Introduction
Globalisation refers to the increasing interconnectedness and interdependence among countries, characterised by the freer flow of goods, services, capital, labour and ideas across borders. It encompasses not only the movement of physical goods but also the institutional and policy changes that have made such flows easier and more efficient. Over recent decades the world has seen an acceleration of globalisation, driven by a combination of technological advances, liberalised trade policies and the expansion of global markets, giving rise to global supply chains, cross-border investment and international labour migration.
Technology
Falling transport costs
A key driver has been the sharp fall in transport costs from advances in air and sea travel. Containerisation revolutionised shipping in the late twentieth century by standardising cargo handling, dramatically reducing the cost and time of moving goods. Low cost carriers and better air freight have made it feasible to move not just high value goods but also people, whether tourists, workers or business travellers. Production has become more fragmented across borders, with components made in different countries before being assembled and sold elsewhere, allowing firms to exploit comparative advantages across regions and improve efficiency.
The digital revolution
Developments in information and communications technology have been central. The internet, mobile connectivity and cloud computing have sharply lowered the cost of coordinating production and trade across distance. A multinational can now manage plants across continents in real time, share information instantly and use data analytics to make supply chains more responsive. For labour, ICT has reduced the cost of relocation and given rise to remote working, freelance contracting and digital nomadism.
E-commerce platforms
The rise of e-commerce has let small businesses in developing economies reach global markets with minimal infrastructure. Platforms such as Amazon, Alibaba and Shopify have lowered barriers to international trade, and even traditionally non-tradable services, from customer service to medical consultations, are now delivered across borders by digital means.
Trade liberalisation and free trade agreements
Alongside technology, policy decisions have fuelled globalisation. Since the 1980s many countries have adopted more outward looking policies, reducing tariffs, abolishing quotas and dismantling capital controls, making it easier for firms to invest abroad and join global supply chains. The proliferation of free trade agreements has also been important. These reduce or eliminate barriers between members, making trade smoother and more predictable. Agreements such as the North American Free Trade Agreement (NAFTA), the European Union's single market and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have integrated regional economies, and as firms gain preferential access to larger markets the incentive to internationalise operations and source inputs globally grows stronger.
Conclusion
The trend towards globalisation in recent years has been driven largely by technological advances and policy reform. Improvements in transport and digital connectivity have reduced the cost and increased the speed of cross-border exchange, while trade liberalisation and the signing of free trade agreements have created a more favourable institutional environment for international economic activity.