3 Conclusions

1. Globalization started before WWI, and was set back by the Depression and WWI. Since then trade has grown rapidly, promoted by GATT, WTO, IMF, UN, and World Bank

2. Migration is more restricted, because of the fear of low wages. FDI is fairly unrestricted, but is still largely controlled, but faces some limitations in developing economies.

Globalization means many things: the flow of goods and services across borders, the movement of people and firms, the spread of culture and ideas among countries, and the tight integration of financial markets around the world. Although it might seem as if such globalization is new, international trade and the integration of financial markets were also very strong in the period before World War I. The war and the Great Depression disrupted these global linkages. Since World War II world trade has grown rapidly again, even faster than the growth in world GDP, so that the ratio of trade to world GDP has risen steadily. International institutions established after World War II have promoted the growth in trade: the General Agreement on Tariffs and Trade (now known as the World Trade Organization), the International Monetary Fund, the United Nations, and the World Bank were all established in the postwar years to promote freer trade and economic development.

Migration across countries is not as free as international trade, and all countries have restrictions on immigration because of the fear that the inflow of workers will drive down wages. That fear is not necessarily justified. We argue in a later chapter that immigrants can sometimes be absorbed into a country with no change in wages. FDI is largely unrestricted in the industrial countries but often faces some restrictions in developing countries. China, for example, requires approval of all foreign investments and until recently, required that foreign firms have a local partner. Typically, firms invest in developing countries to take advantage of lower wages in those countries. Investments in developing countries and industrial countries enable firms to spread their business and knowledge of production processes across borders. Migration and FDI are further aspects of the globalization that has become so widespread today.