publishers, 2005

Further Reading

Colander, D. C., Economics, 3rd E., Irwin-McGraw-Hill, 1998.

Bosselman, F., Energy, Economics and the Environment, Second Edition, Foundation Press, 2005.

Energy Economics, Science Direct Elsevier Publishing Company. Publishes research papers concerned with the economic and econometric modeling and analysis of energy systems and issues.

External Links

United States Association for Energy Economics (http://www.usaee.org).

International Monetary Fund (http://www.imf.org).

The World Bank (http://www.worldbank.com).