Economic globalization refers to ‘the further internationalisation of economic activity, in terms of greater interdependence and integration between economies and economic activity’ (Thompson, 2000, p92). To what extent is the traditionalist interpretatio
...our economies are enmeshed, economically reliant on one another. As nations are developing at different rates this has resulted in certain nations being pushed to the periphery making for uneven business relationships. Transformationalists believe that ultimately all national economies will become international economies as we become a more interdependent global society. The traditionalists theory is that national economies have not been supplanted by a global economy because the growth in the global economy has not been that great, although they accept there has been an increase in the amount of economic reliance between agents and this has resulted in more multinational companies and some growth in trade between agents. However this growth has not been so strong it has destabilized the economic independence of the participating nations and the agents concerned are able to collaborate, and run their economic systems effectively. The traditionalist view is one that can see an increasing link between nations but does not think that it is replacing the individual nation states. With a broad idea of the different theories about globalisation it is now possible to examine Thompson’s description. People pick the definition that suits their argument but how far does Thompson’s description suit the traditionalists? Trade flows and capital investments are the means to an economy’s ability to thrive. It follows therefore that overseas trade flows and capital investments are the key to an international economy and therefore is an indicator of the extent of international globalisation that exists today. Also, trade interdependency is a factor in the growth of globalisation so we should look at world economies and what proportion of those economies involve international trade. If we look at the ratio of merchandise trade to Gross Domestic Product in France, Germany, Japan, the Netherlands, the UK and the USA (exports and imports combined) at selected periods from 1913 to 1995 we see that that whilst there is disparity between the nations, that disparity stays roughly the same over time, showing that the amount of interdependency is approximately the same now as it was in 1913. There was a reduction in the ratios after 1913 but the two world wars would obviously have an impact as well as the collapse of the Gold Standard. All data is open to suspicion and for people who are inclined to a globalisation theory of rapid change in world trade, these figures are a conundrum. They object to the data because it doesn’t allow for inflation and because the Gross Domestic Product does not include the production of services. Both objections are legitimate but if we want to get a rough overview of trends in imports and exports it is probably reasonably valid data and it supports the traditionalist view that the global economy is unchanged. Another way of assessing the extent of globalisation is to look at capital flows, which show the amount of borrowing and lending between nations. Foreign Direct Investments are a good measure of the movement of corporations around the world. From 1980 onwards the FDI has generally increased apart from a recession-induced dip in the early 1990’s and this could be proof of globalization, as businesses must be expanding around the world. This would support the globalist’s theory of increasing globalization. Nevertheless, if we look at what has happened to total capital flows between the G7 economies we see a different pattern. The amount that the main industrialised countries have been investing in each other has had peaks and troughs but is roughly the same now as it was in 1870. I would question, however, the notion of G7 countries investment in one another as an indicant of non-globalization as surely investors are looking to place FDI in under-developed countries. Still, this is an argument used by the traditionalists to support their view. In 1995 ‘Foreign Direct Investment only contributed about 5.2 percent of the world’s capital formation’ which implies that Multinational Companies are not dramatically changing, and most economic resources are still being found domestically. In fact, the world’s economy doesn’t seem to be as international as it was in 1913, another supporting statistic for the traditionalists. Businesses developing braches overseas have been documented since the 1850’s, so there is nothing new in manufacturers using bases abroad. But in the twenty-first century are Multinational Companies losing their national identity and becoming truly global? Perhaps a Transnational Corporation is an example of a Multinational Companies becoming globalized? One example of a Transna...