CH1 Globalization
CH1 Globalization
CH1 Globalization
economies toward an interdependent, integrated global economic system Globalization refers to the shift toward a more integrated and interdependent world economy Globalization has two facets:
1) the globalization of markets 2) the globalization of production
historically distinct and separate national markets into one huge global marketplace In many industries, it is no longer meaningful to talk about the German market or the American market Instead, there is only the global market
internationally The tastes and preferences of consumers are converging on some global norm Firms help create the global market by offering the same basic products worldwide
of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production like land, labor, and capital
Companies compete more effectively by lowering their
overall cost structure or improving the quality or functionality of their product offering
GATT) is primarily responsible for policing the world trading system and making sure that nation-states adhere to the rules laid down in trade treaties signed by WTO members In 2007, the 150 nations that accounted for 97% of world trade were WTO members The WTO promotes lower barriers to trade and investment
were created in 1944 The IMF was established to maintain order in the international monetary system The World Bank was established to promote economic development
Drivers Of Globalization
Two macro factors underlie the trend toward greater globalization: the decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II technological change
services to consumers in another country Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country After World War II, advanced countries made a commitment to lower barriers to trade and investment Since 1950, average tariffs have fallen significantly and are now at about 4% Countries have also been opening markets to FDI
markets a reality Important advances have occurred in: microprocessors and telecommunications the Internet and World Wide Web transportation technology
the world economy in the last 30 years Four trends are important: the Changing World Output and World Trade Picture the Changing Foreign Direct Investment Picture the Changing Nature of the Multinational Enterprise the Changing World Order
world economic activity By 2006, the United States accounted for less than 20% of world economic activity A similar trend occurred in other developed countries The share of world output accounted for by developing nations is rising and is expected to account for more than 60% of world economic activity by 2020
of worldwide FDI flows Today, the United States accounts for less than onefifth of worldwide FDI flows Other developed countries have followed a similar pattern In contrast, the share of FDI accounted for by developing countries has risen from less than 2% in 1980 to almost 12% in 2005 Developing countries, especially China, have also become popular destinations for FDI
has productive activities in two or more countries Since the 1960s, there has been a rise in non-U.S. multinationals, and a growth of mini-multinationals
are now committed to democratic politics and free market economies and so, create new opportunities for international businesses China and Latin America are also moving toward greater free market reforms
system, but globalization is not inevitable Globalization also brings risks like the financial crisis that swept through South East Asia in the late 1990s
Anti-Globalization Protests
More than 40,000 anti-globalization protesters took to
the street at the WTO meeting in Seattle in 1999 Protesters now regularly show up at most major meetings of global institutions
are destroying manufacturing jobs in advanced countries Supporters of globalization contend that the benefits of this trend outweigh the coststhat countries will specialize in what they do most efficiently and trade for other goodsand all countries will benefit
efforts to adhere to labor and environmental regulations by moving production to countries where such regulations do not exist, or are not enforced Globalization supporters claim that tougher environmental and labor standards are associated with economic progress, so as countries get richer from free trade, they get tougher environmental and labor regulations
interdependent global economy is shifting economic power away from national governments toward supranational organizations like the WTO, the EU, and the UN Supporters of globalization contend that the power of these organizations is limited to what nation-states agree to grant, and that the power of the organizations lies in their ability to get countries to agree to follow certain actions
nations and poor nations is getting wider Supporters of globalization claim that the best way for the poor nations to improve their situation is to reduce barriers to trade and investment and implement economic policies based on free market economies, and to receive debt forgiveness for debts incurred under totalitarian regimes