Globalization handout
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Globalization refers to the increasing global integration and interdependence of economic, cultural, and political aspects of life. It involves the increasing cross-border flow of goods, services, capital, culture, technology and people. While globalization has led to increased economic growth and spread of technology and culture to developing countries, it has also been associated with job losses in developed countries, increased inequality, and threats to national and cultural identities. Both supporters and critics have presented arguments for its positive and negative effects.
Globalization handout
- 1. Globalization Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import quotas. Apparently Globalization has contributed to economic growth in developed and developing countries through increased specialization and the principle of comparative advantage. Globalization also refers to the transnational circulation of ideas, languages, and popular culture. Globalization has been given many meanings in different contexts. One frequently-encountered meaning is that globalization is the homogenization of people’s tastes and demand patterns around the world, due to increased access to international communication of information about products and services as well as increased access to transportation of products and people across borders. From another perspective it may be seen as the threat of loss of national identity in response to homogenization of lifestyles around the world. National identity is also threatened by the trend toward reduction in the number of languages used around the world. Concepts: The United Nations says globalization is: “When used in an economic context: it refers to the reduction and removal of barriers between national borders in order to facilitate the flow of goods, capital, services and labour... although considerable barriers remain to the flow of labour... “ Takis Fotopoulos defined economic globalization as “the opening and deregulation of commodity, capital and labour markets which led to the present neoliberal globalization”. Political globalization: “named the emergence of a transnational elite and the phasing out of the nation-state.” Cultural globalization: “was the worldwide homogenization of culture. Other elements included "ideological globalization", "technological globalization" and "social globalization". Thomas L. Friedman popularized the term "flat world", arguing that “globalized trade, outsourcing, supply-chaining, and political forces had permanently changed the world, for better and worse” The Forces Behind Globalization Increased expansion and technological improvements in transportation and communications networks Liberalization of cross-border trade and resource movements
- 2. Development of services that support international business activities Growing consumer demand for foreign products Increased global competition Changing political and economic situations Expanded cross-national treaties and agreements The Effects of Globalization Positive Creation of firms, leads to increase income levels, therefore, consumer demand Create new jobs Production advantages: new technology, raise worker´s skills Economies of scale Increase competicion in domestic industry Negative Outsourced their manufacturing and white-collar jobs to Third-World countries and developing economies, takes jobs It has led to an increase in activities such as: child labor and slavery Consumerism habits has increase junk food, branded products, Environmental degradation Positive Effects of Globalization • Increased Competition One of the most visible positive effects of globalization is the improved quality of products due to global competition. Customer service and the 'customer is the king' approaches to production have led to improved quality of products and services. As the domestic companies have to fight out foreign competition, they are compelled to raise their standards and customer satisfaction levels in order to survive in the market. • Increased Employment With globalization, companies have penetrated into the developing countries and hence generated employment for them. It has given an opportunity to invest in the emerging markets and take advantage of the talent which is available there. In developing countries, there is often a lack of capital which prevent the growth of domestic companies and hence, employment. In such cases, due to global nature of the businesses, people of developing countries too can obtain gainful employment opportunities. • Investment and Capital Flows One of the most visible positive effects of globalization is the flow of foreign capital. A lot of companies have directly invested in developing economies. Many companies have benefited from capital inflow to improve production and services
- 3. • Spread of Technology While it is generally assumed that all the innovations happen in the Western world, due to globalization, technology also comes into developing countries due to globalization. Without globalization, the knowledge of new inventions, medicines would remain confined in the countries that came up with them and no one else would benefit. But due to improved political ties, there is a flow of information both ways. • Spread of Culture The positive effects of globalization on culture are many! Not all good practices were born in one civilization. The world that we live in today is a result of several cultures coming together. People of one culture, if receptive, tend to see the flaws in their culture and pick up the culture which is more correct or in tune with the times. Societies have become larger as they have welcomed people of other civilizations and backgrounds and created a whole new culture of their own. Cooking styles, languages and customs have spread all due to globalization Negative Effects of Globalization Poorer countries suffering disadvantages While it is true that free trade encourages globalization among countries, some countries try to protect their domestic suppliers. The main export of poorer countries is usually agricultural and comodity goods. Larger countries often subsidise their farmers (e.g., the EU's Common Agricultural Policy), which lowers the market price for foreign crops. The shift to outsourcing Globalization allowed corporations to move manufacturing and service jobs from high cost locations, increasing unemployment in the domestic country. In rich countries, outsourcing has been a double- edged sword; it enabled cheaper services but displaced some service-sector jobs. However, in lower- cost locations such as India, the outsourcing industry is the "primary engine of the country’s development over the next few decades, contributing broadly to GDP growth, employment growth, and poverty alleviation" An increase in exploitation of child labour Countries with weak protections for children are vulnerable to infestation by dishonest companies and criminal gangs who exploit them. Examples include quarrying, salvage, and farm work as well as trafficking, forced labour, prostitution and pornography. Brain drain Opportunities in rich countries attract skilled workers from poor countries, leading to brain drains. For example, nurses from poorer countries come to the US to work. This phenomenon cost Africa over $4.1 billion for the employment of 150,000 expatriate professionals annually, Spanish engineers are moving to Germany looking for better job prospects
- 4. Working conditions In some developing countries labour policies provide less protection than in developed countries. One example is the use of sweat-shops by manufacturers. Clothing makers such as The Gap and Nike were accused of contracting with factories that used child labour in violation of local and law Political Globalization reduced the importance of nation states. Sub-state and supra-state institutions such as the European Union, the WTO, the G8 or the International Criminal Court, replace national functions with international agreements. Cultural Mandarin is the first language of 845 million speakers, followed by Spanish (329 million speakers) and English (328 million speakers). However the most popular second language is undoubtedly English, the "lingua franca" of globalization: • About 35% of the world's mail, telexes, and cables are in English. • Approximately 40% of the world's radio programs are in English. • Some 3.5 billion people have some acquaintance of the language. • English is the dominant language on the Internet Environmental Environmental challenges such as climate change, water and air pollution and over-fishing of the ocean, require trans-national/global solutions. Since factories in developing countries increased global output and experienced less environmental regulation, globalism substantially increased pollution and have a severe impact on natural resources Consumerism Consumerism is a social and economic order based on fostering a desire to purchase goods and services in ever greater amounts. Opponents of consumerism argue that many luxuries and unnecessary consumer products may act as social mechanism allowing people to identify like-minded individuals through the display of similar products, again utilizing aspects of status-symbolism to judge socioeconomic status and social stratification. Critics of consumerism often point out that consumerist societies are more prone to damage the environment, contribute to global warming and use up resources at a higher rate than other societies.
- 5. Inequalities in consumption are stark. Globally, the 20% of the world’s people in the highest-income countries account for 86% of total consumption while the poorest 20% a minuscule 1.3%. More specifically: The richest consume 45% of all meat and fish, the poorest fifth 5% The richest consume 58% of total energy, the poorest fifth less than 4% The richest consume have 74% of all telephone lines, the poorest fifth 1.5% The richest consume 84% of all paper, the poorest fifth 1.1% The richest own 87% of the world’s vehicle fleet, the poorest less than 1% Runaway growth in consumption in the past 50 years is putting strains on the environment never before seen. Sustainable Consumption Sustainable consumption is: ‘the use of goods and services that respond to basic needs and bring a better quality of life, while minimising the use of natural resources, toxic materials and emissions of waste and pollutants over the life-cycle, so as not to jeopardise the needs of future generations’ (OECD, 2002) The great challenge faced by economies today is to integrate environmental sustainability with economic growth and welfare by decoupling environmental degradation from economic growth and doing more with less. This is one of the key objectives of the European Union, but the consequences of climate change and the growing demand for energy and resources are challenging this objective. International Trade
- 6. International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history (Silk Road, Amber Road, etc), its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders. Foreign Direct Investment According to the International Monetary Fund, foreign direct investment, commonly known as FDI, "... “refers to an investment made to acquire lasting or long-term interest in firms operating outside of the economy of the investor." The investment is direct because the investor, (foreign person, company or group of entities), is seeking to control, manage, or have significant influence over the foreign firm” FDI is a major source of external finance which means that countries with limited amounts of capital can receive finance beyond national borders from wealthier countries Why Do Companies Invest Overseas? Market seeking: Firm may go to find new buyers for thier goods and services Resource seeking: A company may find it cheaper to produce its product in a foreing subsidiary. The foreing facilities may be able to superior or les costly access to the imputs: (land, labour, natural resources) than at home Strategic seeking: firms may seek invest in other companies abroad to improve distribution network or new technology
- 7. Efficiency seeking: Multinationals may seek to be more competitive, in response to economic changes Companies doing business across international borders face many risks • Buyer insolvency (purchaser cannot pay); • Non-acceptance (buyer rejects goods as different from the agreed upon specifications); • Credit risk (allowing the buyer to take possession of goods prior to payment); • Intervention (governmental action to prevent a transaction being completed); • Political risk (change in leadership interfering with transactions or prices); and • War, piracy and civil unrest or turmoil; • Natural catastrophes, freak weather and other uncontrollable and unpredictable events Protectionism May be defined as “any policy that is intended to protect domestic industries from import competition” One of the common reason for the creation of trade barriers is to encourage local production by making more difficult for foreign firm to compete there. Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports and prevent foreign take-over of domestic markets and companies. Government implement restriction on importation with the objective of fight unemployment and create jobs in the domestic market. This policy contrasts with free trade, where government barriers to trade and movement of capital are kept to a minimum The main reasons for protectionism are: • Protect local jobs and fight unemployment • Encourage local production to replace imports • Protect infant industries • Reduce dependence on foreign suppliers • Encourage local and foreign investment • Reduce balance payment problems • Promote export activities The World Bank The mission of the World Bank is to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development, through loans, guarantees, and advisory services. The World Bank aims at issues such as building infrastructure (roads, dams, power plants), natural disaster relief, humanitarian emergencies, poverty reduction, infant mortality, gender equality, education, and long-term development issues.
- 8. Furthermore, the World Bank tries to foster social reforms to promote economic development, such the empowerment of women, building schools and health centres, provision of clean water and electricity, fighting disease, and protecting the environment. Since 2000, the World Bank has been devoted to helping implement the Millennium Development Goals (MDGs) The goals are as follows: 1. Eradicate extreme poverty and hunger. 2. Achieve universal primary education. 3. Promote gender equality and empower women. 4. Reduce child mortality. 5. Improve maternal health. 6. Combat HIV/AIDS, malaria, and other diseases. 7. Ensure environmental sustainability. 8. Develop a global partnership for development. Why Is the World Bank Controversial? The World Bank, TWO and International Monetary Fund; all these organizations exemplify the globalization of policymaking, which causes national governments to lose some of their sovereign ability to set the rules of the game for their citizens/residents. While such multilateral organizations have existed for centuries, the particular power of the WTO to force member countries to eliminate some policies that interfere with free trade, and to treat other member countries equally, certainly threatens those who want a more independent national policy framework. And likewise, the lending power of the IMF and World Bank certainly coerce emerging markets to follow economic policies that they might not otherwise choose, in order to obtain funding that is offered conditionally if the recipient country follows the specified policies Glossary Sweatshop: Fabricas donde las condiciones de trabajo son inhumanas, peligrosas y salarios muy Develop countries: Paises desarrollados Developing countries or economies: paises en vias de desarrollo Export fees: derechos de exportacion Comparative advantage: ventajas comparativas Homogenization: homogenizacion Trend: tendencias Flow. Flujo GDP: PIB Producto interios bruto Phasing out: elimination Supply chain: cadena de suministro Network: red Cross border: fronteras Foreign products: productos extrnjeros Capital Inflow: Entrada de capital
- 9. Income: ingresos Economy of scale: economia de escala Outsource: externalizar Slavery: esclavitud Foreign competition: copetencia extranjera Emerging markets: mercados emergentes Ties: lazos Background: contexto Encougrage: fomentar Double-edged sword: arma de doble filo Displace. Desplazar Quarrying: la explotación de canteras Salvage: recoger el material desechado Restraining: prevenir Coerce: Forzar http://www.youtube.com/watch?v=3JW7S8HfBJQ http://video.google.es/videoplay?docid=4455150481097997498