MODULE%203%20INTERNATIONALIZATION%20AND%20GLOBALIZATION

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MODULE 3INTERNATIONALIZATION AND GLOBALIZATION

• By Murat Ali DULUPÇU and Onur DEMIREL
• Süleyman Demirel University

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CONTENT
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• Defining Globalization
• Impacts
• The Debate
• Theories of International Trade
• Regulating Globalization and Internationalization
• Future Qua Vadis?

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Meaning
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• Globalization 3D Figure-geometric
• -conceptual origin- Entirety-Total?
• Homogeneity-similiar
• The origins
• Global Village by Marshall McLuhan in 1960-main
  starting point
• Corporate Giants by Charles Taze Russell in
  1897-the earliest
• Globalization by Ronald Robertson
• DefinitionFast and continuous inter-border
  flow of goods, services, capital (or money),
  technology, ideas, information, cultures and
  nations.
• Covers so many concepts

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HISTORY
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• Milestones
• Globalization since Neanderthal Human
• The Silk Road
• The Golden Age of Islam
• Pax Romana/ Pax Ottoman then towards Pax
  Britannica
• Two significant World Wars and competition
  between the United States of America (USA) and
  the Union of Soviet Socialist Republics
  (USSR)/Blocs/Perestroika-Glasnost
• Stages of Globalization
• Colonization, slave trade, church constructions
  abroad, inventions in the high-capacity
  transportation, industrialization, high
  constructions among provinces and countries,
  electrical and electronic infrastructure.

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(3 main)STAGES
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Stages First Stage 1490 (overseas discoveries) Second Stage 1890 (West extension) Third Stage 1990 (economism)
Impulse Nautical developments Industrialization and its requirements Multi-National Companies in 1970s, Communication Reform in 1980s, Disappearance of Competitors of the West in 1990s
Process Profit and then military occupation Evangelists, then explorers, then companies and finally occupation Cultural-Ideological effect, therefore countrywide spontaneous effect
Medium To get the Gods religion to the pagans Burden of the white man, humane mission, racialist theories Highest level of civilization, governance of international community, invisible hand of the market, globalization for everyones interest
Political Structure Empires and Colonization Nation States Regional and Economic Integrations
Result Colonialism Imperialism Globalization
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TRADE
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• World trade volume of 380 billion in 1950 has
  increased to 21.2 trillion in 2005.
• Catalysts of the increase
• Decrease in tariffs
• Trade agreements signed among countries and
  regions
• Regional integrations
• Developments in and cheapening in communication
  and transportation technologies
• The mass and just-in-time production
• The standardization of tradable goods
• Convergence of human needs
• The creation of new needs for humankind (New
  World Order)

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THEORIES OF MNC
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• Multinational Companies (MNCs) ate the companies
  that make FDI and produce value added in more
  than one country and own the process.
• Theories of MNCs
• Location Theory (focus on resources)
• Internationalization Theory (Instead of various
  companies only one-company-production is
  advantageous. Focus on technology transfer and
  vertical integration)

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THEORIES of fdi

• Product Life Cycle Theory
• By Vernon, 1966, Where to produce? Developed vs.
  developing economies, focus on standardization
  and production cost
• Internalization Theory
• By Buckley and Casson, 1976, How to produce? By
  licensing or leasing vs. FDI, focus on
  transportation costs, trade barriers, foreign
  market information, information asymmetries
• OLI (Eclectic) Paradigm
• Ownership (Focus on patent, trade secrets,
  trademarks, economies of scale and synergy,
  diffusion of geographical risk, cross-country
  arbitrage)
• Location (Production efficiency, transportation
  cost, chep labor, proximity to customers, local
  image, trade applications)
• Internalization (Imperfect competition)
• Other Theories
• Caves Economies (Focus on firm advantages)
• Oligopolistic Reaction Theory (By Knickerbocker,
  Follow-the-leader)
• Hymer and Kindlebergers Theory (Focus on
  intermediate good transfers of MNCs)

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Death of distance
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• Transportation costs ? 50
• Airline transportation ? 80
• Transatlantic Phone Calls ? 99

COST REDUCTIONS
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End of nation state

• Debate on the future of nation-states
• Structures such as European Union

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Hegemony of rd

• RD as a of GDP increases
• Severe relationship among RD, invention and
  transformation of technology

  1700 - 1900 1900 - 2000 2000 -
Economics Agriculture Manufacture Information
Technology Plow Machine Computer
Output Food Good Information
Resource Land Capital Knowledge
Unit Family Company Network
Energy Muscle Fossil Fuels Brain
Competition Local National Global
Education Demand Focus Primitive Minimal "What?" Procedures Remarkable "How?" Thought Continuity "Why?"
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Cultural erosion

• Cultural Integration ? McDonaldization
• vs.
• Effect of Local Cultures ? Impossibility of a
  single global culture

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glocalization

• Creation of goods and services that are
  customized to supply global markets but
  consistent with local values (Hamburgers with
  local spices, meat, so on)
• Globalization of the local and localization of
  the global simultaneously

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Visible impacts

• Information Technologies and Technology Flows
• Scientific invention and innovation
• Diffusion of pre-existing technologies
• Benefiting new technologies
• Labor Hyper-Mobility and Global Distribution of
  Labor

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of Immigrants (Million People) The Ratio of Immigrants to the Population of the Region
Europe 64.1 8.8
Asia 53.3 1.4
North America 44.5 13.5
Africa 17.1 1.9
Latin America 6.7 1.2
Oceania 5.0 15.2
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Deep impacts - 1

• Economic Issues
• Income, Income Distribution and Poverty
• Huge income distribution inequality among people
  and countries
• Different income growth rates
• Deterioration in the world income distribution
• Reduction in absolute poverty
• Capital, Finance, FDI and MNCs

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FDI INFLOWS
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Deep impacts - 2

• Production and Competitiveness
• Globalization of Knowledge
• Environmental Issues
• International effects of environmental problems,
  Limited natural resources, Lack of global
  management of environment

GLOBAL COMPETITIVENESS INDICES
Rank of Country 2005 2006 2007- 2008
Germany 6 8 5
Czech Republic 29 29 33
Lithuania 34 40 38
Turkey 71 59 53
Singapore 5 5 7
Korea 19 24 11
China 48 54 34
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• Social Issues
• Huge differences in
• Level of education, infrastructure, gender
  discrimination, life expectancy at birth, infant
  mortality, health expenditure per capita

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The debate - 1

• Advocates of Globalization Neo-Liberal View
• World Economic Forum
• Established in Sweden, 1971.
• Members ? 1000 largest firms 200 relatively
  small firms from developing countries
• Its motto ? Entrepreneurship in the global
  public interest
• The Washington Consensus
• Initiated by John Williamson in 1989
• Has 10 special economic policy recommendations
  for the countries that experience economic
  crises.
• These recommendations are taught to be standart
  reform package and criticized.

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The debate - 2

• Opponents of Globalization Anti-Globalist
  Movement
• World Social Forum
• Members ? Open to everyone
• Its motto ? Another world is possible
• International Forum on Globalization
• Established in 1994
• Criticizes the lack of free trade and
  neo-liberalism criticism.
• Peoples Global Action
• Established in 1998, Geneva
• Anti-capitalist
• CorpWatch
• Established in 1996 and took this name in 2001
• Drew attention with the analyses of poor working
  conditions
• Friends of the Earth
• Established in 1971
• Deals with environmental issues

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Theories of international trade-1

• Smith and Ricardo Classical View
• Adam Smith, 1776 and David Ricardo, 1817
• Very restrictive assumptions
• First win-lose then win-win
• Absolute advantage then comparative advantage
• Neo-Classical Theories of Trade
• Opportunity-cost instead of labor theory of value
• Transformation curves, demand conditions
• Heckscher-Ohlin Theory (Factor Endowment Theory)
• Factor Price Equalization
• Income Distribution
• Rybczynski Theory

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Theories of international trade-2

• Alternatives
• Skilled-Labor Theory
• Focus on the differences in skilled-labor among
  countries
• Technology-Gap Theory
• By Posner in 1961
• Initial version of Product Life Cycle Theory
• Product life Cycle Theory
• Preference Similarity Theory
• By Linder in 1961
• Focus on the similarity of tastes and
  preferences-demand
• Theory of Economies of Scale
• Monopolistic Competition Theory
• Focus on differentiated products
• New Trade Theories
• Internalizes the concepts of scale, network,
  innovation and global competition

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international organizations-1

• International Monetary Fund IMF
• Established in 1944
• Has 185 member states
• Promotes international monetary cooperation,
  exchange stability and orderly exchange
  arrangements fosters economic growth and high
  level of employment provides temporary financial
  assistance to countries to help balance of
  payments adjustment
• Control and regulation process involves
• Surveillance
• Financial Assistance
• Technical Assistance
• World Bank WB
• Established in 1944
• Has 185 member states
• Worldwide poverty alleviation
• Made up of 2 unique development institutions
• International Bank for Reconstruction and
  Development (IBRD)
• International Development Association (IDA)

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international organizations-2

• Organization for Economic Co-Operation and
  Development OECD
• Formed as OEEC in 1947
• Named as OECD in 1961
• Has 30 member states
• World Trade Organization WTO
• Has 151 members
• GATT is the principle rule book for trade in
  goods
• Promotes freer trade
• United Nations UN
• Roots go back to 1865, International
  Telecommunication Union
• Has 192 member states.
• Deals with the problems challenging humanity

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international integrations-1

• European Union EU
• Established in 1951 as the European Coal and
  Steel Community by six founding members
• Today has 27 member countries
• Acts in a wide range of policy areas economic,
  social, regulatory and financial
• Asia-Pasific Economic Co-Operation APEC
• Established in 1989
• Has 21 members
• Works in 3 broad areas to meet the Bogor Goals
• Trade and investment liberalization
• Business facilitation
• Economic and technical cooperation
• North Atlantic Free Trade Agreement NAFTA
• Came into effect on Januart 1st, 1994
• Members are Canada, Mexico and the USA
• Freer trade and the protection of intellectual
  property rights

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international integrations-2

• European Free Trade Agreement EFTA
• Established in 1960
• Updated in 2001
• EEA has 27 EU members and entered into force in
  1994
• ASEAN Free Trade Agreement AFTA
• Established in 1967 in Bangkok
• Has 5 members
• Central European Free Trade Agreement CEFTA
• Signed in 1992 and entered into force in 1994
• Has 8 members

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Future Qua Vadis? - 1

• Both capitalism and communism lack absolute
  success!
• But globalization is not a magic cure for the
  problems of humanity either!
• World still has growth potential, mainly due to
  developing countries
• The growth in developing countries depletes
  natural resources and therefore future growth
  potential
• The high growth rates in developing countries
  decreases poverty
• However, imbalances still prevail!
• Divergences in incomes produce polarization and
  therefore threat!

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Future Qua Vadis? - 2

• Polarization causes migration to be the only
  salvation in developing countries
• Will the world continue to rotate from west to
  east or will it reverse?
• The future of globalization and the world depends
  on the process itself and how it is managed.

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Thank youfor your attention
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