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Economic Globalization and Its Impact

Economic globalization refers to the process in which economic activities across countries become increasingly interconnected and interdependent, transcending national and regional boundaries, driven by the development of production, technological advancements, and the deepening of international division of labor.

  • Marx and Engels foresaw the trend of economic globalization as early as the 19th century.
  • The rapid development of economic globalization was accelerated by the end of the Cold War and the information technology revolution in the late 1980s and early 1990s.

2. Manifestations of Economic Globalization

First, Globalization of Production: The production of high-tech products is no longer confined to a single country but is a collaborative effort among multiple countries, forming a global production chain. Second, Globalization of Trade: Goods and services flow freely on a global scale, leading to an expansion in trade volume, diversification of trade methods, and more standardized trade systems. Third, Globalization of Finance: Financial activities, policies, and competition across countries become more interconnected and coordinated, leading to more open financial markets, freer transactions, and more convenient capital flows.

3. Drivers of Economic Globalization

First, Technological Advancements and Productivity Development: The information technology revolution has broken geographical barriers, accelerated the dissemination of information, reduced costs, and promoted the development of economic globalization. Second, The Growth of Multinational Corporations: Multinational corporations organize production on a global scale, promoting the flow of production factors and international division of labor, thus driving the process of economic globalization. Third, Economic System Reforms and the Development of International Organizations: The transition of national economic systems toward market economies and the push for trade and investment liberalization by international economic organizations have provided institutional and organizational support for economic globalization.

4. How Economic Crises Erupt

1. Accumulation of Contradictions:

  • The fundamental contradiction of capitalism—the conflict between the socialization of production and the capitalist private ownership of production means—continues to accumulate and intensify.
  • This is manifested in:
  • Unlimited Production Expansion vs. Insufficient Effective Demand: Capitalists, in pursuit of maximum profits, continuously expand production, but the purchasing power of the working masses remains relatively insufficient, leading to overproduction.
  • Organized Production vs. Anarchy in Social Production: While production within individual enterprises is well-organized, there is a lack of macroeconomic regulation of overall social supply and demand, leading to blind production.

2. Crisis Eruption:

  • Products pile up unsold, leading to cash flow disruptions and waves of business bankruptcies.
  • Unemployment rises, further shrinking social purchasing power, creating a vicious cycle.
  • Financial markets become turbulent, investments decline, and the economy falls into a recession.

3. Crisis Relief and the Start of a New Cycle:

  • After a crisis erupts, production scales are forced to contract, alleviating supply and demand imbalances to some extent.
  • As governments implement economic stimulus policies, the economy gradually recovers.
  • However, the fundamental contradictions of capitalism remain unresolved, leading to new capital accumulation, which eventually triggers another economic crisis.

In summary: The economic crises of capitalism are the inevitable result of the accumulation of contradictions inherent in the capitalist system. The eruption process reflects the cyclical nature of capitalist economic operations.

5. Impact of Economic Globalization

Positive Impacts:

  • Promotes global productivity growth and brings significant benefits from division of labor.
  • Provides developing countries with access to advanced technologies and management expertise.
  • Creates more employment opportunities in developing countries.
  • Stimulates the development of international trade in developing countries.
  • Facilitates the growth of multinational corporations in developing countries.

Negative Impacts:

  • Inequality in the positions and benefits of developed and developing countries within the global economy.
  • Exacerbates resource shortages and environmental pollution in developing countries.
  • Increases economic risks, with crises more easily transmitted globally.
  • Economic globalization is an irreversible historical trend.
  • It is necessary to guide economic globalization towards a more open, inclusive, balanced, and mutually beneficial direction.
  • China, as a beneficiary and contributor to economic globalization, will continue to uphold the correct direction of economic globalization and promote the building of a community with a shared future for humanity.