According to Wolf (2004), globalization is deemed as a movement in the direction of greater integration, as both natural and manmade barriers to international economic exchange continue to fall. This definition includes not only the increased international mobility of goods within the world economy, but also the greater mobility of services, capital, labour and financial assets.
The neo-liberal discourse on globalization is based on the conviction that free trade is the key to global prosperity. In due respect Robbins (2005) states that “the culture of capitalism is devoted to encouraging the production and sale of commodities”. At that, the importance of free trade overwhelms free movements of labor and capital. Even skeptics of the ‘globalization boom’ agree that free trade is the most advantageous component of globalization progress since it causes few problems. Since economic theory promotes the superiority and dominance of free trade, it is apparent that under the contemporary conditions of internationalization and open markets free trade is the best possible option.
Regarding the capital mobility within the process of regional integration, the integration of the transition economies into the international capital markets is one of the major challenges of the reform process. Attracting foreign savings to finance domestic investment can be of great value for the new market economies and can give them access to superior know-how and technology.
At the same time, the current global financial crisis has shown that increased integration into international capital flows can also expose countries to adverse external shocks. Rather, changing patterns of capital flows may make the economies less dependent on specific types of capital inflows, and may thus enhance the sustain-ability of their balance of payments positions (Hooghe, and Marks, 2001).
Fact is, over the last decades, international trade, measured by the volume of imports and exports, has become increasingly free. International trade is generally considered as an ability to undertake economic transactions with counterparts in other countries free from any restraints imposed by governments or other regulators.
Global trade has no limits and many people much more rely on outsorcing practices that enable doing their businesses across national borders. In economic sense, globalization, expresses the tendency of the world economy to integrate, not only in respect to cross-country trade and investment flows, but also in regard to the harmonization of laws and regulations of economic activity.
For instance, European integration is deemed by experts as a form of regional globalization, driven by political decisions that are aimed to promote freedom and cohesion of European societies, as well a single and free European market that would eventually benefit most Europeans (Poettering, 2007). Privatization in the Central and East European (CEE) economies resulted in reforms in regulation, liberalization and privatization in an attempt to integrate transition economies to the globalized system.
The final goal of transition was not only the establishment of a market economy but the integration of these economies, not only on a regional basis but rather in the global system. These transition countries' goal was to become members of the European Union (EU) and then members of the Economic and Monetary Union (EMU). As for now, the core advantage of regional integration within the EU zone is that in the course of regional integration the former centrally planned economies of central Europe (i.e. Poland, Chech Republic, Slovakia, Hungary, Slovenia, Bulgaria, and Romania) have attracted increasing shares of the international capital flows to emerging market economies. Moreover, compared to other world regions, a relatively large share of these flows has been constituted of foreign direct investment (Baláž and Williams, (n.d.).
Baláž, V, Williams, A.M. (n.d.) ‘Capital mobility in transition countries of Central Europe: macroeconomic performance factors and structural policies’ Department of Geography, University of Exeter, UK and the Institute of Forecasting, Slovak Academy of Science, Slovakia
Hooghe, L. and Marks, G. 2001, Multilevel Governance and European Integration, Lanham, MD: Rowman and Littlefield.
Poettering, H. Europe as a Global Player Harvard International Review. Cambridge: Spring 2007. Vol. 29, Iss. 1; pg. 26, 4 pgs.
Robbins, R. 2005, GLOBAL PROBLEMS AND THE CULTURE OF CAPITALISM, ISBN 0-205-40741-2
Wolf, M (2004), Why globalization works, Yale Books.