Professional Documents
Culture Documents
Globalization
Chapter 1
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Chapter Outline (1 of 2)
Waves of Globalization
The U.S. as an Open Economy
Why is Globalization Important?
Globalization and Competition
Common Fallacies of International Trade
Does Free Trade Apply to Cigarettes?
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service or otherwise on a password-protected website for classroom use.
Globalization of Economic Activity
(1 of 2)
Globalization
◦ Greater interdependence
Countries and their citizens
◦ International flows
Goods and services
People
Investments in equipment, factories, stocks, bonds
Non-economic elements
Culture and the environment
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service or otherwise on a password-protected website for classroom use.
Globalization of Economic Activity
(2 of 2)
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service or otherwise on a password-protected website for classroom use.
Waves of Globalization (1 of 11)
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service or otherwise on a password-protected website for classroom use.
Waves of Globalization (2 of 11)
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Waves of Globalization (3 of 11)
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Waves of Globalization (4 of 11)
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Waves of Globalization (5 of 11)
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service or otherwise on a password-protected website for classroom use.
Waves of Globalization (6 of 11)
◦ Agglomeration economies
Benefits only those that are in the clusters
No benefit for those that are left out
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Waves of Globalization (7 of 11)
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service or otherwise on a password-protected website for classroom use.
Waves of Globalization (9 of 11)
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service or otherwise on a password-protected website for classroom use.
Waves of Globalization (10 of 11)
◦ World
More globalized - international trade, capital flows
Less globalization - labor flows
◦ Foreign outsourcing
Certain aspects of a product’s manufacture are
performed in more than one country
Manufacturing moved to wherever costs were lowest
Job losses for blue-collar workers
Cries for the passage of laws to restrict outsourcing
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service or otherwise on a password-protected website for classroom use.
Table 1.1
Manufacturing an H-P Pavilion…
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service or otherwise on a password-protected website for classroom use.
Table 1.2
Globalization Goes White Collar
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service or otherwise on a password-protected website for classroom use.
Waves of Globalization (11 of 11)
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The U.S. as an Open Economy(2 of 8)
Openness
◦ Large countries – lower measures of openness
Less reliant on international trade
Many firms in larger countries can attain an optimal
production size without having to export due to the
population and economic size
◦ Small countries – higher measures of openness
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Table 1.4
Exports & Imports as a % of GDP...
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The U.S. as an Open Economy(3 of 8)
Openness of the U.S. economy, 1890 to
2013
◦ Less open to international trade, 1890 to 1950
Relatively high openness in the late 1800s
Rise in world trade: technological improvements in
transportation and communications
Two world wars + Great Depression of the 1930s
Reduced dependence on trade
National security reasons
Protect home industries from import competition
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The U.S. as an Open Economy(4 of 8)
Openness of the U.S. economy, 1890 to 2013
(cont)
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Table 1.5
Top 10 Countries, U.S. Trades, 2012
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The U.S. as an Open Economy(5 of 8)
Labor mobility in U.S. has not risen in past
100 years
◦ 1900, 14% of U.S. population: foreign born
◦ 1920s to 1960s – immigration sharply curtailed
Foreign-born U.S. population: 6%
◦ 1960s, liberalized restrictions; By 2014
12% the U.S. population was foreign born
Foreigners: 14% percent of the labor force
Half – from Latin America
One quarter – Asians
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The U.S. as an Open Economy(6 of 8)
Capital flows to the U.S.
◦ Foreign ownership of U.S. financial assets
Risen since the 1960s
◦ 1970s, OPEC - investments in U.S. financial
markets
◦ 1980s, major flows of investment funds to U.S.
◦ By late 1980s
U.S. - consuming more than it produced
Net borrower from the rest of the world
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The U.S. as an Open Economy(7 of 8)
International banking
◦ Average daily turnover in foreign-exchange
market
Today: almost $4 trillion
1986: $205 billion
◦ The trading day begins in Tokyo and Sydney and
moves around world in unbroken 24 hours cycle
◦ London - the largest center for foreign-exchange
trading
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The U.S. as an Open Economy(8 of 8)
Commercial banking
◦ U.S. banks
Worldwide branch networks, 1960s and 1970s
Loans, payments, foreign-exchange trading
◦ Foreign banks
Increased presence in U.S., 1980s and 1990s
Today: 250 foreign banks
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Why is Globalization Important? (1 of 2)
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Why is Globalization Important? (2 of 2)
Open economies
◦ More competition which lowers prices
◦ More firm turnover
Improvements for the industry
Economic growth rates - close relation to:
◦ Openness to trade
◦ Education
◦ Communications infrastructure
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Globalization and Competition (1 of 3)
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service or otherwise on a password-protected website for classroom use.
Globalization and Competition (2 of 3)
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service or otherwise on a password-protected website for classroom use.
Globalization and Competition (3 of 3)
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service or otherwise on a password-protected website for classroom use.
Common Fallacies of International Trade
(2 of 2)
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Table 1.6 – Advantages and
Disadvantages of Globalization
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