What is globalization? The term explained simply

The term globalization was first used in the mid-20th century before becoming established in our everyday language in 1990. It describes the increasing global interconnectedness and interdependence of politics, economics, culture, and the environment.

Globalization: Definition and meaning

Globalization refers to the process of increasing worldwide interdependence in the areas of economics, politics, culture, the environment, and communication. You are experiencing that countries, companies, and people are becoming increasingly connected and interacting across national borders.

• This development is primarily driven by technological advances such as the Internet, modern means of transport, and the liberalization of world trade.

• Globalization means that events, decisions, and activities in one part of the world have a direct impact on people and communities in distant regions. This applies, for example, to international trade, the global dissemination of information, cultural exchange, and global environmental problems.

• For you as an individual, globalization is evident in the fact that products from all over the world are available in supermarkets, that you communicate with people from other countries, and that companies organize their production internationally.

• Globalization brings opportunities such as economic growth, access to new technologies, and cultural diversity, but also challenges such as social inequality, environmental problems, and the risk of cultural homogenization.

Dimensions of globalization

Globalization encompasses various dimensions that affect social, cultural, political, and ecological areas. These four dimensions are closely intertwined and shape the opportunities and challenges of globalization in many ways.

• Social globalization refers to the worldwide interconnectedness of people and societies. It leads to a growing awareness of social injustices and promotes exchange and cooperation in the areas of infrastructure, health, poverty, and education.

• At the same time, new social challenges are emerging, such as increasing social inequalities, low-wage working conditions and a lack of protective standards, as well as the risk of a “race to the bottom” in terms of workers’ rights. Positive aspects include international cooperation on human rights and improved access to education through digital networking.

• Cultural globalization is leading to greater mixing and networking of cultures. It enables cultural diversity and promotes the exchange of ideas, lifestyles, and consumption habits. At the same time, there is a risk of cultural loss, as dominant cultures can supplant smaller ones and traditional values can be lost.

• Political globalization manifests itself in increased international cooperation and the formation of global institutions that establish common rules and standards, for example in the areas of trade, security, and environmental protection.

• It can promote democratic structures, but also leads to tensions between national sovereignty and global governance. Powerful states or actors can play a dominant role in this process, leading to inequalities at the international level.

• Ecological globalization is reflected in the global interdependence of environmental problems. Increased resource consumption, global production, and international trade lead to environmental problems such as climate change, air and water pollution, and loss of biodiversity.

• Environmental problems can no longer be solved by individual states alone, but require global cooperation and joint political measures.

Digital technologies and the Internet

Digital technologies and the Internet have fundamentally changed and massively accelerated globalization in recent years. At the heart of this development is the rapid increase in global networking, which has been made possible by the Internet and modern communication technologies. As a result, information, ideas, products, and services can now be exchanged in real time across national borders.

• Real-time communication: Advances in information and communication technology enable faster and more effective collaboration across continents. Video conferencing, cloud services, and digital platforms are replacing physical meetings and accelerating decision-making processes.

• Global markets & e-commerce: Companies of all sizes can operate globally via online trading platforms and tap into new markets. E-commerce and digital payment systems have lowered trade barriers and internationalized value chains.

• New business models: Digital technologies are forcing companies to constantly reinvent their value creation and organization. Innovation cycles are becoming shorter, and companies must adapt more quickly to global competition.

• Blockchain & security: Technologies such as blockchain promote trust in cross-border transactions by increasing transparency and security. This facilitates international trade and reduces the risk of fraud.

• Industry 4.0 & Networking: Integrated, digital value chains and automated production processes (Industry 4.0) connect companies and suppliers worldwide and make production and logistics more efficient.

• Social networks: Platforms such as Facebook, Twitter, and LinkedIn connect people and organizations globally and accelerate the exchange of knowledge, culture, and trends.

• Democratization of knowledge: The Internet provides broad access to information and knowledge, which further drives globalization, particularly in education, research, and innovation.

• Technological innovations such as the Internet of Things (IoT), cloud computing, artificial intelligence and 5G mobile communications are driving this development forward by enabling new forms of collaboration, production and communication.

Opportunities and challenges

Globalization brings economic opportunities, but also leads to significant challenges: environmental degradation, social inequality, protectionist backlashes, and vulnerable supply chains are key issues that need to be discussed and regulated globally.

• Globalization leads to increased use of natural resources and environmental pollution through intensive production, transport, and trade. The most important environmental problems include climate change (due to rising greenhouse gas emissions), deforestation (e.g., for agriculture and urbanization), air, water, and soil pollution, and overfishing of the oceans.

• Production facilities are often relocated to countries with lower environmental standards, which increases the environmental impact there. The global transport of goods also contributes significantly to CO₂ emissions.

• Globalization can increase income and social inequality both within and between countries. While multinational corporations and wealthy countries often benefit, developing countries and less skilled workers suffer from low wages, poor working conditions, and inadequate social security systems. The benefits of globalization are unevenly distributed: some regions flourish, while others lag behind.

• Protectionism refers to measures such as tariffs, import restrictions, or subsidies that countries use to protect their own economies from foreign competition. In globalization, this can occur as a response to international competition, for example when national industries are threatened by cheaper imports. Protectionist measures can trigger trade wars, which in turn disrupt global supply chains and increase prices for consumers.

• Global supply chains are complex networks that extend from production to the end customer. They are vulnerable to disruptions caused by political conflicts, natural disasters, pandemics, or trade wars. Examples include supply bottlenecks caused by blocked transport routes (such as in the Suez Canal in 2021) or by pandemic-related disruptions. Such problems lead to production losses, price increases, and economic losses worldwide.

More sustainable and fairer globalization

More sustainable and fairer globalization can be achieved through various approaches and instruments that combine social, environmental, and economic goals:

• Fair trade is a trading partnership based on dialogue, transparency, and respect that aims to improve the living and working conditions of producers and workers at the beginning of the supply chain, especially in countries of the Global South.

• Key principles include fair prices, long-term and transparent trade relationships, strengthening the rights of small farmers and workers, compliance with labor and human rights, child protection, and the promotion of gender equality.

• Fair Trade also promotes environmental and climate protection, for example through the conversion to organic farming, and carries out educational and political campaigning to make the rules of world trade fairer.

• International organizations such as Fairtrade International support over 1.4 million producer organizations in 73 countries and campaign for stable wages, better working conditions, and fair participation in the global market.

• Global climate protection agreements, such as the Paris Agreement, create binding frameworks for climate protection and promote international cooperation. Climate justice means that the main contributors to climate change (mostly industrialized countries) take on more responsibility and support countries in the Global South in adapting to climate change, as they are particularly affected.

• Fair trade contributes to climate resilience in global supply chains by combining social, economic, and environmental principles.

• Organizations such as the United Nations (UN), the World Trade Organization (WTO), the International Labor Organization (ILO), and specialized networks such as Fairtrade International are committed to the implementation of human rights, labor standards, and environmental protection.

• The UN Sustainable Development Goals (SDGs) provide a global framework that commits countries to fighting poverty, promoting sustainable development, and strengthening social and environmental standards worldwide.

• Civil society alliances and networks, such as the “Network for Fair World Trade,” are calling for social and ecological guidelines for globalization and a trade policy that puts people and the environment before profit interests.

• Demands and challenges: Lives-wage incomes and binding due diligence obligations for companies along global supply chains. Curbing corporate power and introducing ecological and social criteria in procurement and foreign trade promotion. Coherent government action that is guided by sustainable development goals and takes into account the consequences for the most vulnerable, as well as for the climate and the environment.

• Such an approach to fairer globalization therefore combines fair trade practices, binding climate protection measures, and the strengthening of international cooperation in order to reduce global inequalities and enable sustainable development for all.