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Globalisation and the
“new globalisers”
The rise of the East - tipping the global
scales?
Or “ Are your wages being set in
Beijing/Mumbai” ?
-
Outline:
EU The twenty-first century is witnessing a shift in
the East-West global balance of economic and
political power with the rise of the two “Asian
giants” China and India.
EQ 1. How has globalisation contributed to this
rise in power ?
2. What sorts of pressures might impede this rise?
3. What threats and possibilities does the rise of
the East hold for Singapore? Can Singapore
respond effectively to these?
What will be the overall impact of rise of China
and India on the world economy?
• Global effects on
• International trade, markets and finance
• Global workforce
• Integration of economies
Neo liberal view(economists (who support freeing
up national and international economies) believe
“If you free up the flow of private capital, goods
and services across national borders then
this will lead to raised levels of productivity,
GDP growth, employment and real income.”
The East/South Asia is rising! Incomes
increasing ; absolute poverty reducing;
% of middle income earners increasing
Globalisation and economic interdependence:
how has it contributed to “the rise of the East?
Globalisation
China and globalisation– some key
areas for external markets
• Manufacturing e.g. cars, white goods (frig,
washing machines) and garments (clothing)
• Science and technology
8 “ cutting edge” areas of science and tech:
biotech, IT, new material, advanced manufacturing,
advanced energy, marine technologies, lasers
and aerospace
EQ1. How is rise of China
shown by a manufacturing
case study? Track a T-shirt!
• Where does your favourite t-shirt
come from?
• Ever stopped to think about how
your t-shirt illustrates globalisation
in action?
• How does your purchase as a
consumer place you in a complex
web of inter-relationships that starts
thousands of kilometres away?
History in pictures
T-shirts in the 40s and
50s
Who wears t-shirts?
• Traditionally – young affluent consumers in the
developed world (including Singapore). The
more attractive and ‘new’ the product, the higher
the street value
• Increasingly – aspiring new markets (e.g. China)
which want a ‘slice’ of the consumer pie
• In future – emerging ‘less conventional’ markets
such as the second-hand markets in poorer
nations
• Follow the animation!
EQ 1: T-shirts today
• Before globalisation of
markets
• After globalisation of
markets
• Consumer – American
• Consumer – American +
global consumers
• Traditional supplier American
?
• Supplier – China + +
• Cheaper supplier Bangladesh
EQ1:What are the factors that
caused this ‘globalising’ shift?
• Cost in original country (e.g. USA) rising due to
higher standard of living and labour costs
• Designers/manufacturers seek new sources
(lower costs esp. labour)
• Manufacturers invest in infrastructure (e.g.
sewing machines, packing machines,
distribution chains etc.)
• Supply of goods ‘outsourced’ to increase profit
margins
EQ 2 Potential pressures?
What happens to global wages?
• China
US$117.00 – 147.00per month
• Vietnam
US$ 94.00 per month
• Bangladesh US$ 64.00 per month
EQ1: This is great! China’s economy develops
and cheaper goods for me…
• Benefits
– the consumer gets a quality product for a lower price
– Manufacturer gets better profit margins
– Supplying country (e.g China) gets higher levels
of employment, better paid workforce, better
infrastructure…hooray!
– Wealth is shared globally and poorer nations make
progress in standard of living, education etc.
– Wider choice of goods and no loss of quality
How does a globalised product get to the
consumer? –a trans-national Tshirt
Who benefits? How?(EQ1)
•
•
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•
•
•
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US design
China manufacturer
HK owned company
Raw materials from…
Sold to consumers in…
Shipped under flags of
convenience
Ship’s crew from…
Payroll/financial support
in…
Consumer issues handled
by…
Profits in tax-haven
But…
• Problems/issues/pressures (EQ2)
– Labour costs in new economies rise
– New sources for cheaper labour sought
– Emerging economies make short term gains
but can ‘outprice’ themselves
– Increased production creates wasteful
consumerism (a ‘throw-away’ attitude)
– Increased pressure on environment,
resources etc.
Sidebar! Impact of globalisation on
workers’ rights
• Over 300 strikes repressed by employers or the police,
in nearly 90 countries
• About 8,500 arrested or detained
• 209 trade unionists killed or disappeared
• Over 100,000 harassed
• 20, 000 dismissed because of their trade union activities
• 20 million bonded labourers worldwide
• 700,00 women and children victims of cross-border
human trafficking each year
• Worldwide, women are paid anything between 10-50%
less than men for doing similar jobs or different jobs of
equal value
EQ 1 China
In summary:
• China has reaped tremendous benefits
from astronomic growth in economy
• China’s population continues to develop in
terms of skills and education
• Prosperity has brought higher
expectations and a shift from ‘producer’
nation to ‘consumer’ nation
• This brings significant ‘soft power’
What about India?
EQ1: Context of globalisation in India
Slide show
http://www.slideshare.net/captaink99/indiaglobalisation?from=share_email_logout3
-- Massive changes since 1990’s : opening to the
world, transformed business landscape, IT
powerhouse, emerging world-class firms
-- But lopsided growth: benefits urban middle
classes but not the vast majority of the poor –
unlike China
EQ1: Why is India rising (and may be
more stable in long term than China)?
• Potential drawbacks: the most difficult country to
govern: vast, hugely diverse, split so many
different ways
• Messy democratic politics: multi-party coalitions
at the centre; kaleidoscope of musical-chair
politics in the states
• But advantages (compared with China): unity
and stability; checks and balances; Britishendowed liberal institutions; the English language;
political and civic freedoms
The role of the IT sector
• http://www.youtube.com/watch?v=LnhTQF
Hkgmw
• India outsourcing (3 mins)
An example: NEW DELHI, India, and SAN JOSE,
Calif., December 6, 2006 (press release)
- Cisco® today announced the next stage of its globalization
strategy with the selection of India as the site for its
globalization center, called "Cisco Globalization Center East."
"Cisco chose India as the location from which to expand its
globalization vision because India has a highly skilled
workforce, supportive government, innovative customers
and world-class partners that already have global
capabilities," said John Chambers.
"As our global development strategy. Under Wim's leadership,
Cisco will lead the market transition being driven out of India
with our talented employees and partners across the globe to
meet the needs of customers on every continent in the world."
As a multi-national corporation that today operates in over 120
countries, Cisco's globalization strategy represents an evolution
in traditional business models by delivering an enhanced
customer and partner experience on a 24-hour basis.
EQ1: India: Other areas of
globalisation
• International finance
• India, despite issues of corruption and
transparency, has adjusted its regulations
for financial markets to encourage
international capital and finance managers
and investors to operate from India.
Pharmaceutical industry (medicines)
• India’s share of world market in pharmaceutical
manufacturing rapidly increasing
• As a production location, the country is benefiting
from its lower wage cost
• Other advantages over western competitors
when it comes to producing medicines e.g.
transportation costs.
• BUT: sector’s development slowed by major
infrastructure problems - qualitative and
quantitative shortcomings in energy and transport
sectors.
Other potential growth areas
• Low cost small vehicle manufacturing (for
domestic market) Tata unveils the $2,500 car
(but what are the global environmental
and energy demand implications ?)
• Internal consumer demand(especially for IT- cellphones)
• Food processing and packaging
• Medical /cosmetic tourism
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India and China “Contest of the Century” ?
Potential threats to Rise of the East:
Rivalry over status as global forces –”Asian giants”
Competition between China and India – especially
for raw materials and energy sources
Demographic stresses (population aging faster in
China than in India)
Multinationals outsourcing to lower wage
developing countries
Internal unrest (religious/economic tensions/
strains of rapid growth)
Corruption- political, legal and financial
Environmental degradation
EQ3 What might this rise mean for Singapore?
Globalisation
Concluding Reflections
• If emerging economies enjoy only short
term growth before an industry ‘relocates’
– what then?
• If developed economies cannot afford to
compete with countries with lower costs,
what happens to employment in these
countries?
• Globalisation is certainly reducing poverty
in many developing countries BUT what is
the impact for developed, more
established nations?