Globalization Questionnaire
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Globalization Questionnaire
“Globalization is not something we can hold off or turn off . . . it is the economic equivalent of a force of nature — like wind or water” Bill Clinton (2000). This questionnaire will provide comprehensive answers to what is globalization and two of the traditional trade theories that support the concept of globalization today. Major drivers of globalization will be discussed and examples will be provided. Last, an explanation of four effects of globalization that affect my community and organization.
Globalization
According to Hill (2009), globalization is the shift toward a more integrated and interdependent world economy. Two aspects of globalization are the globalization of markets and the globalization of production. The globalization of markets concerns the integration of the historically distinct and separate national markets into one enormous global marketplace. The globalization of production describes the advantage of obtaining goods and services from around the globe, the differences in quality and cost, and the variances of land, labor, production, and capital (Hill, 2009).
Traditional International Trade Theories
When citizens purchase goods and services from other countries and sell goods and services to other countries without governmental influence of quotas and duties this is referred to as free trade. There are several trade theories known, but not all support the concept of globalization. Two of the traditional trade theories that support the concept of globalization are Absolute Advantage and Comparative Advantage.
Absolute Advantage developed by Scottish economist Adam Smith in 1776, explains that a country has an advantage when they have greater production of a good or service rather than other countries using the same number of resources. Using the theory of Absolute Advantage, there are gains for both countries to exchange, creating a positive-sum game in international trade.
Comparative Advantage, introduced in 1817 by David Ricardo, continues to be a major influence on international trade policy and in the present global economy. Comparative Advantage is an extension of the Absolute Advantage theory. According to Hill (2009), Comparative Advantage suggests countries should concentrate in the production of goods they produce most efficiently and purchase