What is Globalization?

The breaking down of traditional boundaries in the face of increasingly global and financial trends.

Globalization is a process of economic, political and cultural integration and unification. Globalization is the increasing interconnectedness of people and societies and the

interdependence of economies, governments and environments Integration and interdependence in the economic, social, technological, cultural, political,

and ecological spheres. An umbrella term and is perhaps best understood as a unitary process inclusive of many

sub-processes that are increasingly binding people and the biosphere more tightly into one global system.

The influence of globalization

Industrial - emergence of worldwide production markets and broader access to a range of goods for consumers and companies.

Financial - emergence of worldwide financial markets and better access to external financing for corporate, national and sub national borrowers.

Economic - realization of a global common market, based on the freedom of exchange of goods and capital.

Political - Political globalization is the creation of a world government which regulates the relationships among nations and guarantees the rights arising from social and economic globalization.

Social - the achievement of free circulation by people of all nations. Informational - increase in information flows between geographically remote locations. Cultural - growth of cross-cultural contacts; cultural diffusion; "world culture". Ecological- the advent of global environmental challenges that cannot be solved without

international cooperation, such as climate change, cross-boundary water and air pollution, over-fishing of the ocean, and the spread of invasive species.

Pros and Cons of Globalization

1. Economic Aspect2. Cultural Aspect3. Political Aspect Economic Aspect

Pros

Employees of a transnational corporation may be well paid compared to other workers in the country

Increased investment in developing countries stimulates their economies Free trade between nations is established – countries can produce to its strengths and

import the goods it needs without the threat of tariffs A wide range of products are available at affordable prices due to free trade Sharing of technological innovations is fast and fair.

Cons Jobs are being outsourced from developed countries to less developed countries

resulting in higher unemployment Transnational corporations may have fewer environmental regulations to follow and can

pay lower wages – they can ‘shop around’ for best options Corporate headquarters are usually located in the USA or western Europe resulting in

resentment in the accumulation of economic power Transnational corporations are becoming so large they are beyond the power of smaller

governments Economies are linked due to trade – economic hardship in one country will more greatly

affect other nations Cultural identity is lost due to mass use of western consumer products and

entertainment Profits usually do not stay in developing countries – they are returned to developed

world

Cultural Aspect Pros

Globalizations of communications sees great quantities of information shared around the world

The best of cultures can be shared and understood on a global scale There is more influx of information between two countries, which do not have anything

in common between them There is cultural intermingling and each other is trying to know about the other’s cultural

preferences and in the process of doing so, we are actually coming across things that we like and in the course of time adopt it

Cons A small number of private media companies decided what information is to be shared

and shape public opinion through sensationalization (bias) Media and entertainment impact is westernizing other cultures There are some experts who think that globalization; along with the positive aspects is

also leading to the incursion of negatives like communicable diseases and social degeneration

Political Aspect Pros

Gradually there is a world power that is being created instead of compartmentalized power sectors. Politics is merging and decisions that are being taken, are actually beneficial for people all over the world

Since we share financial interests, corporate and governments are trying to sort out ecological problems for each other

International agreements are working towards trying to protect the environment from pollutants that cause global warming, destroying ecosystems, and increasing acidity levels in seas and oceans

Communications allow for the message of political freedom tyranny in the for of democracy to spread globally

Cons For nations that are at the receiver’s end are also giving up the reins in the ends of a

foreign company which might again lead to a sophisticated form of colonization

Why globalization is good (Advantages)

Developing international trade and companies Enhancing information speed Reducing the probability of beginning a war

Why globalization is not good (Disadvantages)

Increase in Terrorism Job In-Security National Cultures & Traditions Ecological Damages Human Right Violations

Promotes IMPERIALISM The Rich will Get Richer Negative impact on gender roles Exploitation of Third World countries

Arguments For Globalization

1.Trade:

International trade and investment have been the engines of world growth over the past 50 years

The tonnes of goods traded around the world have grown by 16 times since 1950, reflecting the lowering of tariff barriers.

The benefits of that growth have been shared The countries that are getting poorer are those that are not open to world trade, notably

many nations in Africa. Many people believe that exports create jobs, and imports cost jobs and that it therefore

makes sense to have barriers against imports. This thinking led to the Great Depression in 1930, because so many countries had erected barriers against imports that global trade fell with catastrophic consequences.

Companies of all sizes are involved in world trade – the benefits do not just flow to large multi-nationals. In most trading nations, raging from Thailand to France, small firms employing less than 200 people account for between 10 and 25% of exports

2. Environmental Issues:

The remedy is to make the polluter pay. Indeed the principle that the polluter should pay underlies both the Kyoto Protocol greenhouse gas emissions and agreements to control acid rain in the United States and Europe.

What is required to impose ‘polluter pays’ principles on a global basis is stronger democratic institutions so that those who feel the impact of pollution can exercise their political rights to have it stopped.

3. The Internet, Communication and Technology:

Technology can do much to reduce poverty and environmental damage. It can increase the supply of food and reduce morbidity and mortality, particularly in Africa.

DC see Internet as an opportunity to gain access to knowledge and services from around the world. To both import and export.

The internet may also facilitate opportunities for economic development in industries such as tourism.

Communication infrastructure - Mobile telephony vs poor land line telephone system. Globalization has drastically improved access of technological latecomers to advanced

technologies and, to the extent that technological upgrading is important for development, it provides a unique opportunity for low-income countries to raise per capita income.

Research shows that improved access to technology imports is improving the demand for skilled labour in many low-income countries.

"The Internet does not act like a cybermissionary. Instead it acts like a universal conduit, carrying ideas and information from one place to another".

Globalization Alternatives

The increase in world trade as a proportion of world GDP was proportionately greater between 1870 and 1914 than it has been since 1975. That expansion was stopped, not just by the first world war, but by the loss of support for free trade which followed. Tariffs and controls on capital were imposed around the developed world. This led directly to the 1930 depression and indirectly to the second world war.

Arguments Against Globalization

1. Globalization increases the gap between rich and poor countries:

Over the past ten years, the number of people earning $1 a day or less has remained static at 1.2 billion while the number earning less than $2 a day has increased from 2.55 billion to 2.8 billion people.

The gap in incomes between the 20% of the richest and the poorest countries has grown from 30 to 1 in 1960 to 82 to 1 in 1995.

2. Trade between industrialized countries and developing countries is of relative small range,eg. the USAs trade with developing countries is only about 4 percent of GDP.

3. Cooperation on globalization was initiated by the richest even from the beginning and it is still these nations who set the agenda for discussions and decisions in the greatest forums of globalisation.

4. Global organisations like the WTO, the IMF and the World Bank are undemocratic, and developing countries have little influence:

Trade policy is dictated by corporate interests. Undemocratic processes in the WTO: Secret negotiations (eg. TRIPS), "green

room"meetings, limited participation in discussions. DCs do not have the resouces for lobbying activities or to analyse policy proposals in

depth. IMF's programmes are all in DCs, but the institution is contolled by the advanced

industrial countries, and only one country has effective veto power.

5. WTO trade policies are unfair and hurt developing countries:

Trade agreements have left in place barriers in the north against the exports of the DCs, typically labour intensive goods like textile and agricultural produce, even as the DCs have opened up their markets to the goods of the industrialised countries.

The intellectual property regime (TRIPS) makes drugs unaffordable to DCs, and this has negative implications for the combat of the AIDS pandemic.

6. IMF policies have not been good for growth and hurt DCs:

Rapid capital market liberalisation that has been forced on many DCs as a condition for their loans, has had many negative effects.

Due to problems like corruption, weak financial institutions and lack of safety nets the countries were not ready for rapid liberalisation.

Instability and unemployment have increased, and the debt burden is often enormous.

7. Globalization is empowering corporations at the expense of the nation state:

MNC are extremely powerful, and many MNCs are larger than nation states. Multinational companies exploits workers in countries with inferior labour

standards. Small farmers and businesses in DCs have difficulties competing with the MNCs.

8. Globalization is bad for the environment:

Rich countries export their polluting industry to poor countries which have less strict environmental standards.

Processes of industrialisation are leading to global warming and a deterioration of the atmospheric quality. Developing countries have been excluded from the Kyoto Protocol, providing a loophole for transnational companies.

Resource industries such as forestry, mining and fisheries exploit the resources of poor countries with little regard to either the long term cost to the country in terms of the loss of a national resource, or to the environment.

What is anti-globalization

The political attitude of people and organizations that resist certain aspects of globalization. Social movements. Participants are united in opposition to the political power of large corporations. Self-consciously internationalist, organizing globally an advocating for the cause of

oppressed people around the world.

Anti-globalization Movements

J18

June 18, 1999 London, UK; Eugene, Oregon

Seattle/N30

November 30, 1999 5,000 protesters blocked delegates’ entrance to WTO meetings in Seattle Protesters forced the cancellation of the opening ceremony and lasted the length of

the meeting until December 3 Genoa July 18 – July 20, 2001 Biggest anti-globalization gathering in history, 250,000 protesters against the G8

meeting in Genoa, Italy 3 dead, hundreds hospitalized

Causes of Anti-globalization Movement

Globalization globalizes money and corporations, but not people and unions Outsourcing and offshoring caused millions of westerns lost jobs or paid less Fear losing jobs in western countries Exploitation of the resources in the developing countries by western countries.

Economical

Exploitation of the resources in the third world country Example of Starbucks Vs. Ethiopian Coffee

o Ethiopians demand Starbuck’s support to trademark 3 of its coffees in USo $4, a cup of Cappuccino at Starbucks; o $.50, a day income of the Ethiopian farmer at the coffee farm.

Cultural

Local or minority culture are facing the fate of disappearing Western culture invaded into developing countries Example: McDonalds

o More than 100 countrieso 30,000 restaurants o Serves 50 million people daily

Environmental

Aggravated pollution, Global warming, losses in biodiversity and species extinction Average global temperatures are estimated to rise 1- 3.5 centigrade (33.8 – 38.5

degrees) by 2050 Developed industrial countries export hazardous waste to third world countries Example: one global agribusiness firm closed a terminal in Brazil's Amazon region

for environmentalists

Women and children

90% of the workers at the sweatshops are women Child labor hired by global companies in developing countries Example: 14-year-old workers in Nike factories in Indonesia

Human rights

More and more strict immigration restrictions in developed countries, no free move for labors

In sweatshops in developing countries, harsh working conditions, low pay and overtime working are common

Example: The Pouty Bratz dolls factory in Southern Chinao Working 94 hours a weeko 17 cents, workers are paid for making each doll $19, retail price in USo More than 120 million Bratz dolls sold in US since 2001.

Social

The unequal wealth distribution worldwide The gap between the developed countries and the third world counties The gap between the poor and rich

Globalization might be harmful to Developed Countries in the future

China is striving to create global automobile and electronics brands. India’s skill-intensive service sectors like IT and outsourcing are rising very fast. Western firms would face unprecedented competition from the two and other developing

countries.

Conclusions

Anti-globalization movements are the indication of self-protection.

Globalization already resulted in many adverse effects and made a portion of people worse-off.

Globalization makes highly liberalized countries expose their vulnerabilities to the rest of the world.

Can All Countries Benefit from Globalization?

Establish international monitoring system

Domestic:

each country should build up a system that can integrate into the global market protectionism in the domestic market

International:

International institutions should reform to fit into the needs of the globalization, such as IMF, World Bank, UN

Be more responsible for all the countries, rather than some or few countries Be more transparent and be monitored by member countries from third world

To enhance corporations between countries and regions

Make free trade free and fair for both developing and developed countries Eliminate or reduce the trade barriers Get more countries involved into the global market Equal and balance development in the global market

MEASURING GLOBALIZATION

WHY MEASURE GLOBALIZATION?

There appear to be a direct relationship among civil liberties, more political rights, lower levels of corruption and ... the level of globalization. Also, it seems to be a relationship between globalization and patterns of inequality of income.

HOW MUCH GLOBALIZATION IS OUT THERE ?

Trade flows are not significantly higher than they were prior to 1914 if one measures them against GDP, but loom much larger if they are compared against industrial production.“

HOW TO MEASURE GLOBALIZATION?

There is not a clear-cut method for measuring the extent of globalization.Researchers have used a variety of references to provide an idea on globalization and their impact.

FOREING POLICY MAGAZINE 2005

The FOREING POLICY Globalization Index measures 12 variables and group them in 4 categories:

1. Economic Integration2. Personal contacts3. Political engagements4. Technological connectivity

1. ECONOMIC & FINANCIAL INTEGRATION

Economic integration can be measured by the volume of Capital Flow, Trade, or Gross Domestic Product (GDP) between countries.

Financial Integration can be measured by the Amount of Foreign Direct Investment, or, the Ratio of Foreign Capital stock to GDP.

2. PERSONAL CONTACTS

The amount of international travel and tourism The amount of international telephone traffic The amount of Remittances and personal transfers

3. POLITICAL ENGAGEMENT

The amount of membership in international organizations The amount of personal and financial contribution to UN peace keeping missions The amount of international treaties ratifications The amount of governmental transfers

5. TECHNOLOGICAL CONNECTIVITY

The amount of internet users The amount of internet hosts The amount of secure servers

The Silk Route

As classical empires reduced the costs of long-distance trade, merchants began establishing an extensive network of trade routes that linked much of Eurasia and northern Africa

Collectively, these routes are known as the “Silk Roads” because high-quality silk from China was one of the principal commodities exchanged over the roads

The Silk Road, or Silk Route, is an interconnected series of trade routes through Southern Asia mainly connecting Chang'an (today's Xi'an) in China, with Asia Minor and the Mediterranean. It extends over 8,000 km (5,000 miles) on land and sea.

Trade on the Silk Route was a significant factor in the development of the great civilizations of China, Mesopotamia, Persia, India and Rome, and helped to lay the foundations for the modern world.

Major Stops on the Road

CHAPTER – ONE

(SLIDES)

What Is The Globalization of Markets?

Historically distinct and separate national markets are merging It no longer makes sense to talk about the “German market” or the “American market” Instead, there is the “global market”

o falling trade barriers make it easier to sell globallyo consumers’ tastes and preferences are converging on some global normo firms promote the trend by offering the same basic products worldwide

What Is The Globalization of Production?

Firms source goods and services from locations around the globe to capitalize on national differences in the cost and quality of factors of production like land, labor, and capital

Companies can o lower their overall cost structure o improve the quality or functionality of their product offering

Why Do We Need Global Institutions?

Institutionso help manage, regulate, and police the global marketplaceo promote the establishment of multinational treaties to govern the global business

system

Examples includeo the General Agreement on Tariffs and Trade (GATT)o the World Trade Organization (WTO)

o the International Monetary Fund (IMF)o the World Banko the United Nations (UN)

What Do Global Institutions Do?

The World Trade Organization (like its predecessor GATT)

o polices the world trading systemo makes sure that nation-states adhere to the rules laid down in trade treaties o promotes lower barriers to trade and investment

The International Monetary Fund (1944) maintains order in the international monetary system The World Bank (1944) promotes economic development The United Nations (1945)

o maintains international peace and securityo develops friendly relations among nationso cooperates in solving international problems and in promoting respect for human

rightso is a center for harmonizing the actions of nations

What Is Driving Globalization?

The decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II

o since 1950, average tariffs have fallen significantly and are now at 4 percento countries have opened their markets to FDI

Technological change

o microprocessors and telecommunicationso the Internet and World Wide Webo transportation technology

What Does Globalization Mean For Firms?

Lower barriers to trade and investment mean firms can

o view the world, rather than a single country, as their marketo base production in the optimal location for that activity

Technological change means

o lower transportation costs - firms can disperse production to economical, geographically separate locations

o lower information processing and communication costs - firms can create and manage globally dispersed production systems

o low cost global communications networks - help create an electronic global marketplace

o low-cost transportation - help create global marketso global communication networks and global media - create a worldwide culture,

and a global market for consumer products

The Changing Demographics Of The Global Economy

There has been a drastic change in the demographics of the world economy in the last 30 years

Four trends are important: 1. the Changing World Output and World Trade Picture2. the Changing Foreign Direct Investment Picture3. the Changing Nature of the Multinational Enterprise4. the Changing World Order

How Has World Output And World Trade Changed?

In 1960, the United States accounted for over 40% of world economic activity By 2008, the United States accounted for just over 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

How Has Foreign Direct Investment Changed Over Time?

In the 1960s, U.S. firms accounted for about two-thirds of worldwide FDI flows Today, the United States accounts for less than one-fifth 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 Developing countries, especially China, have also become popular destinations for FDI

What Is A Multinational Enterprise?

A multinational enterprise (MNE) is any business that 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

The Changing World Order

Many former Communist nations in Europe and Asia are now committed to democratic politics and free market economies

o so, there are new opportunities for international businesseso but, there are signs of growing unrest and totalitarian tendencies in some countries

like Russia

China and Latin America are also moving toward greater free market reformso between 1983 and 2008, FDI in China increased from less than $2 billion to $90

billion annuallyo but, China also has many new strong companies that could threaten Western firms

How Will The Global Economy Of The 21st Century Look?

The world is moving toward a more global economic system… But globalization is not inevitable

o there are signs of a retreat from liberal economic ideology in Russia Globalization brings risks

o the financial crisis that swept through South East Asia in the late 1990so the recent financial crisis that started in the U.S. in 2008, and moved around the world

Is An Interdependent Global Economy A Good Thing?

Supporters believe that increased trade and cross-border investment mean o lower prices for goods and serviceso greater economic growtho higher consumer income, and more jobs

Critics worry that globalization will causeo job losseso environmental degradationo the cultural imperialism of global media and MNEs

Anti-globalization protesters now regularly show up at most major meetings of global institutions

How Does Globalization Affect Jobs And Income?

Critics argue that falling barriers to trade are destroying manufacturing jobs in advanced countries

Supporters contend that the benefits of this trend outweigh the costso countries will specialize in what they do most efficiently and trade for other goods—

and all countries will benefit

How Does Globalization Affect Labor Policies And The Environment?

Critics argue that firms avoid costly efforts to adhere to labor and environmental regulations by moving production to countries where such regulations do not exist, or are not enforced

Supporters claim that tougher environmental and labor standards are associated with economic progress

o as countries get richer from free trade, they implement tougher environmental and labor regulations

How Does Globalization Affect National Sovereignty?

Is today’s interdependent global economy shifting economic power away from national governments toward supranational organizations like the WTO, the EU, and the UN?

Critics argue that unelected bureaucrats have the power to impose policies on the democratically elected governments of nation-states

Supporters claim that the power of these organizations is limited to what nation-states agree to grant

o the power of the organizations lies in their ability to get countries to agree to follow certain actions

How Is Globalization Affecting The World’s Poor?

Is the gap between rich nations and poor nations is getting wider? Critics believe that if globalization was beneficial there should not be a divergence between

rich and poor nations Supporters claim that the best way for the poor nations to improve their situation is to

o reduce barriers to trade and investmento implement economic policies based on free market economieso receive debt forgiveness for debts incurred under totalitarian regimes

How Does The Global Marketplace Affect Managers?

Managing an international business differs from managing a domestic business because o countries are differento the range of problems confronted in an international business is wider and the

problems more complex than those in a domestic businesso firms have to find ways to work within the limits imposed by government

intervention in the international trade and investment systemo international transactions involve converting money into different currencies