The Globalization

Globalization is the process of interaction and integration among people, companies, and governments worldwide. This is also what the game Globalization attempts to simulate.

The four aspects of globalization

The International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people, and the dissemination of knowledge. All those aspects are present in Globalization.

Trade and transactions

Trade and transactions are the key mechanics of Globalization. They are based on simple supply and demand theory, where resources added to a market (increased supply) decrease the price while resources removed from a market (increased demand) increase the price.

Capital and investment movements

The capital and investment movement mechanics are implemented through the players' own transactions. They act as risk capitalists, investing their capital in the companies they expect to provide the highest return on investment.

Migration and movement of people

The migration and movement of people is also present, although only partially. Certain event cards may add or remove workers to or from a labor market and certain technology allow employment of workers from other labor markets. In a perfect market economy, workers would immediately move to labor markets with high demand, resulting in equal prices and salaries across the world. Since this is not the case in the real economy, it is not fully implemented in the game economy either. Besides, without market differences, Globalization wouldn't be a very interesting game.

The dissemination of knowledge

The dissemination of knowledge is indirectly present. The companies may invest in technologies and it is likely that certain game states favor certain technologies, encouraging more companies to invest in them and thus they will disseminate. The fact that technologies get cheaper over time also contribute to this.

The waves of globalization

The economic development of the world has been and is still unequal with different regions industrializing in different waves. This will also affect the international trade patterns.

Domestic trade

Trade usually starts with domestic trade due to the additional costs incurred by cross-border trade. In Globalization, the main cross-border trade cost is transportation, inciting the companies to buy from and sell to their local markets first.

Global trade

Domestic trade turns into global trade when there is a cross-border demand and when the technology is ripe. In Globalization, the initial domestic trade will saturate the local market and make export to overseas markets feasible, since the higher overseas prices compensate for the cost of transporting the goods there.

Offshoring

Offshoring is the relocation of a business process to another country, often to lower the costs and increase the profit. In Globalization, this may happen when lower labor overseas salaries compensate for transporting resources to the overseas market and consumer goods back to the local market.

Emerging markets

Offshoring will eventually increase the salaries in the overseas market as well, increasing the demand and creating an emerging market, to which consumer goods can be sold. In Globalization, this may happen when the overseas salaries (and with them the demand) increases so much that it is better to sell consumer goods there instead of paying for transport to other markets.