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CHAPTER 1 GLOBALISM GLOBALISM > LOCALISM = the emergence of: 1. An integrated world economy 2. A universal Westernized culture (individualism + capitalism) 3. Diminished Western nationalism WHO IS RESPONSIBLE FOR GLOBALISM? 1. Companies that sell outside their home market. 2. Companies that offshore (manufacture abroad) 3. Companies with foreign suppliers 4. Companies that hire illegal aliens & the consumers who use the products & services of these companies. 5. Stockholders who invest in global companies. 6. Nations dependent on foreign natural resources. 7. Nations that join the World Trade Organization, International Monetary Fund, or free trade agreements. 8. People who buy foreign owned brands & don’t even know it 9. YOU! GATEWAYS TO GLOBALISM 1. 2. 3. 4. 5. Global proliferation of individualism culture & the emerging universal generation Digital communication technology Turbo-capitalism Media World Trade organization, International Monetary Fund, International Standards org. 6. 7. Oil Outsourcing of Western manufacturing & computer services to Asia & other developing nations 8. Asian financing of Western government fiscal deficits 9. Economic power > Military 10. Free trade agreements COMPONENTS OF GLOBALIZATION THE IDEOLOGICAL ASPECTS OF GLOBALIZATION 1. The ideological exports of powerful nations often include their government & economic system (such as representative government & profitmaximization capitalism for the USA), as well as their culture (American pop culture). 2. Such exports are designed to advance the nation’s nationalistic agenda & open new export markets. TECHNOLOGICAL ASPECTS OF GLOBALIZATION 1. Global telecommunications infrastructure 2. The Internet & e-commerce 3. Cross-border licensing of patented technology between corporations 4. A universal computer operating system in place (Microsoft Windows) POLITICAL ASPECTS OF GLOBALIZATION 1. Power of global government organizations (GGOs) over nations 2. Rise of non-profit governmental organizations (NGOs) to represent non-business interests around the world 3. Emergence of the International Criminal Court 4. Proliferation of regional free trade agreements (EU, NAFTA, etc.) FINANCIAL ASPECTS OF GLOBALIZATION 1. Worldwide integrated financial markets 2. The World Bank and International Monetary Fund 3. Instantaneous electronic transfer of funds across borders 4. Dollarization: consolidation of the number of currencies used throughout the world 5. “Hot money”--$3 trillion crossing borders daily CULTURAL ASPECTS OF GLOBALIZATION 1. Global consumerism spurred by giant global corporations & the advertising of global brand names 2. Emergence of middle class social structure in a growing number of developing nations 3. Greater international tourism & immigration 4. The emergence of a universal generation of young people who share more cultural similarities than differences ECONOMIC ASPECTS OF GLOBALIZATION 1. Relatively easy movement of people, merchandise, technology, & capital across borders 2. Rising free trade in large part due to regional free trade agreements and the World Trade Organization (WTO) 3. Spread of capitalism to China, the former Soviet Union, & to developing nations MARKETING ASPECTS OF GLOBALIZATION 1. Rise of the service sector, backed by intellectual capital (patented, copyrighted products) among developed nations 2. Sales of global brands with global product designs around the world 3. Emerging consumerism in former Communist nations 4. Rapid increase of joint ventures between companies in different parts of the world OPERATIONS ASPECTS OF GLOBALIZATION 1. Off-shoring of manufacturing from highly industrialized nations to developing nations 2. Standardization of business technology & operations practices by the International Standards Organization (ISO) 3. Rapid informational flows across borders 4. Emerging ecological problems requiring proactive global cooperation Fat Kodiak bears have a system working for them because they live near GOLDilocks. The system satisfies both their needs AND their wants. These fat bears have so much that they waste a lot of the luscious salmon scooped out of the gorged streams. Mother nature has provided these bears with a system that takes care of their needs, but not necessarily all of their wants (they'd rather eat salmon than berries). They are not quite as big or fat as the Kodiak bears, but they are in good health. THE GARBAGE CAN BEARS Human land encroachment (colonialism & “turbo” capitalism) has ruined the feeding system of these bears, so they fend for themselves as best they can out of garbage cans. The garbage can bears aren’t served by GOLDilocks. They long to visit their kindred bruins who have it made in a better system, but those bears don’t share; they want MORE from GOLDilocks. FOUR WORLDS World #1: Affluent Middle Class (“Godzilla” nations): USA, Western Europe, Japan, Hong Kong, Taiwan Pop culture exports (media, music, lifestyles), service sector, patents & copyrights Who made Jerry’s clothes & cell phone? Who takes care of his luxstadium? House? Swimming pool? Lawn? Car maintenance? Shopping? Taxes? Laundry? Cooking? Crashed computer? Xmas presents? World #2: Rising middle class (large “Tiger” nations): Mexico, Chile, Singapore, Taiwan, etc. 1. Skilled labor manufacturing 2. Computer hardware & electronics 3. Cell phones 4. Medical equipment World #3: Emerging middle class (“Tiger cub” nations): China, SE Asia, India, some of South America 1. Low-skill labor assembly (sports equipment, shoes, bicycles, etc.) 2. Local, non-exported agriculture 3. Under-employment & unemployment World #4: The nondeveloping world (“zebra” nations): Africa, Middle East 1. Small farm agriculture 2. Oil, gas, minerals & other earth exports 3. Social problems stemming from historical colonialism, religious intolerance, & political dictatorships •How can impersonal, invisible, uncontrollable capitalism be managed in C21 to bring its potential benefits to more of the world’s people? •Currently there is no agreed upon answer to this question. •Something is going to have to happen in C21 that didn’t happen in C20 for capitalism to serve ALL of the world’s people, not just a few. UNBALANCED GLOBALISM GLOBAL CONSUMPTION PATTERNS The USA (4.5% of population), Europe, & Japan currently consume 68% of the global economy, while the “BRIC” (Brazil, Russia, India, & China) consume only 10%. Obviously, global consumption patterns are not balanced, equitable, or stable. The 21st century will be a time of fluid change in global consumption & the capitalist system. THE TWO-EDGED SWORD OF GLOBALISM “There is no question globalism has been responsible for flourishing international trade and foreign direct investment, particularly for China, Brazil, India, and Turkey, to name just a few. But globalization has also generated imbalances in the market that have resulted in disastrous consequences both in the developing & developed worlds. Globalism ought to be good for all countries.” UNBALANCED WORLD POPULATION 1. Current estimated world population: 6.3 B; 10.5B predicted by 2050 2. Asia, including India: 60% of global population 3. Africa: 15% 4. Europe: 11% 5. Latin America/Caribbean: 9% 6. North America: 5% 7. Oceania: less than 1% THE POSTAMERICAN WORLD (a book by Fareed Zakaria) Fareed Zakaria (foreign news editor for Newsweek magazine) says his new book is “not about the decline of America, but rather about the rise of everyone else.” This rise of “emerging” global economies (especially China, India, Brazil, Russia, & Mexico) has accompanied the 21st century decentralization of global power, the natural outgrowth of the fall of Communism in the late 20th century. “Power is shifting away from nation states, & the traditional application of both economic & military power have become less effective.” KEY OBSERVATIONS BY ZAKARIA 1. The biggest challenge stemming from the “rise of the rest” is to “stop the forces of global growth from turning into the forces of global disorder and disintegration.” 2. Because the U.S. is the top world power, it will be most challenged by this new global era. 3. With so many other nations on the rise economically & politically, the U.S. must allow other nations to participate in running the world’s affairs. 4. American culture is not sufficiently globalized to deal with shared governance. Americans are “increasingly suspicious” of the new global order & are encouraged in their ethnocentrism by an “irresponsible national political culture.” 5. China currently has a larger supply of global currency assets than any other nation, reflecting its rising global status. 6. By 2040, India will be the 3rd largest global economy, behind the U.S. & China. 7. America faces a serious future growth dilemma stemming from its high indebtedness. “Americans are borrowing 80% of the world’s surplus savings and using it for consumption. We are selling off our assets to foreigners to buy a couple of lattes a day.” 8. “The American political system has lost the ability for large-scale compromise, and it has lost the ability to accept some pain now for much greater gain later on.” 9. “For the past 2 decades the growing integration of the world economy has coincided with the intellectual ascent of the Anglo-Saxon brand of free market capitalism. The freeing of trade and capital flows and the deregulation of domestic industry and finance have both spurred globalization & come to symbolize it.” 10. “America is losing economic clout and intellectual authority, as emerging economies are shaping the direction of global trade so they will increasingly shape the future of global finance.” 11.“More than a new capitalism, the world needs a new multilateralism.” 12.“Critics claim that the Washington consensus or deregulation and privatization, preached condescendingly by America and Britain to benighted governments around the world, has actually brought the world economy to the brink of disaster. If this notion continues to gain ground, politicians from Beijing to Berlin will feel justified in resisting moves to free up the movement of goods and services within & between their economies.” Not too many years ago, a sports team was sold to a foreign entity. I wondered, how much did these people know about baseball? It’s been happening, this selling off of America, for several years. I don’t know all that has been sold to foreign nationals and I doubt the average citizen is aware of this selling off of America. Not too long ago, some wanted to sell an American port business to a foreign nation. Recently, the Chrysler building was sold to another foreign concern. Now Budweiser is to be sold to Belgians. What’s left? If we average American knew what has been sold to foreigners, I would say we would not at all be pleased. (Letter to the editor) st 21 THE CENTURY DRAMA OF GLOBAL BUSINSS Click for CHARACTERS in the global business drama PREVIEWS OF THE ST COMING 21 CENTURY GLOBAL DRAMA ? TOP 10 ECONOMIC REVERBERATIONS OF THE CAPITALISM GLOBAL DRAMA: 1. Currency values 2. FDI flows 3. Geo-political power & interdependencies 4. Importing & exporting patterns 5. Industry/corporate profitability 6. Interest rates 7. National protectionism 8. Stock prices 9. Taxes 10.Unemployment BUCKLE YOUR SEATBELTS! ST 21 century global megatrends usually arrive unannounced, unexpected, & leave a trail of uncertainty. 1. Global mortgage financing meltdown 2. EU member bail-outs 3. Currency protectionism 4. Chinese defective exports 5. Rebuffing of Western financial policy by China GLOBAL DRAMAS DRAMA #1 Large nations end agricultural subsidies 1.Domestic unemployment in AG industry 2.Decline in AG exports & increase in imports 3.Standard of living benefits to DCs DRAMA #2 Asia cuts its USA investments by 20-25% 1.Hiking USA T-bond interest 2. Rising USA taxes 3. Decline in USA dollar 4. Recession DRAMA #3 Significant new global tax hikes on natural & resource consumption (gas, wood, water) 1.Declining profits & stock prices in connected industries 2.Increased R&D for alternative resources 3.Decline in USA dollar DRAMA #4 China gains control over the global supply chain for all digital products. 1. Increased consolidation & concentration of digital industry 2. Disruption of industry price declines 3. Digital manufacturers increase influence over software developers DRAMA #5 Expansion of NAFTA into the free trade agreement of the Americas eliminates all trade barriers in North, Central, & South America 1. Rise of corporate liquidations, concentration, & privatization in Americas 2. Rising FDI flow to Americas 3. Impetus for global free trade triangle DRAMA #6 The WTO mandates global sustainable income standards 1. Employee lay-offs in developing nations 2. Stock price declines in outsourcing corps 3. Increase in “shadow” (illegal underground) corps 4. Longer worker hours in nations lacking overtime pay DRAMA #7 EU ratifies a constitution that significantly expands government power 1.Rising EU taxes 2.Increased EU mixed capitalism 3.Rising stock prices in EU’s larger companies DRAMA #8 The WTO, IMF/World Bank merge into a single economic global government organization 1.Increases in FDI flows to individualism capitalist ecos 2.Power surge for Western global corps DRAMA #9 Asian nations pledge to base their future economic growth on trading within Asia more than with the West 1.Fall of Western currencies 2.Rise in stocks of Asian-based corps 3.Rise in Chinese geo-political influence DRAMA #10 EU accepts Turkey as a fullfledged member 1. Increase cooperation between largest EU economies 2. Rising FDI into Turkeybased corps 3. Rise of Euro 4. Backlash of European racism DRAMA #11 The world’s existing regional free trade agreements consolidate into a single, integrated FTA 1. FDI, stock price, & currency declines in protectionist & mixed capitalism nations 2. Stock price increases in Godzilla corps 3. New pockets of unemployment & “creative job destruction" DRAMA #12 Faster than predicted middle class growth in China & India 1. Rising FDI & outsourcing in both nations 2. Rise in C & I domestic corps 3. More mergers between Western & Eastern corps DRAMA #13 Trade wars among Asia nations 1.Eco destabilization of entrepot Asian nations 2.Greater influence of China over Japan & region DRAMA #14 The Kyoto global warming protocol mandates that all nations must cut CO2 emissions 10% annually for 10 consecutive years 1. Fall of profits & stocks of CO2-heavy corps 2. Fall of FDI & currencies in “red bulls” (nations living beyond their means) & rise in “green bears” (nations with resources to spare) DRAMA #15 Joblessness soars in Mexico 1. Increased USA taxes for law enforcement bulk-up 2. Rise of American racism 3. Increased drug cartel violence in both MX % USA DRAMA #16 Permanent free trade agreement between USA & EU 1.Rise in FDI & Godzilla corp. stocks 2.Hypocritical controversy over mixed capitalism DRAMA #17 China becomes world’s largest economy and market 1. Increase in C. domestic corps 2. Increased FDI for entire region, especially for Asian entrepot nations (those who ship global exports to China) 3. Empowering Chineseowned domestic corps USA GB DRAMAS USA DRAMAS DEALING WITH TRADE DEFICITS DRAMA #1 USA mandates 5 years to turn trade deficits into surpluses 1.Legislation to curb outsourcing 2.Devalued dollar sparks global currency conflict 3.Rise of global protectionism DRAMA #2 America devalues $ to stimulate exporting 1.Complaints from Asian investors 2.More expensive imports 3.Subsidizing corps who manufacture in USA DRAMA #3 Interest rates on government bonds hiked to attract more incoming FDI 1.Slowdown of domestic borrowing, investment, new job creation 2.Increased sale of treasury bonds DRAMA #4 America imposes high “luxury” taxes on imported products 1.Trade wars & WTO suits 2.Violation of NAFTA 3.Complaints of USA outsourcers who import to USA Drama #5 USA subsidizes America corps that don’t off-shore 1. Hiking of USA T-bond interest 2. Rising USA taxes 3. Decline in USA dollar DRAMA #6 NAFTA repealed 1.Fall in FDI to NAFTA zone 2.Rise of Mexican protectionism 3.Decline of USA exports to MX & Canada USA DEALING WITH GOVT. SPENDING DEFICITS DRAMA #1 New USA legislation mandates permanent balancing of the federal government budget within 5 years 1.Tax increases at national & local levels 2.Decreases in govt programs & rise in social problems 3. Prolonged recession DRAMA #2 New financial legislation & higher interest rates encourage Americans to save more, consume less 1. Rising corp. equity but falling revenue 2. Declining dollar, eco growth, importing, FDI, Asian stocks USA DRAMAS DEALING WITH FEDERAL BUDGET CUTS PRICE OF THE BUDGET CUTS AHEAD 1. Dampened eco growth 2. Higher unemployment 3. Declining value of stocks, currency, FDI 4. Gradually balancing the budget 5. Rise in social problems DRAMA #1 2% annual increase in federal taxes for 5 straight years to finance temporary aid program for eliminated govt. workers DRAMA #2 USA to cut military budget 1/3 over 10 years while withdrawing as “policeman of the world” DRAMA #3 Most forms of subsidized health care eliminated over 7 years DRAMA #4 Govt. privatizes Social Security system DRAMA #5 Agricultural subsidies eliminated over 7 years DRAMA #6 Federal food stamp programs eliminated over 3 years DRAMA #7 All federal aid to public schools eliminated over 6 years DRAMA #8 Post office system privatized over 3 years DRAMA #9 Federal education loan program truncated DRAMA #10 Privatization of national parks system DRAMA #11 States given mandate to consolidate or eliminate 1/4 of higher education institutions within 10 years DRAMA #12 Legalization of most illegal drugs to cut state & local law enforcement budgets in half DRAMA #13 Crackdown to expel all illegal immigrants DRAMA #14 Official adoption of the metric system to cut costs of noncompliance with ISO standards ???????????? THE UNKNOWN ZONE ???????????? OECD undertakes longterm program of significant economic subsidies to the world’s least developed economies (due to continued ineffectiveness of GGOs) Global insurance companies drop coverage of all “acts of God,” including hurricanes, tornados, & floods Swiss banks open secret accounts for review by world governments and judicial authorities WTO regulates Internet & taxes Internet sales WTO grants Microsoft legal monopoly to become the world’s official computer operating system Nuclear war in the Middle East