globalization theme: impact of globalization and related responses and related responses

GlobalizationGlobalizationTheme: Impact of globalization Theme: Impact of globalization and related responsesand related responses

Theme Mind Theme Mind MapMap

Different perceptions of Different perceptions of globalizationglobalization

Discourses on Discourses on globalizationglobalization

Economic Economic dimension of dimension of globalizationglobalization

Cultural dimension Cultural dimension of globalizationof globalization

Reactions Reactions towards towards globalizationglobalization

The mainland and Hong The mainland and Hong

Kong under globalizationKong under globalization

Impact of Impact of economic economic globalizationglobalization

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12

57

11

48

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Political dimension of Political dimension of globalizationglobalization

Impact of Impact of political political globalizationglobalization

Factors Factors influencing the influencing the spread and spread and evenness of evenness of globalizationglobalization

9Impact of Impact of

globalization and globalization and related responsesrelated responses

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Impact of cultural globalizationImpact of cultural globalization

4. Impact of economic

globalization

Exploration Journey 2: Where has all the money gone under globalization?

To analyze the relationship between globalization and the problem of the widening gap between rich and poor

To understand wealth distribution and creation under globalization

To assess the effectiveness of global economic institutions in assisting poor countries to eliminate poverty

Exploration Journey 1: Has economic globalization created wealth and job opportunities?

To understand the impact of economic globalization on wealth creation and employment

To analyze the relationship between economic globalization and worsening working conditions

4. Impact of economic

globalization

To analyze the impact of global financial crises on various countries

Exploration Journey 3: Global financial crises—— Is globalization the troublemaker? To understand the

efforts and limitations of transnational governance institutions

To understand the reasons and background of global financial crises

To assess whether economic globalization brought more advantages or disadvantages

Has economic globalization created wealth and job opportunities?

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ExplorationExploration

JourneyJourney

Exploration Journey 1: Has economic globalization created Exploration Journey 1: Has economic globalization created wealth and job opportunities?wealth and job opportunities?


What is the impact of economic

globalization on employment?

Does economic globalization promote development?Does economic globalization promote development?

Positive influences

Creation of job opportunities

Transfer of capital and production of technology

Negative influences

Continuous rise in unemployment rate

Job migration to countries in the South

Mergers and acquisitions create redundant staff

Creation of wealth

Reduction of costs



Creation of wealth

Countries around the world make use of comparative advantage to promote national development.

Countries focus on producing and exporting products in which they have a comparative advantage and importing products in which they do not.

Most of the newly industrializing countries (NICs) have prospered in a context of significantly increased exports of global goods and services.E.g., Between 1978 and 1993, China’s Gross National Product tripled.

A country can produce a product at a lower cost than another country.

The world’s total production output will Increase.

The impact of globalization on employmentThe impact of globalization on employment



Reduction of costs

Time and space have been ‘compressed’ under globalization. Transnational corporations find the most suitable production sites across the globe.

Workers’ wages, rents, and the prices of raw materials are lower in developing countries.

Transnational corporations can reduce costs and earn more profits.




Creation of job opportunities

Service industries have significantly expanded their payrolls.

Transnational corporations usually create new jobs in areas where they set up new businesses. This alleviates the unemployment problem in developing countries.

Subcontracting by transnational corporations brings a large number of workers a livelihood. By 1992, a total of 29 million people were employed.




Transfer of capital and production technology

International division of labour brings in a large amount of international capital and technology for them.

E.g., ‘Silicon Valley of India’: Bangalore




Continuous rise in unemployment rate

As of the late 1990s, over 800 Export Processing Zones (EPZs) across the world generated only 27 million jobs.

Total increased employment in the South created less than 700,000 new jobs annually from 1960 to 1990.

In general, the jobs created under globalization need less labour.

The end of central planning aggravated the unemployment problem of ‘transition countries’.




Mergers and acquisitions create redundant staff

Mergers and acquisitions led to job overlaps. To cut costs, a large number of people were laid off.




Job migration to countries in the South

Transnational corporations exploited the possibilities of globalization to move their production facilities to low-wage sites in Southern and Asian countries.

This led to job losses in the North.

Between 1960 and 1990, some 6 to 12 million jobs were relocated from the North to the South.




Is globalization the only cause of unemployment?



Is globalization the only cause of unemployment?Is globalization the only cause of unemployment?

The emergence of new labour-saving technologies (e.g., digital computers and robotics)

Other types of unemployment (e.g., Job seekers do not meet the skill requirement of the jobs. This is a matter of structural unemployment.)

Other factors leading to unemployment

So, globalization is not the only cause of unemployment.



Do workers not have any choice

under globalization?



• Eastern countries practiced state socialism. Workers could obtain substantial benefits.

• In the North, workers also benefited from the welfare state.

• Trade unions in many countries in Latin America hold considerable power. They can protect the interests of workers.

Before globalization, working conditions improved, because:

Do workers not have any choice under Do workers not have any choice under globalization?globalization?



Globalization has shifted the political balance substantially against workers, because:

The global mobility of capital has not been matched with an equivalent global mobility of labour, and so it has boosted the bargaining power of employers over employees.

Workers are far more bound to a territorial place and are forced to accept the terms that the jobs offer.




Globalization has shifted the political balance substantially against workers, because:

The global mobility of capital has not been matched with an equivalent global mobility of labour, and so it has boosted the bargaining power of employers over employees.

Workers are far more bound to a territorial place and are forced to accept the terms that the jobs offer.




Worker protection worsens.

Two major problems of worker

protection

SweatshopsFlexible workers




Sweatshops

Refer to the poor or dangerous working environment provided by corporations to their staff. For example:

Exposure to hazardous materials without proper safety measures

Poor hygiene in working places

The use of violence or unreasonable measures on employees




The governments are not willing to lose the economic benefits produced by corporate businesses.

Workers seldom have the chance to complain or look for help.

Sweatshops




Since the 1990s, a consumer campaign called ‘Anti-

Sweatshop Campaign’ (反血汗工場行動 ) emerged in Europe and the USA. Through opposition and boycott, consumers forced manufacturers to stop exploiting workers. For example, there were large-scale campaigns opposing and boycotting Nike, as the corporation used child labour, and exploited the workers’ interests. Similar campaigns were also launched against other brand companies, such as Gap, Reebok, Adidas, etc. Under public pressure, these corporations started to take the matter seriously so as not to ruin the corporation’s reputation or affect the business performance. They also set guidelines on corporate behaviour and employed experts to supervise if anyone did not follow them, to make sure that the subcontractors respected workers’ interests.

Consumers can do a bit more

　　 In the US school campuses, students launched the ‘Anti-Sweatshop Campaign’, in which they made sure the clothes with their university logo were not made under sweatshop conditions, exploiting the workers’ interests. Students from around 200 universities, colleges and secondary schools joined the campaign. If they found out the clothes sold in the school campus were made with the exploitation of workers’ interests, they would boycott the products, and would demand the school to stop business relations with the company or factory.

As to Europe, there was the ‘Clean Clothes Campaign’ (乾淨衫運動 ), forcing different brands and their factories to respect workers’ interests through publicity and consumer education.

Consumers can do a bit more

Flexible workers

‘Flexible’ workers:

Only a few of these workers are able to earn substantial wages and benefits, have good promotional prospects, or long-term job security.

They lack a job for life, change jobs frequently, and need retraining to meet altered market demands.




Different types of marginal workers in Hong Kong (1996 － 99):

Year Unemployment Under-

employmentWorking

poor

Total marginal workers

Proportion of labour

force

Increase per year

1996 86,100 51,700 306,700 444,500 14.4% N/A

1997 71,300 37,600 361,500 470,700 14.6% 5.9%

1998 157,600 85,400 352,800 595,800 17.7% 26.6%

1999 217,100 103,300 322,800 643,200 18.5% 8.0%

(Source: Oxfam CyberSchool, Oxfam Hong Kong. Downloaded from http://www.cyberschool.oxfam.org.hk/.)

Where has all the money gone under globalization?

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ExplorationExploration

JourneyJourney

Exploration Journey 2: Where has all the money gone Exploration Journey 2: Where has all the money gone under globalization?under globalization?


Does globalization create wealth, but at the

same time cause uneven distribution of

wealth?

Global products and

services of newly industrializing

countries (NICs) greatly increased, and thus the NICs

became more prosperous.

E.g., China’s GDP increased three

times between 1978 and 1993.

Poor countries mainly export

primary commodities. The prices have been decreasing since

the 1970s.

Every year, the world’s 48 poorest

countries would collectively lose

$300 – 600 million per annum.

Does globalization create wealth but also lead to Does globalization create wealth but also lead to uneven wealth distribution?uneven wealth distribution?




Global products and

services of newly industrializing

countries (NICs) greatly increased, and thus became more prosperous.

E.g., China’s GDP increased three

times between 1978 and 1993.

Poor countries mainly export

primary commodities. The prices have been decreasing since

the 1970s.

Every year, the world’s 48 poorest

countries would collectively lose

$300 – 600 million per annum.



Wealth distribution is getting more uneven!!!

Between 1970 – 2008, the per capita GDP of developed countries increased by more than double.

The per capita GDP of developing countries almost remained unchanged.




Between 1970 – 2008, the per capita GDP of developed countries increased by more than double.

GDP per capita of developing countries almost remained unchanged.




Globalization widened the wealth disparity between the

poor and rich countries.

Under globalization, wealth distribution is becoming uneven.

Should transnational corporations be held

accountable?




(Source: Oxfam CyberSchool, Oxfam Hong Kong. Downloaded from http://www.cyberschool.oxfam.org.hk/.)

Brand name company and retailer: 75%

Raw materials: 10%

Workers’ wages: 1.75%Factory operation costs:

3.25%

Quotas / tariffs: 5%

Procuring / trade company: 4.5%

Transport: 0.5%

Most of the profits end up in the hands of the brand

name company and retailer.

Workers can only enjoy an

extremely low share of the

outcome.




Distribution of the retail price of branded sportswear

　 Gini Coefficient is used to measure the difference in income distribution to compare wealth disparity.

Gini Coefficient ranges from 0-1, with 0 indicating complete equality and 1 indicating extreme wealth disparity. The bigger the coefficient, the bigger the wealth disparity.

In reality, there is no society with complete equality or absolute wealth disparity, so the Gini Coefficient is within the range of 0-1 all around the world.

What is the ‘Gini Coefficient’?

Why is it so difficult for poor countries to get rid of poverty?



Debt crisis in the South

Crisis management measures by global

economic institutionsDebt succession

It is difficult for poor countries

to get rid of poverty.

Why is it so difficult for poor countries to get rid Why is it so difficult for poor countries to get rid of poverty?of poverty?



Debt crisis in the South

‧After the Second World War, developing countries in the South were offered large numbers of loans.

‧Together with the loan interest, the payments were so enormous that developing countries found them hard to settle.

‧During 1970-97, countries in the South increased their global debts by 16 times.

Poor countries need to mobilize national wealth to settle debts, so they may not accumulate wealth to invest in

development projects.




‧In response to the international debt crisis, the US Secretary of the Treasury James Baker proposed the ‘Baker Plan’, to demand the World Bank and IMF to impose more thorough ‘adjustment’ on the economic policies of debtor nations.

Crisis management measures by global economic institutions

James Baker




‧The structural adjustment supervised by the World Bank and the IMF led to a loss of economic freedom which was previously enjoyed by poor countries. The adjustment also failed to resolve the debt crisis effectively.

‧A study pointed out that: the longer the country operates under structural adjustment, the worse its debt burden becomes.

‧Structural adjustment not only affected the economies of poor countries, but also put an obstacle to their social development.





(Source: Committee for the Abolition of Third World Debt, 2009. Downloaded from http://www.cadtm.org/.)

4.0%

11.4% 12.6%

6.7%

20.4%

15.0%

9.2%

36.0% 35.0%

40.0% 40.0%

33.0%

46.0%

14.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Cameron Côte d'Ivoire Kenya Zambia Niger Tanzania Nicaragua

Percentage

Social Services Expenditure

Debt repayment expenditure

Why is it so difficult for poor countries to get rid of Why is it so difficult for poor countries to get rid of poverty?poverty?




To repay the debts, the Third World countries had to cut expenditures in social services, but it had an impact on people’s livelihood.

‧Since the 1980s, developing countries increased their debts continuously:

‧An ever-increasing proportion of the new debts was to service interest payments on the old debts and to keep money in circulation.

Debt succession

Among the $1,300 billion debts accumulated during 1980-94, a majority were for the interest yet to be paid.

By late 1980s: $1,500 billion 2002: $2,500 billion

By 1996, the total debts of the poorest 41 countries in the world amounted to over US$250 billion.

Debts further weaken the capacities of the poor countries to eliminate poverty.




‧The debt relief programmes put forward by global economic institutions could not effectively solve the debt crisis.

Countries in the North made use of the advantages to protect their own interests in the adverse environment instead of lending a hand to the countries in the South that were facing crisis.




Debt succession

Groups called on reduction on loan repayments before eliminating poverty

Different places around the world called on the affluent countries to exempt a part of the loan repayment by poor countries. For example, over 500 non-governmental groups around the world jointly promoted ‘Make Poverty History’ and the ‘Jubilee Debt Campaign’ in 2005, which aim to eliminate debts for poor countries.

　

The effectiveness of these campaigns was seen. For example, in 2005, the G8 agreed to exempt countries in heavy debts from loan repayments to institutions like the World Bank, IMF and African Development Fund in response to demands from the international community. Mozambique in Africa was one of the beneficiaries. She could then spend the money, which was previously reserved for loan settlement, on vaccinations for children of the country to build up resistance to fatal diseases.

Global financial crises ─ Is globalization the troublemaker?

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Exploration Exploration

JourneyJourney

Exploration 3: Global financial crises Exploration 3: Global financial crises — — Is globalization the troublemaker?Is globalization the troublemaker?


Which financial crises affected

the globe?

1990 2000

Financial crisis in Britain, Italy and Switzerland (1994-95)

Financial crisis in Latin America (early 1990s)

Asian financial crisis (1997-98)

Financial crisis in Russia (1998)

Financial crises in Argentina and Turkey (2001)

Global financial tsunami (since 2007)

Which financial crises affected the globe?Which financial crises affected the globe?



Since 2000, the US had been offering ‘sub-prime mortgages’ to individuals with low repayment ability or poor credit records.




In 2007, the US property market came to a downturn. People could not afford to repay the mortgage loans. Even if they sold their property, the profit obtained still could not cover the debts. They defaulted on their mortgage payments. This led to an outbreak of the US sub-prime mortgage crisis.




The bad debts of financial institutions increased. The financial institutions started to tighten credit; investors lost confidence in the value of mortgage securities.




The US financial market plunged. Under the integration of the global financial market, other regions were also affected.




Can transnational governance

institutions enhance the stability of global

finance?



Since the 1990s, a number of transnational governance institutions have endeavoured to increase stability in global finance. For example,

Efforts to enhance the stability of global finance

‧The OECD, WTO and others developed a host of principles and standards for transworld foreign exchange, securities, derivatives and insurance markets.

‧The IMF, joining with other institutions, launched an International Forum on Accountancy Development (會計發展論壇 ) that aims to build accounting and auditing capacity in developing countries.

‧The International Accounting Standards Board ( 國際會計準則委員會 ) has formulated transworld standards on accounting, especially for financial instruments.

Can transnational governance institutions enhance Can transnational governance institutions enhance the stability of global finance?the stability of global finance?



High market fluctuation has continued to generate intense insecurity.

Inability to effectively stop the spread of financial crises

‧They were unable to stop the spread of the crises to other parts of the world.

‧Cooperation plans and rescue packages failed to encourage the quick economic recovery of various countries.

Can transnational governance institutions enhance Can transnational governance institutions enhance the stability of global finance?the stability of global finance?



To stabilize global finance, a number of transnational and private governance institutions have been established since the 1990s. For example,

International Organization of

Securities Commissions

International Association of

Insurance Supervisors (IAIS)

Committee on Financial Markets,

OECD

The Committee on Financial Services,

WTO

International Securities Market

Association (ISMA)G30

-The end-

globalization theme: impact of globalization and related responses and related responses

Documents

impact of globalization

globalization theme

evenness of globalization

wealth creation

creation of wealth countries

exploration journey

wealth distribution

poverty exploration