Globalization

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Globalization

• Andriosopoulos, Kostas
• Bhuta, Viral
• Kuoh, Ndoumbe
• Mattuchio, Todd
• Middleton, Patrick
• Pagani, Brett
• Walsh, Sean

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Definition

• Globalization is seen primarily as an economic
  phenomenon involving increasing interaction and
  integration of national economic systems through
  the growth in international trade, investment,
  and capital flows.
• Increase in cross border social, cultural, and
  technological exchange.

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Factors of Globalization

• The existence of a global infrastructure
• Changes in Transportation and Communication
• Reduction in Trade Barriers
• International Division of Labor
• Internationalization of Finance
• New Technology Systems
• Growth of Consumer Markets

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Key Players

• Businesses
• Transnational Banks and Corporations
• WTO - World Trade Organization
• Entrepreneurs

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Key Issues

• Has globalization reduced jobs and wages in the
  US?
• Who gains and who loses from this process?
• What is the effect of globalization on the
  environment?

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GLOBALIZATION EU

• The EU consisting of 25 countries is now the
  largest market of the world (450 mil. people of
  high educational level).
• Integration was a reaction mechanism towards
  economic decline.
• EUs market center is moving to the North and
  brings to the economy a strong agricultural
  factor.

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GLOBALIZATION EU

• Competition for new investment attraction between
  the old and new members will increase.
• Industrial activity is moving to the Balkans and
  Eastern Europe.
• For example German Siemens, announced the
  transfer of 1/3 of its IT department (10,000
  jobs), to Eastern Europe.

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GLOBALIZATION EU

• European productivity will be boosted in response
  to lower labor costs and continuing
  reconstruction of enterprises.
• Jobs will be lost in South European countries
  like Greece, Portugal and Spain.
• Demographic structure of East and Central Europe
  tends to become the same as Western Europes.
• Immigration movements will lead the recipient EU
  countries (mostly the old ones) to higher
  unemployment, lower wage growth but a slightly
  lower inflation rate.

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Globalization Africa

• Less then 1.5 of world trade, but 1/3 of the
  WTO membership
• Sub-Saharan Africa trade growth of 39, while
  world trade has grown 85
• Exports concentrated around primary resources
• South Africa and Nigeria account for half the
  continents total trade, and more than half of
  its GDP.

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Globalization Africa

• A few positives
• Regional integration
• Outsourcing telecommunications, accounting
• But many negatives.
• - Unsupportive investment climate (customs,
  corruption, telecoms, )
• - Low productivity of labor force
• - Exchange rate unfavorable to exports.

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East Asian Development

• GDP growth led by strong exporting
• Rapid growth fueled by large foreign direct
  investment
• Highly leveraged corporations
• Large dependence on FDI leaves them vulnerable to
  supply shock and credit crises
• Advanced countries v. developing countries
• The advanced Asian countries mutually benefit
  from increased incomes and higher GDP in China
• They also fear China will compete for market
  share in major export markets

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Globalization China

• Low wages, large population
• Rapid growth fueled by strong exporting and large
  foreign direct investment
• Income per capita has increased sevenfold since
  1978
• Changes in transportation and infrastructure
• In 1995, 60 of transportation in Shanghai
  consisted solely of biking and walking.
• In 1949, more than one third of the counties were
  not accessible by road. Now all counties and
  towns are accessible by road

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Globalization China

• Changes in communication
• In 1978, there were no mobile telecommunications
  in China. By 1998, there were 43.65 million
  users of mobile telecommunications technology in
  China
• Rampant pollution a byproduct of the rapid growth
  in China
• In Shangba Village, dubbed cancer village,
  widespread pollution from mining has turned the
  rivers to a rust red color. Villagers have no
  clean water to drink.

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Macro-economic Consequences

• International Trade Openness World Poverty?
• International Trade Openness Inequality?
• Is Globalization Causing A 'Race To The Bottom'
  In Environmental Standards?

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Globalization and Poverty

• Poverty is affected by the pace of increase in
  the total output of goods and services in the
  society.
• The income of the poor rises proportionally with
  the growth rate of overall per-capita income in a
  country. (Dollar and Kraay, 2000)

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Globalization and Poverty
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Globalization and Poverty

• Efficient use of resources
• Increased competition
• Spread of technology and ideas
• Increasing the ratio of trade to GDP by 1 point
  raises per-capita income by between 0.5-2.

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Globalization and Inequality

• No simple association between trade openness and
  inequality.
• Limited knowledge of the factors affecting income
  distribution.
• Rapid changes in rural ? urban
• Equivocal evidence.

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Globalization and Inequality

• Inequality between countries
• Contrary Evidence
• Gap between the rich and the poor countries has
  doubled
• Evidence that liberalizing poor countries grow
  faster than the rich ones.

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 Share of Global Income Going to Richest 20 and
Poorest 20 of World Population
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Evolution of GNP in the major regions of the
world
Increasing the ratio of trade to GDP by 1 point
raises per-capita income by between 0.5-2.
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East Asia, the largest and most rapid reduction
in poverty in history
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Globalization and the environment

• Pollution due to industrialization and rapid
  urbanization
• Shrinking forests, cultivable land and natural
  resources
• Increased energy consumption and carbon-dioxide
  emissions

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Globalization and the environment

• Incentive to adopt better policies
• Access to latest technology
• Increasing consumer demand for greener imports
• Environmental policies becoming an integral part
  of economic development
• Steel-production in open economies 17 less
  pollution-intensive than in closed economies

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Globalization and the environment

• Harmful emissions have an 'inverted U curve'
  relation with income

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Pollution in China