Download Flattened by Globalization: The Ups and Downs of Globalization

Globalization: The Ups and
Downs of Globalization
or
World economic integration
Globalization results
 Increase
in the importance of
international trade
 Increase in the movement of capital
 Increase in labor migration
 Increase in regional integration
Benefits of Trade
 Specialization
of production
Jose the Wheat Farmer
 Specialize
Teresa the Baker
 Specialize
Specialization leads to efficiencies.
The Law of Comparative Advantage
Where does Comparative
Advantage Come From?

Differences in:
• Climate and natural resources
• Relative abundance of labor and capital
• Technology
• External economies
(External economies are a reduction in a firm’s costs that result
from an expansion in the size of an industry)
How technology affects Global
Trade:
 Information


Technology
collaborative work
communication
 Transportation


Technology
of people
of goods and services
The Gains of Globalization
 Who
gains?
Learning Objective 29.1
Linking the
United States to the
The Current Account
International
Economy
Trade Flows for the
FIGURE 29.1
United States and
Japan, 2006
Does it raise all Boats?
 Are
you better off?
Learning Objective 29.3
The International Sector and
FIGURE 29.4
U.S. Imports and
Exports, 1970–2006
An Overview of International
Trade
• U.S. International Trade in a World Context
•
The Eight Leading Exporting
Countries
An Overview of International
Trade
• U.S. International Trade in a World Context
•
• The Unintended Consequences of
Banning Goods Made with Child
Labor
•Would
eliminating child
labor in
developing
countries be a
good thing?
Government Policies That Restrict
Trade
• The Argument over Trade Policies and
Globalization
•
•
“OLD-FASHIONED” PROTECTIONISM
Protectionism The use of trade barriers to
shield domestic companies from foreign
competition.
 Saving jobs
 Protecting high wages
 Protecting infant industries
 Protecting national security
Trade Agreements
• NAFTA – North America Free Trade –
soon AFTA? Amero?
• European Union – 28 countries - 12 Euro
• CAFTA - Central America Free Trade
The Current Exchange Rate System
The Euro
Countries
Adopting
the Euro
Learning Objective 30.3
International Capital Markets
FIGURE 30-6
The Distribution of
Foreign Purchases of
U.S. Stocks
and Bonds by Country,
2006
Summary: Benefits of Trade
•
•
•
•
Specialization
Foreign Investment
Competition
Higher Standard of Living
Costs of Globalization
 Who
loses?
What about the sinking ships?
Household income
Working more and getting less.
The Lorenz curve and the Gini
Coefficient
(http://en.wikipedia.org/wiki/Gini_coefficient)
In the US
 1967:
0.397 (first year reported)
 1968: 0.386 (lowest coefficient reported)
 1970: 0.394
 1980: 0.403
 1990: 0.428
 2000: 0.462
 2005: 0.469 (most recent year reported;
highest coefficient reported)[3]
Compared with other countries...
 Country
China
India
USA
1980 Gini
.320
.320
.403
2000 Gini
.403
.378
.462
Hot off the presses...
“Gap between rich, poor seen growing
Income disparity reaches highest since 1920s, paper reports, with recent Wall
Street boom partly to blame.” (CNNMoney.com)



The figures, based on "adjusted gross income" which
incorporates certain deductions such as contributions to
individual retirement accounts, revealed that the income
level for the tax filer in wealthiest 1 percent of Americans
grew 3 percent...between 2000 and 2005, according to
the Journal.
At the same time, the median American income,
however, slipped 2 percent during that same period...
...was due a combination of factors including
globalization and technical advances...
Another measure of well being:
Wages
A Race to the bottom?
Real Median Wage in 1973: $12.45
Real Median Wage in 2000: $12.90
Up nearly 1/3 of a percent! Is that good?
Well...
Factors That Affect the
Equilibrium Exchange Rates
A
difference in income growth rates
 Differences in relative inflation rates
 Changes in real interest rates
In the same time period
 GDP
per person went up 72%
 Global Trade as a percent of GDP
doubled
To put it in perspective
 Between
1948 and 1973 real median
wage increased 80%
The Environment
Deforestation
Avoiding Pollution Regulations
We are all affected
Acceleration of Global Warming
Adaptation
Homogenizing Properties of
Globalization
Questions?
Comments?