Summer 2011 Macroeconomics – Lecture 1 Extra Slides Macroeconomics – Lecture 1 Extra Slides 1.
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Globalization: Introduction and
Overview
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What is Globalization?
Globalization: A move toward a more integrated and interdependent economy
Facets of Globalization: Markets and Production
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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
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Drivers of Globalization
1.Declining Trade and Investment barriers
2.Technological Change
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Declining barriers
GATT WTO Trade barriers eliminated over time. This has resulted in a remarkable increase in world
trade.
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Changes in Technology
Rise in the use of internet
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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
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Changing World Output and World Trade Picture
USA and China
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Changing Foreign Direct Investment Picture
Asian FDI excluding Japan
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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
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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
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Evolution of Commercial Institutions
3 notable institutions of Agri era:
1. Agricultural landlords/barons2. Military3. Religious class
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Changing World Order
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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
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Globalization Debate
Is globalization (shift toward a more integrated and interdependent economy) a good thing?
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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
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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
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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
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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
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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