What Is Economic Globalization?

Economic globalization is the increasing interdependence of national economies that has resulted from growing levels of trade between nations. This integration of the world’s economies is possible as a result of technological advancements that allow for quicker communication around the world, as well as drastically reduced costs of shipping goods. Today, it is possible for companies to manage production of goods efficiently, even when production facilities are on opposite ends of the world.

In addition to technological advancements, governments around the world have adopted institutional changes that have facilitated economic globalization. International organizations such as the World Trade Organization provide an important framework for economic cooperation between nations.

An important result of economic globalization is the increasing level of investment by foreign nationals and corporations in economies, particularly in developing nations. This investment by foreigners has helped drive growth in many developing economies, although there is some concern that economic globalization has in fact increased the gap in wealth between developed and developing nations. Additionally, because developed economies have large sums of wealth available for investment in developing nations, there is concern that foreign direct investment may sometimes create bubble markets in these developing nations. While economic bubbles are not uncommon, their impact can be particularly acute on developing nations.