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What is Globalisation?

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What is Globalisation? Cultural & economic imperialism? Or the consequence of increased world trade? Exploitation of developing country resources? – PowerPoint PPT presentation

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Title: What is Globalisation?


1
What is Globalisation?
  • Cultural economic imperialism?
  • Or the consequence of increased world trade?
  • Exploitation of developing country resources?
  • Or a practical application of the theory of
    comparative advantage?

2
Globalisation Its Discontents
  • Joseph Stiglitz is an advocate of economic
    globalisation, but castigates the IMF for -
    punk-Friedmanism, in imposing extreme monetary
    policies and deregulation on countries needing
    tender care .... thereby worsening
    economic, social and political problems, e.g in
    Argentina and Ethiopia

3
Discontents continued
  • In effect, Stiglitz points out that the IMF
    one-size-fits-all policy prescription for
    struggling countries is screw-it-down, i.e. if
    it isnt hurting it isnt working
  • He contrasted the Bush prescription for the
    indebted U.S. deficit financing and tax cuts!
  • The US and UK actions in the Credit Crunch have
    paralleled this approach

4
Global flops
  • Coca-Cola in India has dropped its global
    advertising and produced a campaign that
    reflects Indian traditions of oral dialogue
  • Marks Spencer, Laura Ashley, and many other UK
    retailers (Tesco in US?)
  • U.S. cars/motor industry
  • GM foods in Europe
  • Globalised banking!

5
Coca- Colas India strategy
  • Small bottles sold at 5RP (about 7p) half the
    price of 2 years ago
  • Rebuild sales of the local brand (which they
    deliberately ran down, when they first bought
    into the Indian cola market)
  • Focus on the countryside, not just the towns
  • Employ local, advertise local

6
Global stars
  • American English (therefore culture edn)
  • Anglo-Saxon junk food, from McD Coke to
    Cadburys chocs, 7Up and sweets
  • Household products, toiletries
  • Consumer durables, eg TVs Hoovers
  • Cosmetics, beauty products fashion
  • Boeing and Airbus Industrie

7
Cambodia the sweatshops
  • The Cambodian govt blames western lobbies for
    harming the worlds poor by pursuing their
    anti-globalisation goals
  • 200,000 women work in Cambodian clothes factories
    earning as little as 1 a day
  • but textile and clothing account for 32 of
    GDP, and is Cambodias biggest export
  • The ILO says theres no forced child labour

8
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9
Who deserves criticism?
  • The EU for the CAP and for its import tariffs and
    quotas on 3rd world goods
  • The US for its agricultural subsidies and its
    quota-based protectionism
  • China, for its new-imperialist approach to
    Africa
  • The IMF, for its obsolete, punk-monetarist
    approach to solving economic problems

10
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11
Globalisation the Future
  • Where the wind blows

12
A Global Re-think
  • For 150 years, globalisation has had the West at
    its Centre colonisation, imperialism and
    western capitalism
  • Push and pull from the west pull in oil, copper
    and coffee beans push out Coke, Starbucks and
    Sherlock Holmes
  • Now the world has two focal areas New
    York/Berlin and Beijing/Mumbai

13
The past was about
  • Finding, cheap, plentiful supplies of commodities
  • Finding sources of cheap, plentiful labour (China
    cheap manufacturing site)
  • and using to make products based on western
    RD, branding and marketing
  • E.g. Raleigh bikes UK based and UK distributed,
    but made in China

14
The Future
  • Between now and 2030, 75 of the worlds growth
    will come from BRIC-M, the vast majority of which
    is from China and India
  • Western firms will need to find a way to break
    into these markets as VW and General Motors
    already have
  • Globalisation therefore will change

15
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16
Environmental backlash?
  • Will global warming concerns force changes in
    government policy, e.g. re air travel and air
    miles?
  • Are voters likely to vote for slower growth?
  • More probably, will sharply rising commodity
    prices hit China and Indias growth rates and
    world trade?

17
And the environment?
  • Tonnes of CO2 Total CO2 per cap. p.a. M
    tonnes
  • India 1.25 1,400
  • China 4.75 6,300
  • UK 9.3 560
  • US 20.0 6,000
  • Russia 11.8 1,700
  • World 4.5 30,000
  • Source Energy Information Administration 2009,
    see http//tonto.eia.doe.gov

18
And the environment?
  • Tonnes of CO2 Total CO2 per cap. p.a. M
    tonnes
  • China 2007 4.75 6,300
  • China 2020 10.13 14,400
  • Constant intensity, i.e. in line with GDP
    Assuming 6 GDP growth
  • China 2020 5.57 7,920
  • 45 lower intensity
  • World 2007 4.50 30,000
  • World 2020 4.50 38,580
  • Source Energy Information Administration 2009,
    see http//tonto.eia.doe.gov

19
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20
Globalisation Raises Some Very Basic Economic
Issues
  • In the end, there are perhaps only two economic
    questions that really matter
  • How much wealth is created (Allocation of Scarce
    Resources and Sustainability of Economic Growth)
  • How this wealth is distributed between people and
    countries. (Equity/fairness)

21
Globalisation Raises Some Very Basic Economic
Issues
  • It is how you teach the students to move beyond
    common sense responses to questions and use what
    we used to call the toolkit which is the
    challenge!
  • E.G. How can you apply theory of comparative
    advantage to evaluate UK business responses to
    increased competition from India and China?

22
A Typical Students view on globalisation
  • Globalisation is a good thing and enables
    countries to trade with each other
  • Many governments are powerless to control the big
    MNCs
  • All MNCs are bothered about are profits and
    expansion
  • MNCs pollute and damage the environment
  • Workers in developing countries are exploited and
    are paid too little
  • Globalisation only benefits the MNC

23
A Typical Students view on globalisation
  • The challenge for us is to encourage students to
    reflect upon and move beyond these I think
    judgements and assertions
  • To analyse and evaluate using concepts and
    theories covered in class

24
Many governments are powerless to control the big
MNCs..
  • Analysis
  • What methods do governments use to
    control/regulate MNCs?
  • In what ways may MNCs be able to avoid this
    control/regulation?
  • Evaluation
  • What may governments do in the future and how
    successful may this be?

25
All MNCs are bothered about are profits and
expansion
  • Analysis
  • What are the primary objectives of MNCs?
  • Why is brand image important to them?
  • Evaluation
  • How effective is the ethical consumer in
    promoting MNC responsibility?
  • What about ethical producers?

26
MNC pollute and damage the environment
  • Analysis
  • How and why do MNCs pollute?
  • How and why may MNCs work to improve the
    environment?
  • Evaluation
  • Sustainability implications of GDP growth upon
    sustainability

27
  • Ethisphere 2008 Worlds Most Ethical Companies
  • http//ethisphere.com/wme2008/

28
Workers in developing countriesare exploited and
are paid too little
  • Analysis
  • How and why may MNCs increase gap between rich
    and poor?
  • How and why may MNCs decrease gap between rich
    and poor?
  • Evaluation
  • To what extent does MNC activity increase gap
    between rich and poor and why may it narrow the
    gap?

29
  • The richest fifth (20) of the world's
    population receives 86 of global income and 1.2
    billion people, 20 of the world's population,
    exist on less than a dollar a day, with another 2
    billion officially categorised by the United
    Nations as in poverty'.

30
  • CIA World Fact
  • Book

31
Percentage population living on less than 1
dollar day 2007-2008
32
African Paradox
  • An abundance of valuable natural resources
    combined with widespread poverty
  • 40 of the world's gold reserves are found in
    Africa
  • 73 of platinum reserves
  • 88 of diamond reserves
  • 95 of vanadium reserves
  • 38 of uranium reserves
  • 10 of oil reserves
  • 7.9 of global natural-gas reserves.

33
  • David Landes, the economic historian, estimates
    that the income gap between one of the richest
    countries, Switzerland, and one of the poorest,
    Mozambique, is 400 to one.

Prior to the industrial revolution of the middle
of the eighteenth century, he suggests, the
biggest such gap would have been about five to
one.
Image from Save the Children Three out of every
four people in Mozambique live on less than
US1.25 a day
34
Globalisation only benefits the MNC.
  • Analysis
  • What is a MNC and how may it benefit from some
    of the processes?
  • In what ways may a MNC not benefit from some of
    the processes?
  • Evaluation
  • Future of global trade protectionism
    including WTO, trading blocs, tariffs, quotas,
    currency manipulation
  • Chinese and Indian growth

35
Globalisation
  • Rachel Cole Principal Examiner
  • Edexcel Economics

36
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37
Globalisation the cause of crisis?Default of
Lehman Brothers in US, Northern Rock crisis in UK
but part of a wider picture
  • UK
  • Light-touch regulation of financial sector by
    FSA, concentrating on box-ticking
  • Pension funds seeking higher returns as a result
    of demographic and economic change and government
    policy
  • Banks got too big to fail
  • Government borrowing increasing at the top of the
    cycle as public spending increased prudence
    undermined
  • UK households strongly addicted to credit and to
    owner-occupation
  • WORLD
  • Global imbalances major developed countries
    borrowing on large scale to finance consumption
    spending from emerging economies with surpluses
  • Financial innovation made borrowing easier and
    fuelled booms in housing and business property
  • Encouraged by governments who wanted expansion of
    home ownership
  • Bundling up of sub-prime mortgages into exotic
    assets
  • Banks diversified end of Glass-Steagall (1933
    US Act separated retail and investment banking)

38
Glass-Steagall Act (1933)
  • Designed to control speculation
  • Banking reforms to regulate interest rates and
    risky lending
  • Prevented banks from from owning other financial
    companies
  • All repealed 1999-2000

39
Why should we avoid protectionism?
40
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41
Medium-term?
  • It was initially argued that UK would suffer
    worst from recession
  • high dependency on financial sector, UK
    households had biggest
  • debts/disposable income ratio, we had one of
    biggest housing
  • booms but
  • Sterlings fall is helping help exports compare
    Italy, uncompetitive in many areas but tied to
    euro
  • UK less dependent on manufacturing than Germany,
    Japan and manufacturing slump much greater than
    services
  • Relatively flexible labour markets compared
    with France, Germany, Italy. We start from lower
    unemployment than most EU
  • Swift policy response
  • Sterling fall plus quantitative easing should
    stave off deflation
  • Green shoots? Too early to say, but housing
    market may be picking up, retail sales quite
    strong in some fields, some good profits being
    reported

42
What should A level students think about?
  • Be aware of movements in main economic indicators
    look at BBC Business News website regularly
  • Monetary policy has changed as interest rate
    changes have lost their effectiveness dont
    just prattle on about MPC and targets in the same
    old way
  • Understand threat of deflation and watch the
    figures closely
  • Fiscal policy is in uncharted territory, but keep
    a sense of perspective
  • Look to see what happens with unemployment.
    Compare German Kurzarbeit policy
  • Look sceptically at forecasts and try to
    understand how they can differ
  • World developments will affect the UK because it
    is open
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