What’s globalization, and how did it happen?
What does this word ‘globalization’ really mean? It’s the way that we buy and sell products around the world on a day-to-day basis; watch films, read books, listen to music from countries we’ve never visited; make political and economic decisions about where our governments should and shouldn’t get involved abroad; use the same world wide web to communicate with people as quickly as though they were right next door. Sounds great, doesn’t it?
How have companies spread so far across the world?
A big part of what makes globalization happen is foreign direct investment (FDI), where a company invests in another company abroad rather than just trading with them. If we buy something from one of these companies, the ripple effect of the money we’ve paid goes far beyond our national borders, affecting the people producing, marketing, advertising, selling, and investing in the product, each of whom could be located in a different part of the world.
Exchange rates: How can we trade stuff when we use different currencies?
For international trade to work, we’ve got to set exchange rates for all our different currencies – essentially the price at which we are willing to trade our currencies for another. Not the most exciting term, but seeing as it determines what our income and taxes are worth, it’s a pretty important one.
To what extent should we open up our economies to international trade?