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ADS 660CHAPTER 9 : GLOBALIZATIONNur Izzati2012381831Nur Ezzate Syuhada2012546841Nabilah Najat2012568775Nor Farhana2012577191Alif Matun Saadiah2012363989Definition of globalization

Globalization is the process of international integration arising from the interchange of world views, products, ideas and other aspects of culture.The tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets. Globalization has had the effect of markedly increasing not only international trade, but also cultural exchange.Definition of trade liberalization

In general, liberalization refers to a relaxation of previous government restrictions, usually in such areas of social, political and economic policy.

The removal or reduction of restrictions or barriers on the free exchange of goods between nations. This includes the removal or reduction of both tariff (duties and surcharges) and non-tariff obstacles (like licensing rules, quotas and other requirements). The easing or eradication of these restrictions is often referred to as promoting "free trade."

Historical Precedents of Trade LiberalizationDEFINITION OF 'KEYNESIAN ECONOMICS

An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed by the British economist John Maynard Keynes during the 1930s in an attempt to understand the Great Depression. Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the Depression. Subsequently, the term Keynesian economics was used to refer to the concept that optimal economic performance could be achieved and economic slumps prevented by influencing aggregate demand through activist stabilization and economic intervention policies by the government. Keynesian economics is considered to be a demand-side theory that focuses on changes in the economy over the short run.Definition Of GlobalizationThe worldwide movement towards economic , financial ,trade, communication integration. Anthony Giddens (1990: 64) has described globalization as the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa. This involves a change in the way we understand geography and experience localness.MAX WABER THEORIES

Globalization theories emphasize cultural and economic factors as the main determinants which affect the social and political conditions of nations,Characteristic Of Global Economy1) Open market economyAn economic system with no barriers to free market activity. An open market is characterized by the absence of tariffs, taxes, licensing requirements, subsidies, unionization and any other regulations or practices that interfere with the natural functioning of the free market.E.G : Free trade is a system in which goods, capital, and labour flow freely between nations, without barriers which could hinder the trade process. Many nations havefree trade agreement, and several international organizations promote free trade between their members2) Anti- ProtectionismProtectionism represents any attempt to imposerestrictions on tradein goods and services. The aim is to cushion domestic businesses and industries from overseas competition and prevent the outcome resulting from the inter-play of free market forces of supply and demand.Example: quotas , voluntary export restrains agreement, import licensing Argentina food tariffs. Argentina has increased imports duties on 100 products, including over a dozen agricultural goods under the Mercosur Common External Tariff (CET). 3) Healthy competition between local and foreign playersThe global economy can reap the benefits of increasing economies of scale. With the opening up of the economy the industrial sector has benefited with the attainment of cheap labor, capital and technology. Small companies also witness rapid growth owing to a wider customer base. Many opine that the global economy has promoted international peace and cooperation.Example:-Companies get get access to much wider markets-It promotes understanding and goodwill among different countries.-Businesses and investors get much wider opportunities for investment.

4) Depend on foreign direct investmentDefinitionForeign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing.Important FDI-Avoiding foreign government pressure for local production-Circumventing trade barriers, hidden and otherwise.-Making the move from domestic export sales to a locally-based national sales office.-Capability to increase total production capacity.-Opportunities for co-production, joint ventures with local partners, joint marketing arrangements, licensing, etc;EXAMPLESouth Africa has called for China to step up investment in the country and back projects to boost bilateral trade,Factors That Accelerated Economic GlobalizationAdvancement of Science & Technology

Connect, exchange information, and collaborate with each othersCreating new jobs, innovations, and networking sites to allow individuals to connect globallyMarket-oriented Economic ReformsPrivatizationReform in capital marketTax reformsInducement of FDI & MNCAggressive Contributions by Multi-National Corporations(MNC)

ECLAC: international lending agencies must work with developing countries to change how and where credit is concentrated, at the same time accelerating financial development that countriesFarms, mines, factoriesSell products on a massive scale throughout the world

International tradeFree trade area: IMF, WTO, ASEAN- increase their own wealth & influenceFactors That Accelerated Economic GlobalizationApproaches in Global Trade1) Mercantilismeconomic system of the major trading nations during the 16th, 17th, and 18th century

Generally shares with realism the belief that each state must protect its own interest at the expense of the others

based on the premise that national wealth and power were best served by increasing exports and collecting precious metals in return

The economic doctrine that government control of foreign trade is a paramount importance for ensuring the military security of the state.

Primary objective of Mercantilism was to increase the power of the nation state. One of the important aspects of national power or strength was wealth

Through wealth, a nation can achieve power. A country achieves wealth by producing and exporting more goods than it imports

The states that followed a policy of mercantilism tended to see trade, colonialism and conquest as the primary ways of increasing wealth

Economics should serve politics : the creation of wealth underlies state powerE.g-Britain's trade in the 18th century Britain used trade to rise in relative power in the international system around the 18th century. The creation of a trade surplus in order to reserve the money in the form of precious metal( gold & silver), which could then be used to buy military capabilities ( weapons) in time of wars.However, the mercantilism declined in the 19th century as a Britain decided it had more to gain from free trade than from protectionismCharacteristics of Mercantilism1) Bullionism the economic health of a nation could be measured by the amount of precious metal ( gold or silver) which it possessed.-money was the source of prosperity, prestige , and strength for a nation-Bullionism required a favorable balance of trade-export more than import ( a trade surplus)-high tariff on imported manufactured goods2) Trade is zero-sum game -a nation can gain in international trade only at the expense of other nations(if one gains, another loses)

3) Colonies will provide the captive market for manufactured goods and source of raw materials -Colonies existed or the benefit of the home country. Colonies could not sell their raw materials to anyone but the home country, and they were not allowed to manufacture anything for export

Manufactured goods

-raw materials -cheap labor e.g.-Americans provided raw goods to Britain, and Britain used the raw goods to produce manufactured goods that were sold in European markets and back to the colonies. -As suppliers of raw goods only, the colonies could not compete with Britain in manufacturing

Home country

Colony202) Neo-Mercantilism

Neo-mercantilism is a term used to describe a policy regime which encourages exports, discourages imports, controls capital movement and centralizes currency decisions in the hands of a central governmentThe objective of neo-mercantilist policies is to increase the level of foreign reserves held by the government, allowing more effective monetary and fiscal policyIt is called "neo" because of the change in emphasis from classical mercantilism on military development, to economic developmentFavorable balance of trade: positive balance of trade( trade surplus) versus negative balance of trade( trade deficit) e.g.-China, Japan and Singapore are described as neo-mercantilist.

3) LiberalismGenerally shares the assumption of anarchy but does not see this condition as precluding extensive cooperation to realize common gainsit is dominant approaches in western economics, despite more so in microeconomics( study of firm & households) than macroeconomics(study of national economics)It holds that by building international organizations, institutions, and norms, states can mutually benefit from economic exchangesemphasizes the shares interest in economic exchanges e.g.- the United Stated

LDCs are a group of 49 countries that are recognised as the worlds poorest and weakest countries. Have a per capita Gross Domestic Product (GDP) of less than $900 and very low levels of capital, human and technological development. These 49 countries have a combined population of about785 million, which is equivalent to just over 10 per cent of the worlds populationThe Impact on The Less Developed Countries (LDCs)ADVANTAGESFDIs-job opportunities for locals

The governments will insist for royalties.Nigeria, for example, flooded with petro-dollars, and able to make positive legislation which enabled a high percentage from international firms like Royal Dutch Shell.More choices of products and services

Consumers get quality products at competitive price. For example, the Internet has opened new opportunities for browsing all over the world.

Decrease poverty among LDSc

Bangladesh, managed to sustain economic growth because they not commodity-dependent economies and most of the people manage to get jobThey possess universal primary education, basic health, rural infrastructure, and other public services

Gain access to a much higher level of technologyIn Somalia, the federal government operates two official radio and television networks, which exist alongside a number of private and foreign stations

ADVANTAGES