What Is the Relation Between Economics and Globalization? - JIANGJIASHAN강가삼

  1. Summarize

Globalization is one of the most important economic phenomena in the contemporary world. The relationship between the economy and globalization is not one-way, but rather one of mutual interaction and shaping, which is an important foundation for understanding the current operation of the international economy.Globalization has expanded market reach and improved resource allocation efficiency. Traditional economic theory states that the larger the market and the more specialized the division of labor, the higher the production efficiency. Globalization extends businesses' markets from domestic to global, enabling the cross-border flow of production factors (such as capital and technology), which is a key driver of economic growth.First, economics provides the theoretical foundation for globalization. From Adam Smith's theory of the division of labor to Ricardo's theory of comparative advantage, economics explains why countries engage in trade: specialized production and international exchange can improve overall efficiency and benefit all parties. Subsequently, the Heckscher-Ohlin model further elucidates how differences in factor endowments drive global industrial distribution, while modern new trade theory emphasizes economies of scale and firm heterogeneity, enabling us to understand why globalization occurs not only between countries but also in the competition and cooperation of multinational corporations. Economic theory continuously provides logical support for the expansion of global economic ties.Globalization has profoundly impacted the economic development paths of various countries. In an open economy, a country's economic policies are no longer isolated actions within a closed environment, but are closely linked to international capital flows, trade policies, exchange rate systems, and the global governance system. Globalization has promoted technology diffusion, labor transfer, and optimized capital allocation, enabling many emerging economies to achieve industrialization and economic growth. However, globalization has also brought about problems such as industrial relocation, increased income inequality, and rising economic vulnerability.With technological advancements, globalization has shifted from "globalization of goods" to "globalization of services and knowledge." For example, the internet economy has made information and data global resources, significantly accelerating the global expansion of transnational service industries (such as cloud computing, financial services, and online education). This demonstrates that globalization is not static but evolves continuously with changes in economic structures.

Furthermore, national economic policies also influence the depth and manner of globalization. Some countries pursue trade protectionism when their industries are impacted, or strengthen capital flow controls to maintain financial stability; both of these affect the speed of globalization. In other words, globalization is not irreversible; it is constrained by the economic interests and policy choices of individual countries.

2. Something new and interesting

Observing a simple commodity, such as a pencil, reveals the wonder of globalization: the wood might come from Canada, the graphite from China, the rubber from Southeast Asia, assembly in Vietnam or Malaysia, the brand in the United States, and ultimately, sales worldwide. This example tells us that production in the modern economy is no longer the activity of a single country, but rather a collaborative effort involving multiple nations.


Economics has therefore shifted its focus from final product trade to the study of intermediate goods trade and global value chains. Today, over 50% of world trade consists of intermediate goods, and multinational corporations are the dominant players in organizing these value chains. This deep division of labor makes the global economy more efficient and has also made interdependence between nations closer than ever before.

The phenomenon of technology diffusion brought about by globalization is quite fascinating. Traditional theory holds that technology primarily originates from internal accumulation, but under globalization, technology can spread rapidly through foreign-invested enterprises, the return of overseas students, and knowledge spillover. This creates a "latecomer advantage": developing countries, by participating in global industrial chains, can often improve their technological level faster than through independent research and development.


For example, the industrial upgrading paths of China, South Korea, and many Southeast Asian countries are highly dependent on technology imports and participation in global value chains. This forces economics to re-examine "technology sources" and "innovation models," bringing a new perspective to development economics.

3. Questions and Discussions

In recent years, geopolitical tensions, escalating trade frictions, and intensified competition in the technology sector have triggered a trend of "de-globalization." Some countries are pushing for the relocation of supply chains, restricting high-tech exports, and advocating for localized production.

1. Will future globalization shift from "global integration" to "regional conglomeration"?


2. Will supply chains shift from highly globalized to "de-risking" and diversified layouts?


3. Can economic globalization be balanced with national security concerns?

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