By Murat Ali DULUPÇU and Onur DEMİREL

Süleyman Demirel University

Defining Globalization Impacts The Debate Theories of International Trade Regulating Globalization and

Internationalization Future: Qua Vadis?

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Globalization 3D Figure-geometric

-conceptual origin- Entirety-Total? Homogeneity-similiar

The origins : “Global Village” by Marshall McLuhan in 1960-main starting point “Corporate Giants” by Charles Taze Russell in 1897-the earliest “Globalization” by Ronald Robertson

Definition:“Fast and continuous inter-border flow of goods, services, capital (or money), technology, ideas, information, cultures and nations.”

Covers so many concepts

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Milestones: Globalization since Neanderthal Human The Silk Road The Golden Age of Islam Pax Romana/ Pax Ottoman then towards Pax

Britannica Two significant World Wars and competition between

the United States of America (USA) and the Union of Soviet Socialist Republics (USSR)/Blocs/Perestroika-Glasnost

Stages of Globalization: Colonization, slave trade, church constructions

abroad, inventions in the high-capacity transportation, industrialization, high constructions among provinces and countries, electrical and electronic infrastructure.

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StagesFirst Stage

1490 (overseas discoveries)

Second Stage1890

(West extension)

Third Stage1990

(economism)

Impulse Nautical developmentsIndustrialization and its requirements

Multi-National Companies in 1970s, Communication Reform in 1980s, Disappearance of Competitors of the West in 1990s

ProcessProfit and then military occupation

Evangelists, then explorers, then companies and finally occupation

Cultural-Ideological effect, therefore countrywide spontaneous effect

MediumTo get the God’s religion to the pagans

Burden of the white man, humane mission, racialist theories

Highest level of civilization, governance of international community, “invisible hand” of the market, globalization: for everyone’s interest

Political Structure

Empires and Colonization

Nation States Regional and Economic Integrations

Result Colonialism Imperialism GlobalizationSource: Yaman 2001. A commonly accepted division of the globalization process

World trade volume of $380 billion in 1950 has increased to $21.2 trillion in 2005.

Catalysts of the increase: Decrease in tariffs Trade agreements signed among countries and

regions Regional integrations Developments in and cheapening in

communication and transportation technologies The mass and just-in-time production The standardization of tradable goods Convergence of human needs The creation of new needs for humankind (“New

World Order”)

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Multinational Companies (MNCs) ate the companies that make FDI and produce value added in more than one country and own the process.

Theories of MNCs:Location Theory (focus on resources) Internationalization Theory (Instead of

various companies only one-company-production is advantageous. Focus on technology transfer and vertical integration)

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Product Life Cycle TheoryBy Vernon, 1966, Where to produce? Developed vs. developing

economies, focus on standardization and production cost Internalization Theory

By Buckley and Casson, 1976, How to produce? By licensing or leasing vs. FDI, focus on transportation costs, trade barriers, foreign market information, information asymmetries

OLI (Eclectic) ParadigmOwnership (Focus on patent, trade secrets, trademarks,

economies of scale and synergy, diffusion of geographical risk, cross-country arbitrage)

Location (Production efficiency, transportation cost, chep labor, proximity to customers, local image, trade applications)

Internalization (Imperfect competition) Other Theories

Caves Economies (Focus on firm advantages) Oligopolistic Reaction Theory (By Knickerbocker, Follow-the-

leader) Hymer and Kindleberger’s Theory (Focus on intermediate good

transfers of MNCs)

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Transportation costs 50% Airline transportation 80% Transatlantic Phone Calls 99%

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One day Traffic in 2003:

Total cellular phones1984

Total e-mails1992

Total SMSs1998

Total air travel1975

Total international telephone calls1971

Source: World Bank and Istanbul Technical University

COST REDUCTIO

NS

Debate on the future of nation-states Structures such as European Union

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R&D as a % of GDP increases Severe relationship among R&D, invention

and transformation of technology  1700 - 1900 1900 - 2000 2000 - …Economics Agriculture Manufacture InformationTechnology Plow Machine ComputerOutput Food Good InformationResource Land Capital KnowledgeUnit Family Company NetworkEnergy Muscle Fossil Fuels BrainCompetition Local National GlobalEducation: *Demand *Focus

Primitive Minimal "What?"

Procedures Remarkable

"How?"

Thought Continuity

"Why?"

Cultural Integration McDonaldizationvs.

Effect of Local Cultures Impossibility of a single global culture

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Creation of goods and services that are customized to supply global markets but consistent with local values (Hamburgers with local spices, meat, so on)

Globalization of the local and localization of the global simultaneously

Information Technologies and Technology Flows Scientific invention and innovation Diffusion of pre-existing technologies Benefiting new technologies

Labor Hyper-Mobility and Global Distribution of Labor

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# of Immigrants (Million People)The Ratio of Immigrants to the Population of the

Region

Europe 64.1 8.8

Asia 53.3 1.4

North America 44.5 13.5

Africa 17.1 1.9

Latin America 6.7 1.2

Oceania 5.0 15.2

Source: [Available at http://www.iom.int/jahia/Jahia/pid/255], (Accessed 10.02.2008).

Economic Issues Income, Income Distribution and Poverty:

Huge income distribution inequality among people and countries

Different income growth rates Deterioration in the world income distribution Reduction in absolute poverty

Capital, Finance, FDI and MNCs:

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Source: UNCTAD, 2007, p. 3.

FDI INFLOWS

Production and Competitiveness:

Globalization of Knowledge: Environmental Issues

International effects of environmental problems, Limited natural resources, Lack of global management of environment

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Rank of Country2005 2006 2007-

2008Germany 6 8 5

Czech Republic 29 29 33

Lithuania 34 40 38

Turkey 71 59 53

Singapore 5 5 7

Korea 19 24 11

China 48 54 34

GLOBAL COMPETITIVENESS INDICES

Source: WEF, 2007 and 2006.

Social IssuesHuge differences in;

Level of education, infrastructure, gender discrimination, life expectancy at birth, infant mortality, health expenditure per capita

Advocates of Globalization: Neo-Liberal ViewWorld Economic Forum

Established in Sweden, 1971. Members 1000 largest firms & 200 relatively

small firms from developing countries Its motto “Entrepreneurship in the global public

interest”The Washington Consensus

Initiated by John Williamson in 1989 Has 10 special economic policy recommendations

for the countries that experience economic crises. These recommendations are taught to be “standart”

reform package and criticized.

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Opponents of Globalization: Anti-Globalist Movement World Social Forum

Members Open to everyone Its motto “Another world is possible”

International Forum on Globalization Established in 1994 Criticizes the lack of “free trade” and “neo-liberalism”

criticism. People’s Global Action

Established in 1998, Geneva Anti-capitalist

CorpWatch Established in 1996 and took this name in 2001 Drew attention with the analyses of poor working conditions

Friends of the Earth Established in 1971 Deals with environmental issues

Smith and Ricardo: Classical View Adam Smith, 1776 and David Ricardo, 1817 Very restrictive assumptions First “win-lose” then “win-win” Absolute advantage then comparative advantage

Neo-Classical Theories of Trade Opportunity-cost instead of labor theory of value Transformation curves, demand conditions Heckscher-Ohlin Theory (Factor Endowment

Theory) Factor Price Equalization Income Distribution Rybczynski Theory

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Alternatives Skilled-Labor Theory

Focus on the differences in skilled-labor among countries Technology-Gap Theory

By Posner in 1961 Initial version of Product Life Cycle Theory

Product life Cycle Theory Preference Similarity Theory

By Linder in 1961 Focus on the similarity of tastes and preferences-demand

Theory of Economies of Scale Monopolistic Competition Theory

Focus on differentiated products New Trade Theories

Internalizes the concepts of scale, network, innovation and global competition

International Monetary Fund – IMF Established in 1944 Has 185 member states Promotes international monetary cooperation, exchange

stability and orderly exchange arrangements; fosters economic growth and high level of employment; provides temporary financial assistance to countries to help balance of payments adjustment

Control and regulation process involves Surveillance Financial Assistance Technical Assistance

World Bank – WB Established in 1944 Has 185 member states Worldwide poverty alleviation Made up of 2 unique development institutions

International Bank for Reconstruction and Development (IBRD) International Development Association (IDA)

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Organization for Economic Co-Operation and Development – OECD Formed as OEEC in 1947 Named as OECD in 1961 Has 30 member states

World Trade Organization – WTO Has 151 members GATT is the principle rule book for trade in

goods Promotes freer trade

United Nations – UN Roots go back to 1865, International

Telecommunication Union Has 192 member states. Deals with the problems challenging humanity

European Union – EU Established in 1951 as the European Coal and Steel

Community by six founding members Today has 27 member countries Acts in a wide range of policy areas – economic, social,

regulatory and financial Asia-Pasific Economic Co-Operation – APEC

Established in 1989 Has 21 members Works in 3 broad areas to meet the Bogor Goals:

Trade and investment liberalization Business facilitation Economic and technical cooperation

North Atlantic Free Trade Agreement – NAFTA Came into effect on Januart 1st, 1994 Members are Canada, Mexico and the USA Freer trade and the protection of intellectual property

rights

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European Free Trade Agreement – EFTA Established in 1960 Updated in 2001 EEA has 27 EU members and entered into

force in 1994 ASEAN Free Trade Agreement – AFTA

Established in 1967 in Bangkok Has 5 members

Central European Free Trade Agreement – CEFTA Signed in 1992 and entered into force in

1994 Has 8 members

Both capitalism and communism lack absolute success!

But globalization is not a magic cure for the problems of humanity either!

World still has growth potential, mainly due to developing countries

The growth in developing countries depletes natural resources and therefore future growth potential

The high growth rates in developing countries decreases poverty

However, imbalances still prevail! Divergences in incomes produce

polarization and therefore threat! 23/25

Polarization causes migration to be the only salvation in developing countries

Will the world continue to rotate from west to east or will it reverse?

The future of globalization and the world depends on the process itself and how it is managed.

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