The Globalization of Economy

T h e C o n t e m p o r a r y W o r l d

What is economic globalization?

is a historical process, the result of human
innovation and technological progress.
increasing integration of economies around the
world, particularly through the movement of goods,
services, and capital across borders.
movement of people (labor) and knowledge
(technology) across international borders. (IMF,
2018)
The phenomenon can thus have several
interconnected dimensions, such as
(1) the globalization of trade of goods and services;
(2) the globalization of financial and capital markets;
(3) the globalization of technology and communication;
and
(4) the globalization of production. The Role of Technology
 Lowering of trade barriers made globalization
Glimpses from the global economy
possible;
1. The proliferation of the Internet and the emergence of  Technology has made it a transforming
market places like ebay. movement
2.Tramp shipping, international shipping industry, a • “World Wide Web” has exploded in last 20 years
certain market segment in which vessels that operate do - Computers can move money around the world =
not trade regularly between certain fixed ports. “finance capital”
3. The market for foreign exchange is the largest market - Silicon Valley is 9th largest economy in world!
in the world in terms of turnover.

Why it is called Silicon Valley?
Globalization has been around since the 15th century  A region on the San Francisco Peninsula in
when European exploration &colonization created global California where the miniaturized electronics
empires & markets, but most historians and economists industry is centered, so called because most of
agree that today is special by the extent of the devices built there are made
interdependence and the speed by which it has
What companies are located in Silicon
occurred.
Valley?
Drivers of Globalization  The Biggest Companies in Silicon Valley
•Two factors underlie globalization (AAPL, GOOGL)
1.“Decline in barriers to the free flow of goods, services,  Apple. Apple is one of the most successful
and capital” that has occurred since the end of World companies in the entire world and is
War II headquartered in Cupertino, California. ...
2. Technological change  Google. ...
 Facebook. ...
Declining Trade and Investment Barriers
During the 1920s and ‘30s, many nations erected  Wells Fargo. ...
formidable barriers to international trade and foreign  Visa. ...
direct investment  Chevron.
Advanced industrial nations of the West committed
themselves after World War II to removing barriers to
the free flow of goods, services, and capital between
nations.

Katelyn V. Matsumoto s.y. 2021-2022

Globalization is acceleration of trends of the last How do global corporations function?
10,000 years
The contemporary global corporation is
 People lived for 250,000 years in hunter- gatherer
simultaneously and commonly referred to either
bands
as a multinational corporation (MNC), a
 Rise of agriculture 10,000 years ago led to rise of
transnational corporation (TNC) , an international
empires and nation-states
company, or a global company.
 Science and ‘enlightenment’ after 1600 produced
global trade and empires International companies are importers and
 Free trade and tech after 1945 produced present-day exporters, typically without investment
globalization. outside of their home country.
Multinational companies have investment
Economic Globalization
in other countries, but do not have
Early Capitalist Ideas: coordinated product offerings in each
1. Free Market Economy (Adam Smith, Wealth of country. They are more focused on adapting
Nations, 1776) Market is "free" from State control their products and services to each individual
2. Division of labor is the separation of a work local market.
process into a number of tasks, with each task Global companies have invested in and are
performed by a separate person or group of present in many countries. They typically
persons. It is most often applied to systems of mass market their products and services to each
production and is one of the basic organizing individual local market.
principles of the assembly line. Transnational companies are more complex
3. Competition posits that while protectionist organizations which have invested in foreign
measures may provide short-term remedies to operations, have a central corporate facility
economic problems caused by imports, firms and but give decision- making, research and
nations must adapt their production processes in development (R&D) and marketing powers to
the long term to produce the best products at the each individual foreign market.
lowest price.

Today: Globalization of production of goods and

Economies are increasingly linked together (EXS: NAFTA services
(MX, CA, US), The EU, WTO (World Trade Organization) Vizio flat panel TV is
WTO - Only global international organization dealing -designed in a small office in California
with the rules of trade between nations. Goal: help -assembled in Mexico
producers of goods and services, exporters, and -From : Panels made in South Korea
importers conduct their business. Electronic components made in China

Microprocessors made in the U.S.
Multi-national Corporations Increasingly companies are using modern
Old: Dutch East India Company? communications to outsource service
1602 company of Dutch merchants and activities to low-cost nations
Independent trading companies. Example: Customer Service calls routed to India
Spice trade monopoly in East Asia

Power to colonize territories and enslave Globalization of Markets

In the past, each country has its own
indigenous people
companies in many industries and its own
Indonesia and South Africa
products
Multinational Corporation- any business with
- I never saw Japanese media (and I saw little
productive activities in two or more countries.
non-US media) in college
New: Nike, Wal-Mart, Royal/Dutch Shell
Today everyone knows:
Top 100 multinationals are all US-owned companies
1. Nintendo
Royal/Dutch Shell: global group of energy and
2. Starbucks
petrochemical companies, operating in more than
3. Coca-Cola
140 countries and territories, employing more than
4. Ikea
112,000 people.
5. McDonald's

6. Samsung

Katelyn V. Matsumoto s.y. 2021-2022

Growth of Regional Trading Alliances (shared BREXIT- United Kingdom of Great Britain and
political and economic interests to promote Northern Ireland (UK) formally withdrew from the EU
trade) in March 27.
ASEAN (Association of Southeast Asian Its currency Sterling Pound now has a higher value
Nations) 1967- is a regional grouping that than the Euro and US Dollar in terms of peso
promotes economic, political, and security exchange
cooperation among its ten members: Brunei, Pound - 66
Cambodia, Indonesia, Laos, Malaysia, Myanmar, Euro- 56
the Philippines, Singapore, Thailand, and USD- 51
Vietnam.
EC (European Community) 1967-was an The Changing Roles of Countries in the Global
economic association formed by six European Economy
In the 1960s:
member countries in 1957, consisting of three
The U.S. dominated the world economy and the
communities that eventually were replaced by
world trade picture
the European Union (EU) in 1993. The
U.S. multinationals dominated the international
European Community dealt with policies and
business scene
governing, in a communal fashion, across all
About half the world- the centrally planned
member states.
economies of the communist world- was off limits to
EU (European Union) 1993-aim to ensure the
Western international business
free movement of people, goods, services and
Today, much of this has changed.
capital within the internal market.
In the early 1960s, the U.S was the world's dominant
NAFTA (North American Free Trade
industrial power accounting for about 40.3% of
Agreement) 1994-to encourage trade
world manufacturing output
between the U.S., Mexico, and Canada. NAFTA
By 2007, the U.S accounted only 20.7%
reduced or eliminated tariffs on imports and
Other developed nations experienced a similar
exports between the three participating
decline
countries, creating a huge free-trade zone.
AEC (African Economic Community) 1991- is Economic Globalization in AFRICA
Little Industry and Technology
an organization of African Union states
Can economic globalization help reduce poverty?
establishing grounds for mutual economic
"Brain Drain"- migration of health personnel in
development among the majority of African
search of the better standard of living and quality of
states.
life, higher salaries, access to advanced technology
More recent ones are:
and more stable political conditions in different
APEC (Asia Pacific Economic Cooperation)
places worldwide.
1989-Its primary purpose is to promote
Debt (IMF loans) AF countries can't even pay back
sustainable economic growth and prosperity in
interest
the Asia-Pacific region.
300 million people live on less than $1/day
AU (African Union) 2002- OAU were to rid the
48% people in sub-Saharan AF in extreme poverty
continent of the remaining vestiges of
(less than 750 calories/day)
colonization and apartheid; to promote unity
2001 Index for Foreign Investment in Africa was "0"
and solidarity amongst African States.
Gap between rich and poor increasing
EAEU (Eurasian Economic Union) 2015- was
created in part in response to the economic Global Problems: Economic Inequities and Labor
and political influence of the European Union Servitude
(EU) and other Western trade agreements. Causes of Poverty
Resource distribution and access
European Union Income opportunities limited
Began in 1957 with six nations; now 27 Education opportunities limited
Intended to integrate the European economy Forced Labor
Common currency- the Euro Slavery still exists
Child labor still common
Katelyn V. Matsumoto s.y. 2021-2022