A Globalization Glossary
"The world around us is changing, and we change with it or we will be left behind. We have to adapt to the realities outside."
- Kofi Annan, U.N. secretary-general
Balance of Payments – A summary statement of a nation’s financial transactions with the outside world.
Capital – Human-made resources such as buildings, machinery, and equipment used to produce goods and services. Capital goods do not directly satisfy human wants as consumer goods do.
Capitalism – An economic system characterized by private ownership of the means of production and the use of markets to allocate resources and ration products, and yet some role is reserved for the public sector.
Comparative Advantage – A country has a comparative advantage over another country if in producing a commodity it can do so at a relatively lower opportunity cost in terms of forgone alternative commodities that can be produced.
Economic Growth – The steady process by which the productive capacity of the economy is increased over time to bring about rising levels of national output and income.
Exports – The value of all goods and nonfactor services sold to the rest of the world.
Foreign Exchange – The currency of another nation needed to carry out international transactions between nations.
Foreign Direct Investment – Overseas investments in the productive capacity of economies, usually by multinational corporations.
Free Trade – Trade in which goods can be imported and exported without any barriers in the forms of tariffs, quotas, or other restrictions. Free trade has often been described as an engine of growth because it encourages countries to specialize in activities in which they have comparative advantages, thereby increasing their respective production efficiencies and hence their total output of goods and services.
Globalization – The integration of capital, technology, information, and people across national borders, in a way that is creating a single global market and to some degree a global village. Globalization has important cultural, social, environmental, and political impacts.
Global Economy – Where nations enter into trade and investment in each other’s economy as well as share information and technology.
Global Market – A market in which the goods and services traded are derived from many different countries around the world.
Inflation – A rise in the general level of prices in an economy. Generally measured by consumer and wholesale price indexes.
International Monetary Fund (IMF) – An international association of nations formed after World War II to make loans of monies to nations with temporary international balance of payments deficits. It attempts to facilitate financing of deficits to stabilize trade among nations.
Market Economy – A free private-enterprise economy governed by consumer sovereignty, a price system, and forces of supply and demand with minimal government intervention.
Multinational Corporations – An international corporation with headquarters in one country but branch offices in a wide range of both developed and developing countries.
New Economy – The so-called "new economy" is the idea that it is possible to sustain higher economic growth without igniting inflation due in large part to technology improvements that result in increases in productivity, which hold costs and prices down, thus resulting in low inflation and more rapid growth.
Productivity – A measure of average output or real output per unit of input. For example, the productivity of labor may be found by dividing real output by hours of work. Technology has resulted in increased productivity.
Services – Economic activities other than industry and primary-goods production. Examples include banking, shipping, legal, insurance, financial, and tourist activities.
Social Disintegration - Where it is believed that globalization and its international economic integration may interfere with domestic social and political stability, contributing to domestic social disintegration, i.e., more inequality and poverty because segments of society are being left out of the development process.
Specialization in Resource Use – Where nations specialize in doing what they do best. Thus, they make better use of their resources, which increases productivity and makes gains in output possible for the world. It is the basis for globalization.
Tariff – A fixed percentage tax on the value of an imported commodity levied at the point of entry into the importing country.
Technology – The body of knowledge and techniques that can be used to produce goods and services from economic resources, i.e., better methods of doing things.
United Nations (U.N.) – A global organization set up at the end of World War II with the basic aim of cultivating international cooperation and hence ensuring that any conflicts or misunderstanding between or among countries would be resolved by peaceful means. At present, the United Nations has a membership of more than 180 countries drawn from both the developed and less developed nations.
World Bank – An international financial institution owned by its 181 member countries and based in Washington, D.C. Its main objective is to make loans and guarantee loans to developing nations to help them increase their capital stock and thus achieve economic growth. They also provide technical assistance to developing nations.
World Trade Organization (W.T.O.) – A membership organization of 135 countries established in 1994 to replace the General Agreement on Trade and Tariffs (GATT) and headquartered in Geneva, Switzerland. It is responsible for governing the conduct of trade relations among its members as well as resolving any trade disputes among its members.
