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GLOBALIZATION OF ECONOMIC DEVELOPMENT

BUCUR Ion1, DONE Ioan2, BUCUR Cristian3


Associate professor, Faculty of Economical Sciences, Petroleum-Gas University, Ploiesti, Romania,
ionbucur2006@yahoo.com
2
Professor, Faculty of Economical Sciences, Petroleum-Gas University, Ploiesti, Romania,
done.viorica@yahoo.com
3
Teaching assistant, Faculty of Economical Sciences, Petroleum-Gas University, Ploiesti, Romania, Ph.D.
student ASE Bucuresti, cr.bucur@gmail.com
1

Abstract: Globalization is characterized by amplifying the linkages between national economies and
eliminating barriers between nations. Major contributions to the globalization of economic development have had
costs reducing of transport and revolution induced by information technology. They have made possible the
globalization of trade, investment and financial markets. Technical innovations in communications and finance led
to the globalization of financial services. Currently, people can quickly come in contact wherever they are in the
world, thanks to modern means of communication. New techniques allow creditors and debtors to inform quickly
about market conditions and to transfer the funds to banks offering the best interest rates.
Keywords: globalization, economic development, economical growth, sustainable development
JEL classification: F01

1. Introduction
Now a fundamental feature of world economy is the increasing of globalization. It is
characterized by amplifying the linkages between national economies and the increased trend of reducing
and eliminating barriers between national economies.
Globalization - definition and causes
Globalization reflects carrying a greater part of economic activity between firms and individuals
from different countries. It represents the current state of economic development characterized by
economic internationalization and globalization of trade and economic interdependence of national and
world states.
Thus, a number of humanity activities take place on a scale and a horizon so large that go beyond
national borders, within which sovereign states exercising their right to governance. Globalization, as
worldwide movement, means declaring a specific territory, a locality or a state such as international or
global territory, with responsibilities and rights at worldwide scale.
After the views of economists, the process of internationalization of the economy has gone
through two phases, now being in the third phase. The first phase was conducted in the first three decades
of the postwar period, characterized by the development of trade between the economies of the world,
who retain their national character. The second phase, specific to period 1970-1990, the Trannationalization, is characterized by the appearance of foreign investment flows. The third phase begins in
the 90s and is characterized by the existence of technology and information transfer flows at global level.
It is also called borderless economy or global economy.
Major contributions to the globalization of economic development have had costs reducing of
transport and revolution induced by information technology (Lipsey1999).
They have made possible the globalization of trade, investment and financial markets.
Technical innovations in communications and finance led to the globalization of financial services.
Currently, people can quickly come in contact wherever they are in the world, thanks to modern means of
communication.
New techniques allow creditors and debtors to inform quickly about market conditions and to
transfer the funds to banks offering the best interest rates. Large firms can only make transfers while
banks near them are open. Once closed these banks, firms can make transfers to their reopening the
following day. In that time, the funds can be transferred to another bank (money market) where are used
until it closes and then moved to another bank. Globalization was not possible before the computer age
when international communications were much slower and expensive than today. Transferring abroad or
bringing into the country of cash funds is facilitated by the establishment of increased bank deposits of
national currency in exchangeable currency.

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The first favoring factor of globalization has been the development of currency markets in last
decades of the twentieth century. This development was stimulated by the progressive elimination of
global domestic interest rate ceilings and the removal of exchange control, which occurred gradually in
different countries. Removing restrictions caused the rapid integration of domestic monetary markets in
international markets.
Globalization of financial markets is caused by the behavior of trained creditors and debtors
handling large sums of money and investigating the possibilities of placing or purchasing monetary funds
in favorable conditions.
Until the last decades of the twentieth century, financial markets were highly specialized.
Because obtaining and analyzing information was heavier, more specialized institutions were needed that
expertise, each of them relatively narrow operations. Speed in obtaining information led to collapse of the
high degree of specialization of financial markets. Communications development and scale economies
have led to integration of various financial operations in an investment. Thus, in many countries banks
have entered on the market where value titles are traded, while many firms selling value titles began to
offer a wide range of banking services. As integrated companies are growing also are expanding
operations conducted by them. Current trend is unifying commercial and investment banks, transforming
them into universal banks.
2. Implications of globalization
Globalization has several implications that government officials and executives of firms should
consider in their decisions.
1. Increased intensity and speed with which events are taking places produced in various places around
the world
Due to globalization, external economic shocks are transmitted rapidly and quickly affect the
socio-economic developments in different countries. Currently the world economy is facing the biggest
financial and economic crisis that goes far beyond that of the years 1929-1933. Crisis began in the United
States of America and by the effects of globalization has been transmitted in a relatively short time in all
developed, developing countries and third world countries. Rapid spread of economic and financial
phenomena raises at least two problems for governments:
- to create mechanisms to ensure protection against unforeseen financial and economic shocks;
- to develop policies based on anticipation of external events to valorize the opportunities of
development and minimize costs incurred by propagation of phenomena.
2. Overlapping globalization with phenomenon of increased regionalization
Regionalization is a consequence or a way to protect against globalization. It is seen as an area
where capital flows, goods, people, information and culture take place. Regionalization is a form of
interrogation to support their national economies to become more competitive on global market,
facilitating multilateral cooperation on a global scale. In essence, countries in a regional economic bloc
reduced customs barriers mainly for its members and less for other countries, which constitutes a
discriminatory measure contrary to the characteristics of globalization. Forms of economic integration
occurred, represented by regional political and economic organizations that reflect the concentration of
economic activity into three main regions: North America (NAFTA), Europe (EU) and Asia (ASEAN).
3. Influencing economic policy by globalization process
Economic policy, namely the set of principles, rules, means and methods used to achieve a
proposed strategy for development is influenced by globalization. Thus, macroeconomic policy of
supporting economic growth must take into account the high degree of openness of an economy
comprised of globalization. High economical growth can not be supported by an expansionist economic
policy based on low interest rates because it would facilitate access to new loans of firms with losses or
without markets. Such a production increase would be unsustainable.
Also, lower interest rates causes capital outflows that would lead to currency depreciation.
Reducing cost of information and support transparency of economic environment allow relatively easy to
identify the economic policy decisions and anticipate its effects. Globalization of economic development
affects also the national currency depreciation. Thus, to eliminate the trade deficit could act upon

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regulating quantities imported and exported, or (and) the prices of imports and exports. Typically, direct
intervention on prices is difficult because they are under restrictions of global market.
A method practiced to eliminate the external deficit is depreciating national currency, which
stimulates exports. Favorable impact of national currency depreciation on the current account is
temporary, the effect disappearing with the growing of domestic prices of goods and services.
In some cases, the economic policy aims to prevent or eliminate negative phenomena in the
economy, the others to create conditions for accelerating socio-economic progress. Economic policy
comprises a multitude of partial policies, such as investment policy, industrial policy, agricultural policy,
policy to train labor resources, trade policy, financial and credit policy, exchange rate policy, monetary
policy, foreign economic policy.
Government intervention, characterized by measures designed to influence economic life, aim
finally, long-term development. It seeks determining economic agents to accept guidance and decisions
subordinate to public interest and keeping under control of key economic and social variables.
4. Increase competitiveness of economic agents
In conditions of globalization, companies must improve their ability to cope with international
competition. They must take measures to increase the employment skills, increase investment, and
improve management.
Greater competitiveness based on know-how and research activity, have international
corporations, which contribute to the internationalization of flows of goods, services and capital. They
tend to gain advantages in all sectors in which application of technology is possible.
Emerging and growth of multinational corporations have changed the data on competition. Thus,
appeared new global economic branches which are branches of the economy in which the competitive
position of firms in a country is significantly affected by their position in other countries and vice versa.
The overall strategy of multinational corporations is based on increased interdependence between
geographically separated activities of parent companies and subsidiaries. It involves the optimization of
local advantages for each subsidiary and meeting the target market demand conditions.
According to global strategy, subsidiaries tend to specialize in the type of production which
exploits the comparative advantage of the host country. Thus, labor activities are located in geographic
areas with cheap labor force. However, research and development laboratories are built near the major
universities in countries with high scientific potential.
In this way, transnational corporations globally redistribute production factors. They seek to gain
advantages in production, marketing and research by combining all production factors at world scale, as a
result of increasing economic globalization. There is a tendency of concentration of business in areas of
greatest competitive advantages and to markets with high growth potential and demand a greater degree
of liberalization and openness.
Currently, multinational corporations not countries are the first agent of international trade. Also,
multinational corporations are promoters of the globalization of capital which includes a wide range of
activities, dominated by services and featuring sophisticated financial instruments. Financial capitals
contribute to the rapid development of global financial markets and has freedom to move where is better
rewarded.
In the global economy, the size of firms has become an essential feature. Size of enterprises
condition their expansion abroad, while creating operational and financial synergy designed to reduce
vulnerabilities. Through purchases and mergers of firms it can be obtained advantages having more
extensive and diversified activities.
5. Globalization increases the competitive pressure.
Telecommunications revolution has led the globalization of economic competition; national
markets couldnt be protected by the high costs of transport or by blocking access to foreign companies.
Globalization of competition is beneficial for consumers who can choose quality goods from a variety of
goods.
Domestic firms facing foreign businesses, to survive are forced to raise economic efficiency and
to adapt quickly to market requirements. Increasing competition leads to a continuous pressure on
manufacturers to reduce costs, increase quality and productivity. To reduce labor costs, firms seek areas
with cheap labor and qualified for the "implantation" of business units. Thus lead to phenomenal of

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activity migration in the U.S. and Canada to South, then from Western Europe eastward to economies in
transition.
A country with cheap labor and growing market is the Czech Republic. Currently, many
transnational corporations and some Central European companies move eastwards, redirecting to areas
with cheap labor force.
6. Globalization diminishes or reconsiders state sovereignty.
State plays an important role in global politics but can not control the policy and globalization.
State ability to control domestic life has diminished. State become more globalized and internationalized,
an important component in its policy is supporting regional and global market forces.
Undermining state sovereignty and authority is reflected in its inability to control migration.
International labor movement is a characteristic of the globalization process. In past decades there have
been significant movements of labor and capital in less developed areas to economically developed areas.
Process was favored by some countries (Canada, USA, for example) policy to attract highly skilled
migrants. However, the process was accompanied by an illegal emigration of unskilled or semi-skilled
workers. Usually immigration policies are characterized by attracting highly qualified people and stop the
entry of unskilled workers.
7. Risks of globalization
Globalization involves numerous risks including increased environmental degradation, widening
gaps between rich and poor, spread in various countries of information (textual or image) and patterns of
undesirable human behavior, global financial crisis, etc.
Global economic growth accelerated reduction of global resources and has affected the planet's
regenerative capacity including the balance between different life forms and structures that they generate.
It is estimated that economic activity in the last two centuries has consumed natural resources at a pace
that exceeds the capacity of the planet to regenerate.
Human assault on nature has made important changes in the relationship between man and nature,
especially by disruption of the natural environment. In the relationship with nature people must have a
responsible attitude, because economic growth and quality of life are conditioned by maintaining and
improving the quality of the natural environment. Any breach of the relationship between economy and
ecology lead, sooner or later, to economic and social disturbances with negative consequences for society.
After the collapse of "socialist camp" and the end bi-polar power at world scale, the line of world
conflicts is not between East and West, but between rich and poor. Globalization of economic
development has helped to increase the proportion of the general wealth which is unequally distributed.
This inequality can be expressed by figures: 40% of world population, namely 2.7 billion people live on
less than $2 per day, (i.e. the World Bank's criteria) - they are part of the poorest population (Economist
2007).
The contradiction between rich and poor has become chronic in both developed countries and the
richest countries. Widening inequalities have various causes: rising incomes in the context of
globalization, increased competitiveness of firms by introducing new technologies, the emergence of
huge gain opportunities, etc. In a globalized world, laws are similar or nearly identical for the rich and the
poor. The rich are able to use laws in their favor. Thus, in a market economy increases the importance of
consulting a lawyer, which can warn the employee, entrepreneur, investor, a freelancer about changes of
law which is expected, and when laws change, property owners can change.
Laws must be respected; businesses must be conducted without their violation. Employers have
some "legal loophole" to protect its revenues. They can shelter incomes, passing income streams on their
business and can pay less money in the form of taxes. Employers can reduce their taxable income by
shifting expenses to their company, benefiting from the deductibility of some taxable income. However,
employers retain some income on companies they hold, which enables them to make spending with
untaxed money. Employers have legal advisers who lower the risk of money or goods loss.
Everyone faces the risk of revenue loss, but the consequences and losses are different for
employees or employers. Employers are likely to reduce income, which exceeds the level required to
meet various needs. Employees and retirees live a fierce battle for survival when revenues are
substantially reduced.

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To a certain point, inequality is inevitable and desirable. Perspective of well fare encourages
people to work harder to develop new skills and take risks. A special problem is to establish "fair
contribution" through taxes on rich people satisfying the general needs of society. Tax rates should not
diminish the economic initiative and not to encourage a massive avoidance of taxation.
With the continuing development of media and communication, information are transmitted very
quickly from side to side of the globe. Rapid transmission of information has some negative
consequences. Along with very useful information transmitted between people from different countries,
also information (as images or text) less necessary, as triviality and pornography etc.
A negative consequence of globalization is the dehumanization of individuals caused by the huge
gap that was created between technological and social components of human society. Thus, if
technological progress has made huge leaps from antiquity to the present, social and ethical-moral
component of the planet has seen very little progress, if not, in some aspects even regressed.
People face major existential shortcomings related to recreational needs, peace, love, selffulfilling, contemplation. Eliminating existential gaps require the creation and adherence to a value
system that contributes to the fulfillment of human life. To enjoy life and really live, the individual must
deal with what life gives. However, to mitigate the serious problems created by people and troubles they
are facing, must improve human behavior and institutions activity. Man must enjoy life, along with the
loved ones with more pleasure, to enter, when the opportunity arises, in an atmosphere of play and joy.
He should help to relieve stress situation through an appropriate conduct.
3. Economical growth - advantage of globalization
Economical growth is the fundamental factor of human development. It expresses enhancing
capacity of economy to provide more final goods in the structure and quality of demanded by consumers.
Economical growth medium made possible increased economic welfare, level of investment, average
lifetime. In turn, human development becomes a factor to support economical growth.
Economic growth is stimulated by the widespread use of high technology, deepening
international division of labor as a result of increasing trade and capital movements, economic expansion
of market goods, etc.
From the results of economic growth should benefit a large number of people and not just small
groups. For this must be simultaneously satisfied certain conditions in the growth, such as:
- Economic growth to generate employment;
- People must have access to education systems to enable them acquire the knowledge and
skills required by new jobs;
- Corruption to be reduced;
- People who, for specific reasons, not have a place in a competitive system to receive social
protection from state and social communities.
A special problem for Romania is to bridge the gap of economic development levels of the
overwhelming majority of EU countries; gap reflected by the level of per capita gross domestic process.
Table 1: Gross domestic product per capita, calculated on the euro exchange rate
Years
Country
2002
2003
2004
2005
2006
2007
27100
27500
28500
29700
31100
32600
Austria
Bulgaria
2100
2300
2600
2800
3300
3800
Denmark
34400
35000
36500
38300
40500
41700
Italy
22700
23200
23900
24400
25100
25900
Luxembourg
53800
57200
60100
65000
71800
75600
United Kingdom
28800
27700
29600
30400
32000
33700
Romania
2232
2419
2816
3688
4530
5743
Slovakia/Slovenia
12300
12900
13600
14400
15400
17100
Spain
17700
18600
19700
20900
22300
23400
Sweden
29600
30800
32000
32600
34500
36300
Hungary
6900
7400
8100
8800
8900
10100
Source: Statistical Yearbook of Romania 2008, p. 892

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It finds that GDP per capita calculated on the euro exchange rate in 2007 is 7.8 times lower than
in Denmark, 13 times lower than that of Luxembourg, and is higher than that in Bulgaria by 51%. In
2009, Romania's GDP decreased by 7.1% since 2008 (Economist 2010).
The decrease was due to lower volume of gross value added of all sectors and household items:
hotels and restaurants, transport and telecommunications (-11.2%), construction (-13.6%), whose
contribution to the formation of Gross Domestic Product was 31.1%. Net taxes on products decreased by
12.4%.
Total final consumption decreased by 8.2% in 2009 compared with the previous year, especially
by lowering with 10,8% the expenditures of households. Gross fixed capital formation recorded a 25.3%
reduction.
4. Conclusion
Gap reducing requires a growth rate higher than average annual growth rate in the whole EU.
Achieving sustainable economic growth on long term requires ensuring political conditions, economic
and social to favor:
- Physical and human capital accumulation;
- Efficient allocation of resources;
- Continuous improvement of technology.
Sustainable economic development involves quantitative qualitative and structural transformation
in scientific research, manufacturing technologies, organization of work, human behavior that ensure the
consumer's satisfaction without compromise or harm those of future generations.
The concept of sustainable development reflects the enlargement of opportunities for choice of
present and future generations in all fields - economic, social, cultural or political. It involves ensuring
economic, cultural and environmental friendly conditions.
Sustainable development implies the maintenance of opportunities and living conditions for
future generations, especially renewable natural resources, at least at the level existing for current
generations and diminishing existing environmental factors affected by pollution. For this purpose to be
possible must be achieved an economic environment, that through its inputs and outputs, is in
compatibility with the dynamic natural environment, with the needs of present and future generations to
coexist and succeed.
Sustainable development aims to find the optimal interaction and compatibility of economic
systems, human, environmental and technological trends. These systems are dimensions of sustainable
development which include energy, agriculture, industry, investment, human settlements, and
biodiversity.
Achieving sustainable development requires provision of minimum conditions, such as: resizing
growth by increasing the quality sides of production, eliminating poverty in conditions of satisfying basic
human needs, conservation and enhancement of natural resources, monitoring environmental impact of
economic development, maintenance of ecosystems, risk control of the technologies, increasing
participation grade in decision-making on environment and economy.
At the center of development actions is man. To highlight opportunities of people options express
is calculated a human development index based on the following indicators: life expectancy, literacy level
and educational coverage level and the domestic product per capita. These indicators are used to highlight
three essential aspects of human life: longevity, education and standard of living.
Achieving sustainable development is based on macroeconomic policies able to promote
compatibility of economic, human, environmental and technological systems.
These policies include:
- measures taken by government to stimulate economic development such as: creating an
adequate legal framework, creation of proper infrastructure, redistribution of income in accordance with
generally accepted principles of social justice, harmonization of conflict of interest;
- creating conditions for expression of competition in the economy;
- adopting a rate of economic development targeted outwards, towards international trade.

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5. References

Lipsey R. G., Chrystal K.A. (1999) "Positive Economy", Economic Publishing


House, Bucharest, p. 52.
The Economist (July 11, 2007),"Major contradiction in the 21st century: the poor
against the rich".
The Economist (4 March 2010), "In 2009, Romania's GDP fell by 7.1%, No. 3068.
Beck,U.(2003), What is globalization? Errors of globalism, responses to
globalization, Three Publishing House, Bucharest
Dinu,M.(2004), Globalization and its approximations, Economic Publishing
House, Bucharest
Ioan Done (2009), Problems and challenges of economic transition", Expert
Publishing House
Constantin Popescu (2006), "Rationality and hope, all living paradigm, Renaissance
Publishing House, Bucharest.
Constantin Popescu, Alexandru Tanadi (2009), Respiritualization. Learn to be
human, ASE Publishing House, Bucharest.
Marius Florin Pavelescu (2007), Assessments of the readiness of Romanian
companies to integrate into the EU, Expert Publishing House.
Daniel Daianu, Radu Vranceanu (2002), "Romania and the European Union.
Inflation, balance of payments, growth, Polirom Publishing House, Iasi.
R.Gilpin (2004), "The world economy in XXI century, Polirom, Publishing House.
Dinu Marin, Socol Cristian (2005), "The European model of integration", Economic
Publishing House.

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