Lecture Slides 1

Globalization: Introduction and Overview

What is Globalization? Globalization: A move toward a more integrated and interdependent economy Facets of Globalization: Markets and Production

Facets of Globalization Globalization of Markets: the merging of historically distinct and separate national markets into one huge global marketplace Globalization of Production: Sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production

Drivers of Globalization

1. Declining Trade and

Investment barriers 2. Technological Change

Declining barriers  GATT  

 WTO

Trade barriers eliminated over time. This has resulted in a remarkable increase in world trade.

Changes in Technology  Rise in the use of internet

Changing Demographics of Global Economy

4 Facts from the 1960’s that changed: 2.US dominance in World Economy 3.US Dominance in World FDI 4.Dominance of large US Multinational firms 5.Communist national markets off limits

Changing World Output and World Trade Picture USA and China

Changing Foreign Direct Investment Picture

Asian FDI excluding Japan

Changing Nature of Multinational Enterprise Multinational companies emerging from

countries other than USA/Europe/Japan Smaller firms engaging in multinational operations due to lowered costs through internet

Evolution of Commercial Institutions

Economic activity is the basis for social relationships. - - True or false? Discuss. Past basis for societies: 3. Hunting and Gathering 4. Agriculture 5. Industrialization

Evolution of Commercial Institutions 3 notable institutions of Agri era: 3. Agricultural landlords/barons 4. Military 5. Religious class

Changing World Order

Global Economy of the 21st Century Increasing volume of cross-border trade Adoption of liberal economic policies   

Deregulation Lowering of trade barriers Acceptance of market economy by communist and socialist nations

Globalization Debate

Is globalization (shift toward a

more integrated and interdependent economy) a good thing?

Anti-Globalization Protests

Reasons for anti-globalization protests: That wages are pushed lower Jobs ‘exported’ to other countries Detrimental impacts on the environment Globalization promotes ‘colonization’ by other means

Globalization, Jobs and Income Does Globalization increase jobs and income or is it the reverse?  PLUS - Cheaper goods free up resources for use to purchase other goods  MINUS – Real wages, adjusted for inflation, for the average lowest-income families fell by 6% between 1980 2000

Globalization, Labor Policies and the Environment Criticism of Globalization: Manufacturers move to places where they have fewer environmental restrictions. 

Pollution rates increase

Misuse and abuse of labor 

Carpet industry workers in Pakistan

Counter is: As per capita income increases, emission levels decrease

Globalization and the world’s poor

Gap between rich and poor

increasing:  In

1870 average IPC in 17 richest was 2.4 times of others  In 1990 the same group was 4.5 times as rich as rest

Managing the Global Marketplace Challenges faced by an international

business (any firm that engages in international trade or investment). Challenges in:    

Use of Currencies Cultural understanding Legal and political understanding Historical understanding