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, crossboundary water and air pollution, over-fishing of the ocean, and the
spread of invasive species.

Pros and Cons of Globalization

1. Economic Aspect
2. Cultural Aspect
3. 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 others 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 receivers 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 Starbucks support to trademark 3 of its
coffees in US
o $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
o
o

More than 100 countries

30,000 restaurants
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 China
o Working 94 hours a week
o 17 cents, workers are paid for making each doll $19,
retail price in US
o 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.
Indias 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.
2.
3.
4.

Economic Integration
Personal contacts
Political engagements
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
The amount
missions
The amount
The amount

of membership in international organizations

of personal and financial contribution to UN peace keeping
of international treaties ratifications
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 globally
o consumers tastes and preferences are converging on some global
norm
o 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?

Institutions
o help manage, regulate, and police the global marketplace
o promote the establishment of multinational treaties to govern the
global business system

Examples include
o the General Agreement on Tariffs and Trade (GATT)
o the World Trade Organization (WTO)
o the International Monetary Fund (IMF)
o the World Bank
o the United Nations (UN)

What Do Global Institutions Do?

The World Trade Organization (like its predecessor GATT)
polices the world trading system
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 security
o develops friendly relations among nations
o cooperates in solving international problems and in promoting
respect for human rights
o is a center for harmonizing the actions of nations
o
o

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
o

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

Technological change

o
o
o

microprocessors and telecommunications

the Internet and World Wide Web
transportation technology

What Does Globalization Mean For Firms?

Lower barriers to trade and investment mean firms can
o
o

view the world, rather than a single country, as their market

base production in the optimal location for that activity

Technological change means

o
o
o
o
o

lower transportation costs - firms can disperse production to

economical, geographically separate locations
lower information processing and communication costs - firms can
create and manage globally dispersed production systems
low cost global communications networks - help create an
electronic global marketplace
low-cost transportation - help create global markets
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 Picture
2. the Changing Foreign Direct Investment Picture
3. the Changing Nature of the Multinational Enterprise
4. 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 businesses
o 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
reforms
o between 1983 and 2008, FDI in China increased from less than $2
billion to $90 billion annually
o 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 1990s
o 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 services
o greater economic growth
o higher consumer income, and more jobs
Critics worry that globalization will cause
o job losses
o environmental degradation
o 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 costs
o countries will specialize in what they do most efficiently and trade
for other goodsand 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 todays 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 Worlds 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 investment
o implement economic policies based on free market economies
o 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 different

o
o
o

the range of problems confronted in an international business is

wider and the problems more complex than those in a domestic
business
firms have to find ways to work within the limits imposed by
government intervention in the international trade and investment
system
international transactions involve converting money into different
currencies