The global economic system refers to the arrangements and institutions that unite the world's economies in one global marketplace. Developments in international economics since World War II have led to the global system that exists today.
The global economic system allows nations to engage in internationaltrade, exchanging goods and services. The system also allows labor and capital to move more freely around the world
International organizations such as the International Monetary Fund and the World Trade Organization are important institutions in the global economic system.
Global trade agreements such as the North American Free Trade Agreement and the General Agreement on Tariffs and Tradehelped accelerate globalization, opening markets around world to an expanding range of goods and services.
The global economy has allowed consumers access to an expanding range of goods and made it possible for investors to seek opportunities around the world.
Does globalization promote the removal of production and jobs fromdeveloped to underdeveloped countries? What are the social costs of both groups?
The implications of globalization for a national economy are many. Globalization has intensified interdependence and competition between economies in the world market.
Firms tend to move their industry in LEDCs which brings to local people jobs whereas in MEDCs, unemployment is increases. In LEDCs they would be paidpoorly and firms can pull out at any time.
By moving in a developing, industries bring with them the same production techniques and their technology knowledges. By introducing them to local workers, it will increase their skills. Globalization in developing countries had a favorable impact on the overall growth rate of the economy. Gross Domestic Product growth accelerated due toglobalization.
Globalization has an impact on employment of the developing countries. In a developing country, the final employment impact of increasing trade depends on the interaction between productivity growth and output growth both in traded goods sectors and in non-traded sectors. When a developing country opens its borders to foreign capital, Foreign Direct Investments generate positive employmentimpacts both directly and indirectly through job creation within suppliers and retailers and also a tertiary employment effect through generating additional incomes and so increasing aggregate demand.
Globalization has the effect of income inequality. Both trade and FDI should take advantage of the abundance of low-skilled labour in developing countries and so imply an increasing demand fordomestic low skilled labour and hence decreasing within-country wage dispersion and income inequality.
An important trend in labor markets in the advanced economies has been a steady shift in demand away from the less skilled toward the more skilled. This trend has produced dramatic rises in wage and income inequality between the more and the less skilled in some countries, as well as unemploymentamong the less skilled in other countries.
Globalization has played an important role in poverty alleviation. As far as poverty reduction is concerned, trade and FDI are supposed to be beneficial to a developing country’s economic growth and so, given the expected overall neutrality in terms of their impact on income distribution, globalization should be a way to achieve poverty reduction.The lowest wages may also be falling in industries struggling to compete with new imports, while higher-paying export industry jobs are increasing in number but remain unavailable to the relatively unskilled labor force. The price of inclusion in globalisation can therefore be high; foreign investment has limited value to a developing country if no tax is paid, if no skills are transferred to...