Globalization has provided the world economy with an enormous amount of wealth and expansion since it first began in the 1970’s. It slowly progressed throughout the 1980’s up until the fall of the Berlin Wall, which led to a doubling of the global free-market labor force. Since then, the Dow Jones Industrial Average has climbed from 800 in 1979 to over 13,000 by 2007. The era of financial globalization went into effect in 2003, when financial services accounted for 30% of stock market earnings. For the past 3 to 5 years though, we have seen a different trend in globalization and the free flow of capital across borders.
The outlook on globalization for 2013 is not great according to many macro economists. However, this may not be such a bad thing. The current trend for globalization is descending. Banks are becoming more nationalistic, heightened by the global financial crisis and the major emerging economies are seeing a rapid slowdown in exports. We can see this by many companies coming back to the United States to manufacture items due to the higher cost of labor overseas. The rise in freight costs is also dampening foreign investment, which erodes the advantages of the lower cost of production found abroad. Example: Apple announced a 100 million dollar investment to build Macs in the United States. In addition, Boston Consulting Group contends that China's overall cost advantaged will be reduced to 7% by 2015, moving production jobs back to the United States.
This fact alone is not reason enough to rationalize the decrease in globalization. On a more optimistic view though, it could make the world economy more stable and a more politically acceptable climate. Globalization will live on indefinitely; it is too much of a wealth-creating machine not to. What may happen is a decrease of globalization to a more sustainable level than the previously large expansion we have seen in the past couple decades.
( Vivian )11 Jan,2013
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