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What does globalization means? Forces behind globalization Positive and negative effects Consumerism International Trade FDI Foreign Direct Investment Protectionism The World Bank

Is it the integration of economic, political, and cultural systems across the globe?

Is globalization a force for economic growth, prosperity, and democratic freedom?

Is it the dominance of developed countries in decision-making, at the expense of poorer, less powerful nations?

Does globalization only benefit the rich or can the poor take advantage of it to improve their well-being?

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.

Globalisation is the homogenisation 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

Increased expansion and technological improvements in transportation and communications networksberalization of cross-border trade and resource movements

Development of services that support international business activities

Growing consumer demand for foreign products Increased global competition Expanded cross-national treaties and

agreements

Positive Increased competicion

in domestic industry Increased Employment-

create new jobs Capital Inflow: creation

of firms, leads to increase income levels- consumer demand

Spread of technology: raise worker´s skills

Economies of scale Spread of Culture

NegativeOutsource their manufacturing and white-collar jobs to developing economies Poor countries suffering disadvantage (export-import)It has led to an increase in activities such as: child labour and hard working conditionsConsumerism habits has increase junk food, branded products, Environmental degradation

Inequalities in consumption:The 20% of the world’s people in the highest-income countries account for 86% of total consumption. The poorest 1.3%. Accounts 20% of consumptionConsumption in the past 50 years is putting strains on the environment never before seen.

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 incline to damage the environment, contribute to global warming and use up resources at a higher rate than other societies.

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 separating 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 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).

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 homeStrategic seeking: firms may seek invest in other companies abroad to improve distribution network or new technology Efficiency seeking: Multinationals may seek to be more competitive, in response to economic changes

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

Corporations in wealthier countries are shutting down their cost domestic manufacturing operations and sending them overseas to developing countries (“outsourcing”)

Corporations switch from domestic production toward reliance on imports, and to cause higher unemployment domestically

workers overseas may be exploited as a result of this shifting production.

moving manufacturing operations overseas reduce the competitiveness of the domestic economy.

Concerns About Shifting Production Due to Foreign Investment

Certain sectors, such as agriculture, textile do continue to seek out cheap labour sources, these sectors represent small fraction of the global production of goods and services.

With the service sector more international investors seek higher productivity workforces as opposed to low wage ones, and thus look for countries with more skilled workers, despite the higher wages associated with those skills.

Protectionism is the economic policy of restricting 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.

The main reasons for protectionism are:Protect local jobs and fight unemploymentEncourage local production to replace importsProtect infant industries Reduce dependence on foreign suppliersEncourage local and foreign investmentReduce balance payment problemsPromote export activities

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.

Why is the World Bank Controversial? Governments lose some of their sovereign ability to set the rules of the game for their citizens/residentsThe power of the World Trade Organisation (WTO) to force member countries to eliminate some policies that interfere with free tradeThe lending power of the IMF and World Bank certainly coerce emerging markets to follow economic policies that they might not otherwise choose