Switching from the Globalization of Markets to the Globalization of production and Services in a Semiglobalized World

Author:Serghei Mărgulescu; Elena Mărgulescu

The retrospective of the theoretical approaches of the phenomenon of economic globalization in the last three decades emphasizes the movement of attention from the globalization of markets, from the'80s, to the globalization of production and services in the current decade. This trend is essentially the result of implementing new strategies by multinational companies. It also requires accepting... (see full summary)


Serghei Mărgulescu. Professor, Ph.D., Economic Sciences Faculty, “Nicolae Titulescu” University, Bucharest (margulescu@univnt.ro)

Elena Mărgulescu Associate professor, Ph.D., Economic Sciences Faculty, “Nicolae Titulescu” University, Bucharest.

Page 388


Historically, comparisons are made between the first globalization (1870-1914) and the second globalization (postwar and especially since the'80s) and it argues that the world economy reached only in the 80s the same high levels in terms of capital mobility, foreign direct investment (FDI) and trade which were specific to the first globalization, but with the difference that freedom of immigration is not at the levels of that time. While labor migration has played a major role in the first stage of globalization, in the second, the effects of globalization mainly result from the reorganization and relocation of production.

If you look at economic globalization as a process of acceleration of the world economy and of the national economies, leading to the unification of international markets and creating a global market (Suzanne Berger, 2006), then globalization today is the result of political, economic and technological shocks that synchronized and mutually strengthened in the early '80, which led to substantial restructuring of the manufacturing process. Once China began in 1979 to open the economy to the west and the Berlin Wall collapsed in 1989, the most powerful political barriers to trade and capital mobility have been dismantled. An important role also played the policies of the industrialized countries towards the liberalization of capital markets and the elimination of barriers in international trade.

Page 389

We must also mention another very important element of the current globalization process namely the accession to the status of competitors of developed countries by a growing group of developing countries. If poor countries in the past exported food products and natural resources, currently over 70% of total exports of goods of these countries is represented by manufactured products, and the share of developing countries in the world merchandise trade amounted to about 1 / 3 of world trade.

Specific to this new stage of globalization is the complexity reactions (positive and negative) caused by the moving of the focus from the globalization of markets to the globalization of production. We will turn back to this subject after introducing an element of moderation of excessive optimism or concern admitting, as supported by Pankaj Ghemawat1, that the current status of the world economy is one of semiglobalization.

Switching from "the globalization of markets" to "the globalization of production and services” in a semiglobalized world

Pankaj Ghemawat is trying to temperate fears and apocalyptic scenarios of the immediate effects of globalization and makes a table of the degree of internationalization on 10 representative types of activities. Thus, in 2004 seven of them were below 10%, respectively: the use of telephony, the share of immigrants, the share of foreign students, share of foreign-linked research (in the management), international private aid, the share of FDI (in gross fixed capital formation) and international tourism. Only three activities have exceeded the threshold of 10%, namely the share of patents of inventions with a component of international cooperation (15%), investments on international stock markets (about 15%) and the share of international trade in world GDP (about 27%). Other two components, not easily quantifiable, can be also added: the internationalization of data traffic on the Internet, put by the most optimistic estimates slightly below 20% and the internationalization of IT services (considered to be representative in the context of the recent characteristics of globalization), estimated at 2% of the total potential market or at 11% of the current market (as a share that may be the subject of offshoring).

These data prove that the semiglobalized status of the current markets is important also beyond the social and political issues. It is, in particular, the strategies that companies with international vocation are bound to adopt. The acceptance of the semiglobalized status lead to the fact that firms can not achieve success in business decisions based solely on the "country-by-country" or the "valid for all countries” strategies. The potential success of strategies in the last category would had shown that the differences between countries and regions do not play anymore a sizable role because they were brought to a common denominator by homogenization of national markets and their absorption in the broader patterns of global markets.

Differences between countries are still important in developing and optimizing the external strategies while the gravitational theories of trade and other forms of international economic interactions maintain good measure of their validity. There is a direct correlation between these activities and the economic size of countries involved, but also inversely proportional correlation to the physical or non-geographic distances. The similarities between countries, reflecting the reduction of non-geographical distances between them was, for example, measured by Pankaj Ghemawat and Rajiv Mallik2 on five components whose estimated effect on bilateral...

To continue reading