Globalization: The Ups and Downs of Globalization or World economic integration Globalization: The...

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Transcript of Globalization: The Ups and Downs of Globalization or World economic integration Globalization: The...

  • Globalization: The Ups and Downs of GlobalizationorWorld economic integration

  • Globalization results

    Increase in the importance of international tradeIncrease in the movement of capitalIncrease in labor migrationIncrease in regional integration

  • Benefits of Trade

    Specialization of production

  • Jose the Wheat FarmerSpecialize

  • Teresa the BakerSpecialize

  • Specialization leads to efficiencies.

    The Law of Comparative Advantage

  • Where does Comparative Advantage Come From?

    Differences in:Climate and natural resources Relative abundance of labor and capital

    Technology

    External economies(External economies are a reduction in a firms costs that result from an expansion in the size of an industry)

  • How technology affects Global Trade:Information Technologycollaborative workcommunicationTransportation Technologyof peopleof goods and services

  • The Gains of GlobalizationWho gains?

  • The Balance of Payments: Linking theUnited States to the International EconomyLearning Objective 29.1The Current AccountFIGURE 29.1Trade Flows for the United States and Japan, 2006

  • Does it raise all Boats?Are you better off?

  • The International Sector and

    Learning Objective 29.3FIGURE 29.4U.S. Imports and Exports, 19702006

  • An Overview of International TradeU.S. International Trade in a World Context

  • An Overview of International TradeU.S. International Trade in a World Context

  • The Unintended Consequences of Banning Goods Made with Child LaborWould eliminating child labor in developing countries be a good thing?

  • Government Policies That Restrict TradeThe Argument over Trade Policies and GlobalizationOLD-FASHIONED PROTECTIONISMProtectionism The use of trade barriers to shield domestic companies from foreign competition.

    Saving jobs Protecting high wages

    Protecting infant industries

    Protecting national security

  • Trade AgreementsNAFTA North America Free Trade soon AFTA? Amero?European Union 28 countries - 12 EuroCAFTA - Central America Free Trade

  • The Current Exchange Rate SystemThe EuroCountries Adopting the Euro

  • International Capital MarketsLearning Objective 30.3FIGURE 30-6The Distribution of Foreign Purchases of U.S. Stocks and Bonds by Country, 2006

  • Summary: Benefits of TradeSpecializationForeign InvestmentCompetitionHigher Standard of Living

  • Costs of GlobalizationWho loses?

  • What about the sinking ships?

  • Household incomeWorking more and getting less.

  • The Lorenz curve and the Gini Coefficient(http://en.wikipedia.org/wiki/Gini_coefficient)

  • In the US1967: 0.397 (first year reported) 1968: 0.386 (lowest coefficient reported) 1970: 0.394 1980: 0.403 1990: 0.428 2000: 0.462 2005: 0.469 (most recent year reported; highest coefficient reported)[3]

  • Compared with other countries...Country1980 Gini2000 GiniChina.320.403India.320.378USA.403.462

  • Hot off the presses...Gap between rich, poor seen growingIncome disparity reaches highest since 1920s, paper reports, with recent Wall Street boom partly to blame. (CNNMoney.com)The figures, based on "adjusted gross income" which incorporates certain deductions such as contributions to individual retirement accounts, revealed that the income level for the tax filer in wealthiest 1 percent of Americans grew 3 percent...between 2000 and 2005, according to the Journal. At the same time, the median American income, however, slipped 2 percent during that same period......was due a combination of factors including globalization and technical advances...

  • Another measure of well being:Wages

  • A Race to the bottom?

  • Real Median Wage in 1973: $12.45Real Median Wage in 2000: $12.90

    Up nearly 1/3 of a percent! Is that good?Well...

  • Factors That Affect the Equilibrium Exchange RatesA difference in income growth ratesDifferences in relative inflation ratesChanges in real interest rates

  • In the same time periodGDP per person went up 72% Global Trade as a percent of GDP doubled

  • To put it in perspectiveBetween 1948 and 1973 real median wage increased 80%

  • The Environment

  • Deforestation

  • Avoiding Pollution Regulations

  • We are all affected

  • Acceleration of Global Warming

  • Adaptation

  • Homogenizing Properties of Globalization

  • Questions?Comments?

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