Transcript DISTINGUISHING FEATURES OF GLOBALISATION

DISTINGUISHING FEATURES OF
GLOBALISATION
Describe the key features of globalisation
Evaluate arguments for and against
globalisation
Examine the challenges it poses to individual
firms and countries
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Impact of globalisation
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Faster growth rate of international trade
in relation to production.
The emergence of genuine competition
from emerging nations of Asia and Latin
America.
Increased mobility of capital. In 1975
international securities ( stocks and
bonds) transactions represented less
than 5 percent of GDP in developed
countries,
Impact of globalisation (cont’)
Twenty years later, they stood at 1000
percent in the United Kingdom. In a
global economy, persons or firms from
one country can buy different types of
securities (stocks and bonds) on
another country. People would engage
in this type of investment if the interest
rate in another country is high.
Impact of globalisation
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The expansion of international competition:
Since the early 1990’s the following goods
and services have increased their share of
world trade – financial services, transport, the
audiovisual sector and telecommunications.
Major companies have developed their places
of business in another country because of a
boom in direct investment in both production
and innovation.
Impact of globalisation
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Rapid internationalization of financial
markets continues. Note how the
government of Jamaica has been able
to borrow on the international markets.
This may impact on exchange rate and
interest rates locally.
Arguments in support of
globalisation
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The lowering of trade barriers makes free
flow of goods, services and capital possible.
In this free trade environment, it is argued
that inefficient producers would find
themselves being driven out of the market.
Also increased efficiency in production
process would lead to increased production of
goods and services, a reduction in cost to the
consumer, and overall improvement in
welfare.
Arguments in support of
globalisation
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International division of labour and
economies of scale have been cited as
positive benefits to accrue from
globalisation. Some also point to the
wider availability of various
technologies, this has allowed many
developing countries to ‘catch up’.
Arguments in support of
globalisation
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A recent IMF report suggests that
globalisation paves the way for
countries to take advantage of
economic opportunities, whatever their
level of development. As a counter to
the view that globalisation leads to
increased unemployment, the report
suggested that it was the level of
technological development that was the
main contributory factor in the short
term.
Arguments in support of
globalisation
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As far as the IMF is concerned, the
experience of the North American Free
trade Area (NAFTA); US, Canada &
Mexico, jobs lost through relocation of
US industries to Mexico have been
offset by the creation of jobs with a
higher value within the USA itself. The
report rejects the notion that
liberalisation of trade results in a loss of
economic control ( sovereignty).
Arguments against
globalisation
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Current evidence does not support the
view that countries will always benefit
from integration in the world economy.
Reality of globalization is that benefits
have been unevenly distributed,
particularly among developing
countries.
Many developing countries have
become marginalised.
Arguments against
globalisation
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While developing countries kept pace with the
rate of global trade, the ratio of GDP fell in 44
out of 93 developing countries since 1995 to
present.
There is sharp imbalance in the distribution of
foreign direct investment: eight developing
countries accounted for two-thirds of foreign
direct inflows in 1990-93 , while half of all
developing countries received none. WHY?
Arguments against
globalisation
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The disparity in the flow of foreign
direct investments (FDI) can be traced
to another discriminatory feature of
globalisation: production and trade are
highly concentrated. 17 percent of the
world’s inhabitants account for 80
percent of total production and 83
percent of world trade.
Arguments against
globalisation
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40 percent of world exports are controlled by
just 100 companies.
In economic terms , it is the multinational
companies that profit from globalisation
rather than countries and in particular,
developed countries.
There is sectoral arrangements between
companies leading to the emergence of
global oligopolies ( few very large companies
operating like monopolies), e.g. Pepsi,
Microsoft
Arguments against
globalisation
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While there has been lowering of trade
barriers on exports from developing
countries, significant obstacles in the
form of non-tarrif barriers continue to
restrict the volume and value of exports
from developing to developed countries.
One significant non-tarrif barriers is
linked to setting standards. E.g. ISO
9000 and ISO 14 000
Arguments against
globalisation
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There is the strong perception in developing
countries that the aim of these international
Standards are not simply to ensure that
exports are of an acceptable quality, rather it
is felt that they are used as barriers to trade.
In contrast, it is felt that exports from
developed countries not only have relatively
easy access to the markets of developing
countries; there is also increasing evidence of
goods being dumped
Arguments against
globalisation
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The large size of the companies of
developed countries means that they
are able to produce large volumes of a
product at a low cost to serve large
markets.
The economies of scale that such large
firms enjoy make it possible for them to
sell their products either below cost of
production or below a fair market price
to developing countries.
Challenges posed by Globalisation
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Firms need to develop global strategies
in order to compete in the global
market place. E.g offering superior
customer service, low prices, innovative
and quality products.
Firms/companies must become
internationally competitive in both
domestic and foreign markets.
Challenges posed by Globalisation
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The need for social cohesion, from the
standpoint that solid economic relationships
within one and the same living space become
strained. Social cohesion can no longer be
founded on shared economic interests.
The need for policies to be redefined, since
isolated, short-term policies may not be able
to withstand the impact of globalisation
Challenges posed by Globalisation
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The reconciliation by policy makers of
national interests and cultural
differences with the forces unleashed
by gobalisation
YOUR REACTION
What is your view on the impact of
globalisation on employment, the
relationship between multinational
corporations and the, and the impact
of the MNC’s on the lives of ordinary
people.