You've learned about trade--how it affects us, and why it's important. Now it's time to tackle one of the greatest issues in the world economy: GLOBALIZATION. It's a word you might have heard on television or in the newspaper because the idea of globalization has become increasingly important in the modern world. In fact, it is happening already! In this section of A Borderless World, we'll introduce you to the issues surrounding globalization, and the popular ideas and opinions about them. 

While reading keep in mind the important conclusions you've learned about trade in the previous sections:

• Trade allows everyone do do what they are best at doing.

• Trade is mutually beneficial.

• Trade promotes the sharing of essential innovation and ideas, not just material products.

First of all, what is globalization? Globalization is the process of integrating the world economy to every corner of the globe until all economies are interdependent. Many people envision a giant "world economy" where each nation contributes one part. Although this can be great in that it can eliminate tariffs (taxes on imports), and connect the world, many experts are afraid that globalization will marginalize smaller, poorer countries.

These economists say that it is very easy for a large nation to dominate a smaller nation. For example, many nations go to poorer countries for cheap labor or raw materials. In contrast, wealthier nations provide manufactured goods and services. Experts are afraid that this type of activity exploits the less-fortunate nations, and that they will not be able to grow and develop under globalization. Instead, they will always remain poor while the wealthy nations just get richer.

However, recent research has shown that globalization may not be as harmful to poorer nations as once thought. This is because trade DOES help both wealthy and poor countries. We have seen how trade is mutually beneficial in our lessons before! While trading, poorer nations gain exposure to better technology and greater knowledge. Because wealthy nations are investing in them, often these nations industrialize faster. This means that there are more factories and machines, and in turn, this creates more jobs and calls for better educated workers. Industrialization is an effect of globalization which helps developing nations grow and improve their standards of living. In this way, other experts are arguing that globalization is a good thing that the world should continue to work towards.

In recent reports by the National Bureau of Economic Research, evidence indicates that globalization is decreasing world inequality. That means that poorer nations are catching up to wealthy nations! Although poor nations still have a long way to go, trading with wealthy nations does not necessarily result in exploitation. Instead, we that the trading relationship is mutually beneficial. Not only that, when countries trade, their sharing helps eachother. While the rich nations invest money in the poor nations, the poor nations produce and benefit the rich nations!

Let's look at how what you've learned about absolute and comparative advantage comes into play here: Most of the time, wealthy nations will have absolute advantage in goods, but that doesn't mean that poor nations cannot have comparative advantage! If it is relatively cheaper for poorer nations to produce shoes, for instance, than those nations can use shoe production to their favor. Then they can trade with wealthy nations for manufactured goods and gain more through trade than they could manufacture themselves. By this economic theory, it doesn't have to be the rich nation that is always profiting. Poor nations benefit from trade, too! With this idea, and recent research results, many economists are now supporting these ideas.

But of course, this is not to say that the issues stop here. Globalization isn't something simple that can be resolved with such direct reasoning. Politics, culture, psychology, etc. all come into play. Whether globalization is totally good is still uncertain, but we have seen that in the end, maybe all nations can benefit from it, and we can make the world a better place for everyone.