Globe

2. Topics for today
 What does globalization means?
 Forces behind globalization
 Positive and negative effects
 Consumerism
 International Trade
 FDI Foreign Direct Investment
 Protectionism
 The World Bank

3. 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?

4.  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

5.  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

6. 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
Negative
Outsource 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
conditions
Consumerism habits has
increase junk food, branded
products,
Environmental degradation

7. 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
consumption
Consumption 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.

8. 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.

9. 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).

10. 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
home
Strategic 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

11. 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

14.  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.

15. 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 unemployment
Encourage local production to replace imports
Protect infant industries
Reduce dependence on foreign suppliers
Encourage local and foreign investment
Reduce balance payment problems
Promote export activities

17. 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/residents
i The power of the World Trade Organisation (WTO) to force member
countries to eliminate some policies that interfere with free trade
m
The lending power of the IMF and World Bank certainly coerce
emerging markets to follow economic policies that they might not
otherwise choose