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globalization

A buzz word that refers to the trend for people, firms and governments around the world to become increasingly dependent on and integrated with each other. This can be a source of tremendous opportunity, as new markets, workers, business partners, goods and services and jobs become available, but also of competitive threat, which may undermine economic activities that were viable before globalization. The term first surfaced during the 1980s to characterize huge changes that were taking place in the international economy, notably the growth in international trade and in flows of capital around the world. Globalization has also been used to describe growing income inequality between the world's rich and poor; the growing power of multinational companies relative to national government; and the spread of capitalism into former communist countries. Usually, the term is synonymous with international integration, the spread of free markets and policies of liberalization and free trade. The process is not the result simply of economic forces. The decisions of policymakers have also played an important part, although not all governments have embraced the change warmly. The driving force of globalization has been multinational companies, which since the 1970s have constantly, and often successfully, lobbied governments to make it easier for them to put their skills and capital to work in previously protected national markets. Firms enjoying some national protection, and their (often unionized) workers, have been some of the main opponents of globalization, along with advocates of fair trade. Despite all the talk of globalization during the 1990s, in some respects the world economy was more integrated in the late 19th century. The labor market was certainly more global. For example, the flow of people out of Europe, 300,000 people a year in the mid-19th century, reached 1m a year after 1900. Now governments are much fussier about immigration, and people are no longer free to migrate as they wish. As for capital markets, only in the 1990s did international capital flows, relative to the size of the world economy, recover to the levels of the few decades before the first world war. This early globalized economy did not last for long, however. Between the two world wars, the flows of trade, capital and people collapsed to a trickle. Even before the first world war, governments started to put up the shutters against migrants and imports. Could such a backlash against globalization happen again?

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