Session 16 Session 16 Globalization Globalization There are only two families in the world, my old grandmother used to say, The Haves and the Have-Nots. Cervantes, Miguel de (1547 - 1616) Spanish novelist. Don Quixote, Pt. II, Ch. 20, 1615
Dec 21, 2015
Session 16Session 16
GlobalizationGlobalization
There are only two families in the world, my old grandmother used to say, The Haves and the Have-Nots.
Cervantes, Miguel de (1547 - 1616)Spanish novelist. Don Quixote, Pt. II, Ch. 20,
1615
What is globalization?What is globalization?
World IWorld I National economies National economies
were self-contained were self-contained entitiesentities
Barriers to cross-Barriers to cross-border trade and border trade and investmentinvestment
National differences National differences in government in government regulations, culture, regulations, culture, etc.etc.
World IIWorld II Barriers to cross-Barriers to cross-
border trade and border trade and investment are investment are tumblingtumbling
Perceived distance is Perceived distance is shrinkingshrinking
National economies National economies are mergingare merging
Material culture is Material culture is becoming similarbecoming similar
Today factsToday facts
The volume of goods, The volume of goods, services, and services, and investment crossing investment crossing national borders has national borders has expanded faster than expanded faster than world outputworld output
Drivers of Drivers of globalizationglobalization
1.1. Declining trade and Declining trade and investment barriersinvestment barriersProtectionism (1920s – 1930s)Protectionism (1920s – 1930s)WWIIWWIIGATTGATTFrom 1991 to 2000 of the From 1991 to 2000 of the 1121 changes worldwide in 1121 changes worldwide in the laws governing FI, 95% the laws governing FI, 95% created more favorable created more favorable environmentenvironment
word trade >> world outputword trade >> world output
Firms are finding their home Firms are finding their home markets under attack from markets under attack from foreign companies.foreign companies.
CountryCountry 19131913 19501950 19901990 20020000
FranceFrance 21%21% 18%18% 5.9%5.9% 3.9%3.9%
GermanGermanyy
2020 2626 5.95.9 3.93.9
ItalyItaly 1818 2525 5.95.9 3.93.9
JapanJapan 3030 -- 5.35.3 3.93.9
HollandHolland 55 1111 5.95.9 3.93.9
SwedenSweden 2020 99 4.44.4 3.93.9
BritainBritain -- 2323 5.95.9 3.93.9
United United StatesStates
4444 1414 4.84.8 3.93.9
Average tariff rates on manufactured products as %value
Drivers of Drivers of globalizationglobalization2.2. The role of The role of
technological technological changechange
– Microprocessors Microprocessors and and telecommunicationtelecommunicationss
– InternetInternet– Transportation Transportation
technologytechnology
Source: National Science Board, Science and Engineering Indicators - 2000
The Changing The Changing Demographic of the Global Demographic of the Global EconomyEconomy World output and world tradeWorld output and world trade
CountryCountryShare of World Share of World
OutputOutputShare of World Share of World
ExportExport
19631963 20002000 20002000
United United StatesStates
40.3%40.3% 27.0%27.0% 12.3%12.3%
JapanJapan 5.55.5 14.214.2 7.547.54
GermanyGermany 9.79.7 7.37.3 8.78.7
CanadaCanada 3.03.0 2.02.0 4.44.4
ChinaChina NANA 3.23.2 3.923.92
South KoreaSouth Korea NANA 1.41.4 2.72.7
The Changing The Changing Demographics of the Demographics of the Global EconomyGlobal Economy
2. The changing FDI picture2. The changing FDI picture
The Changing The Changing Demographics of the Demographics of the Global EconomyGlobal Economy
3. The changing 3. The changing nature of the MNEnature of the MNESince 1960s, Since 1960s, -The rise of non-US MNEsThe rise of non-US MNEs-The rise of The rise of
mini-multinationalsmini-multinationals
CountryCountry 19731973 19901990 19971997 20002000
USAUSA 48.5%48.5% 31.5%31.5% 32.4%32.4% 26%26%
JapanJapan 3.53.5 1212 15.715.7 1717
UKUK 18.818.8 16.816.8 6.66.6 88
GermanyGermany 8.18.1 8.98.9 12.712.7 1212
GlobalizationGlobalization
0 2 4 6 8 10
FinlandUSA
CanadaIsraelkoreaBrazil
MexicoRussia
VenezuelaIndonesia
Is Globalization threatening your economy?
it is Is not