Globalization is the flow of goods and services, capital, and knowledge across countries. Globalization enhances the economic interdependence among countries and organizations across countries. The increasing interdependence among countries, companies, and even individuals across country borders has decreased the influence that a national government can have on its economy.
The interdependency of country economies across the world became exceedingly clear in the most recent financial and economic crisis. The crisis began in the United States and spread to many other countries. Recently, increasing globalization has dramatically changed the competitive landscape for everyone. For example, when coupled with new technology, especially in information systems, small firms now have access to markets and resources in other countries. This has allowed them to compete effectively with larger and often more established firms. Additionally, even firms from less-developed economies can better compete in international markets.
Globalization has gone beyond the point where small and large companies have moved into international markets. Today, even individuals are collaborating (and competing) on a global basis. Regardless of a country’s origin, increased globalization has made all of us “next-door neighbors”—and competitors.
India and China are predicted to be major players in the global economy over the next 30 to 40 years. Some have claimed that, by the year 2040, the combined economies of Brazil, China, India, and Russia are likely to outstrip the total economies of what are currently the 6 largest economies: Canada, France, Germany, Japan, the United Kingdom, and the United States.
The globalization’s reach has become longer through the development of technology that allows a person in a small country like Bhutan to become an international celebrity through a photo posted on Facebook. And, partly because of the changes in the world, Bhutan has also undergone major changes in the first decade of the 21st century. For example, it introduced a new constitution in 2005 and had its first parliamentary voting in 2008.
Globalization has both positive and negative effects on most countries. It provides opportunities for companies to expand and grow by entering new foreign markets. It can also improve a country’s economic development. Yet, competition from foreign firms entering a country’s home market can harm local companies. Some of the questions about China relate to its effect on U.S.–based firms and their U.S.–based employees. For example, competition in United States markets from Chinese firms has seriously harmed U.S. furniture and textile firms.