Globalization is the process of increasing interdependence of the world’s economies and societies.
- The collapse of the economic communist bloc in 1989 opened up economic relations between the former communist countries and others. Former communist states like URSS or China adopted the capitalist system and, now, with few exceptions (Cuba and North Korea), all countries now form a single global market.
- New information and communication technologies (ICT) -for instance, computers, internet, mobiles- make it possible organize global production, and to move capital from one place to another in seconds.
- Cheaper and improved transport facilitates the flow of goods and people.
- Liberalization economic policies are implemented by governments (deregulation of financial markets and elimination of custom duties).
So, these factors impelled a huge expansion of international trade.
Large multinational companies may distribute phases of production among different locations to save money. This practice is called outsourcing.
Some international economic institutions and organizations influence the global economy:
World Bank (WB) founded in 1944, try to reduce and improve the standard of living in the world providing low-interest loans to developing countries, and give donations to create or improve infrastructure.
International Monetary Fund (IMF), founded in 1944, promotes international monetary cooperation. IMF encourages countries to adopt economic policies which maintain stability and preven crises.
World Trade Organization (WTO), founded in 1995, ensures that international trade is free and fair.