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:

1.US dominance in World Economy2.US Dominance in World FDI3.Dominance of large US Multinational firms

4.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: 1. Hunting and Gathering2. Agriculture3. Industrialization

Evolution of Commercial Institutions

3 notable institutions of Agri era:

1. Agricultural landlords/barons2. Military3. Religious class

Changing World Order

Global Economy of the 21st Century

Increasing volume of cross-border tradeAdoption 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 lowerJobs ‘exported’ to other countriesDetrimental impacts on the

environmentGlobalization 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 othersIn 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