Globalisation

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The concept of "globalisation" is difficult to grasp and is defined in numerous different ways. The term is often used as short-hand for the global division of labour. In any case, however, the concept denotes a process involving the emergence of global markets for goods, services and capital; in this process, national economies become increasingly interlinked within international structures. This development is being driven forward by world-wide information networks and new information and communication technologies such as the Internet, by modern production processes, and by new modes and routes of transport.

Cross-border economic relations are certainly not a new phenomenon, however. For example, in 1950, Germany imported goods valuing 13 billion German marks, and its exports amounted to a total of 11.8 billion marks. These figures are equivalent to 13.4% (imports) and 12.1% (exports) of nominal GDP. The German economy's international trade links have expanded considerably since then. In 2007, imports of goods and services to Germany totalled 962.2 billion euros, while German exports of goods and services amounted to 1.133 trillion euros. Today exports equal 46.8% of nominal GDP, while imports equal 39.7%. Since the mid-1950s, the value of exports has exceeded that of imports. Last year, Germany was once again the world's leading exporter. This fact provides impressive proof that German products possess an extraordinarily high level of international competitiveness.

Thus the German economy benefits from the merging of national markets into international markets, and particularly from the integration of European economies. The positive effects for Germany include both its great success as an exporting country as well as its ability to import new technologies. Further, the opening of international markets facilitates the influx of foreign capital and the migration of skilled labour to Germany. For this reason, the German government works actively to expand the international division of labour and open markets.

The impact of globalisation

Today's business environment is characterised by increasingly intense international competition. This competition affects companies, countries seeking to attract investment, and economic systems in general. Four factors have played an essential role in this development: the increasing liberalisation of the world economy, with open national markets; the adoption of market-oriented policies by countries which formerly had centrally planned economies; the rapid expansion of many emerging economies; and new information and communication technologies.

The rapid pace of global change also accelerates structural shifts. This process results in both winners and losers. The fear of being on the losing side of globalisation engenders insecurity and causes many people to be sceptical of globalisation processes. Nevertheless, the more people recognise and take advantage of the opportunities presented by these structural changes - without underestimating the risks - the more winners there will be.

This is because, contrary to how it is often depicted, globalisation is not a contest over the distribution of a predetermined, finite amount of wealth. It is not a zero-sum game in which one side wins what the other side loses. Rather, it enables all nations to use their comparative advantages within the chain of economic activity; that is, it allows them to focus on their strengths. The expansion of markets worldwide boosts exports. Countries can import certain goods more cheaply than they can be produced at home. As a result, real income rises in importing countries while income and demand grows in the countries that export these goods. Thus the international division of labour - together with effectively functioning markets - makes it possible to enjoy substantial increases in prosperity, because labour and capital can be utilised more efficiently at a worldwide level. In contrast, poorly functioning markets reduce prosperity because they impede necessary adaptations to changing conditions.

Challenges for economic policy

Thus in order for national economies and economic actors to benefit from the opportunities that globalisation provides, markets must function effectively and countries must be able to attract internationally mobile capital. This means that all forms of protectionism are harmful, because protectionist fences also serve to fence off greater prosperity. Globalisation therefore represents a challenge to every society's ability to engage in effective reforms as well as an opportunity for enhanced prosperity - and this is true for Germany, for Europe, and for the many underdeveloped countries standing at the periphery of prosperity.