Globalization and Economic Integration: A Comprehensive Overview

1. EU-integration knowledges Prepared by Dr. Endre Domonkos (PhD) Academic Year 2012/2013, Autumn Semester

2. I. The global world economy and integration I. • The globalization of the world economy and the process of are developments of historical importance in our time. • The world economy must be understood and handled as an organic unit. • The process in the world economy can be characterized in terms of interdependence. • The international division of labour is becoming more complex.

3. I. The global world economy and integration II. • The other very significant process is the formation of regional economic integrations. • In the present world not only the European Union is the only form of regional integration. • A particularly high level of international integration has been achieved by the European Union. • Regional integration doesn’t run counter to the globalizing trend, but is developing in conjunction with it and with reciprocal effects.

4. II. The notion of globalization and its interpretation I. • Globalisation is a process rather than a completed fact, and is more than a mere economic phenomenon. • It has got many aspects and implications, including of course, social, political, institutional, and technical as well as cultural ones. • Economic globalisation, i.e. globalisation in economic terms, did also have various sporadic manifestations. • Globalisation of the economy is related to the expansion of the world capitalist economy.

5. II. The notion of globalization and its interpretation II. • The notrion of globalisation in economic terms: • It is a process that integrates the world economy both „horizontally” (in the sense of territorial expansion) and „vertically” (in the sense of creating lasting functional relations among its parts). • The „organic” nature of the world economy: • All these mean that the already mentioned economic (both real and monetary) processes are getting increasingly transnationalised, along with the economic relations between countries.

6. II. The notion of globalization and its interpretation III. • Economic interdepencies are not symmetrical at all, which means that the partners in them are not of equal position. • The „horizontal” expansion of the world economy: • As to the „vertical” deepening of economic interdependencies in the world economy, it has been primarily promoted by the „revolution” in communication and information technologies. • The transnational companies are the vehicle of the globalisation. • Economic liberarlism playsan important role in the recent acceleration of economic globalisation.

7. III. The notion of integration • The interpretation of integration: • François Perroux „integration is the uniting of two or more economic units into a certain whole”. • According to the theory of Jan Tinbergens we have to distinguish the concept of negative and positive integration. • Negative integration: • Positive integration:

8. IV. Transnational companies and global integration processes I. • In the global world economy an important part is played by transnational company systems. • Particularly since the 1960’s, in the developed countries there has been rapid and significant expansion of the transnational company division of labour. • The definition of transnational company: • The transnational company integrates and optimized in a comprehensive way the process of re-production.

9. IV. Transnational companies and global integration processes II. • In today’s world economy the advantages and efficiency gains of direct international cooperation in research and development, production and sales („transnational competitive advantage”) can to a large extent be exploited in the global division of labour. • An important development concerning transnational companies is their „internalization” of international relations. • Transnational company structures internalize research and development in particular, direct cooperation in production (component outsourcing) and the infrastructure.

10. IV. Transnational companies and global integration processes III. • International production has become an important characteristics of economic structures. • The transnational company division of labour is playing a major role in the globalization of national markets. • Capital flows are many times greater than the trade in goods and services. • The capital markets represent the main sphere of global integration.

11. IV. Transnational companies and global integration processes IV. • One of the main characteristics of the global world economy in the 1980s was the enormous, rapid flow or capital. • The foreign direct investments have become major components of the world economy. • The complete picture of global integration and competitiveness includes not only import and export but also the turnover of foreign-owned companies.

12. IV. Transnational companies and global integration processes V. • World economic processes cannot be dealt with in isolation. • In the last few decades, revolutionary changes have taken place in the whole socio-economic structure. • Undoubtedly in this a major part was played by the technological revolution that after the World War II. • In the political sphere, in every area we have witnessed extensive democratization. • The global world economy also means that traditional bilateralism will be replaced more and more by multilateralism.

13. Conclusion • World economics has got an „organic” nature. • The globalization of world economics is the extension of transnational economic processes and economic relations to more and more countries and the deepening of the economic interdependencies among them. • Asymmetrical interdependenciesare established and deepened in world economics. • Integration embraces the economic and political sphere as well. • Another important attendant phenomenon of globalisation is the regionalism.

14. Glossary • Factors of productions: • International enterprises (ventures) • Interdependencies: • Internalization of production: • Multinational organizations, institutions, enterprises: • Transnational companies:

15. Literature - András Blahó (2004): Világgazdaságtan II. (World Economics II) Aula, Budapest. In: Chapter I. Tamás Szentes: A világgazdaság az ezredforduló idején (The world economy in the turn of the millenium), pp. 23-142. - Tamás Szentes (1999): Világgazdaságtan (World Economics), Aula, Budapest, pp. 451-455. - Tibor Palánkai (2003): Economics of European integration. Budapest, Akadémiai Kiadó, pp. 13-22.