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Hyper globalisation

  • IASbaba
  • December 29, 2022
  • 0
Economics
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Context: Two wars (Russia’s invasion of Ukraine and an economic war – a geopolitical confrontation between two superpowers – the US and China) are raging in 2022, which have undermined the assumption of “hyper-globalisation”.

About hyper globalisation:

  • The term ‘Hyper-globalisation’ is used to describe the dramatic increase in international trade witnessed for about a decade and a half from the early 1990s.
  • It led to an unprecedented movement of capital and of people.
    • Capital and labour flowed across the world.
  • In a hyper-globalised world, countries produce things in which they have comparative advantage and import those others can make at lower opportunity cost.
  • For example, Indonesia and Malaysia produce palm oil; and Ukraine and Russia produce sunflower oil.
  • They have comparative advantages in the palm oil and sunflower oil.
    • Therefore, Indonesia alone is the largest exporter of palm oil.
  • Three forces of hyper-globalization:
    • Economic force in which extensive growth in global trade creates cross-border economic integration,
    • Human communications force via the Internet in which instant and global communication of social media and the Internet are changing norms of human communication blurring social barriers, and
    • Technological disruption force coming from new innovations in technology driven by Internet-of-Things (IoT), big data, and Artificial Intelligence (AI) bringing massive economic and rapid social changes leading to a world of Singularity.
  • Palm oil example:
    • Recently, Indonesia, the world’s largest producer and exporter of the palm oil has been experiencing domestic shortages of the same.
    • This led to spike in the domestic palm oil prices in Indonesia and the world (including India).
    • Therefore, Indonesia has announced to ban all exports.

Source: Indian Express

Previous Year Question

Q.1) Consider the following statements:

  1. Tight monetary policy of US Federal Reserve could lead to capital flight.
  2. Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs).
  3. Devaluation of domestic currency decreases the currency risk associated with ECBS.

Which of the statements given above are correct? (2022)

  1. 1 and 2 only
  2. 2 and 3 only
  3. 1 and 3 only
  4. 1, 2 and 3

 

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