DISTINGUISHING FEATURES OF GLOBALISATION

1. DISTINGUISHING FEATURES OF GLOBALISATION Describe the key features of globalisation Evaluate arguments for and against globalisation Examine the challenges it poses to individual firms and countries

2. Impact of globalisation • Faster growth rate of international trade in relation to production. • The emergence of genuine competition from emerging nations of Asia and Latin America. • Increased mobility of capital. In 1975 international securities ( stocks and bonds) transactions represented less than 5 percent of GDP in developed countries,

3. Impact of globalisation (cont’) Twenty years later, they stood at 1000 percent in the United Kingdom. In a global economy, persons or firms from one country can buy different types of securities (stocks and bonds) on another country. People would engage in this type of investment if the interest rate in another country is high.

4. Impact of globalisation • The expansion of international competition: Since the early 1990’s the following goods and services have increased their share of world trade – financial services, transport, the audiovisual sector and telecommunications. • Major companies have developed their places of business in another country because of a boom in direct investment in both production and innovation.

5. Impact of globalisation • Rapid internationalization of financial markets continues. Note how the government of Jamaica has been able to borrow on the international markets. This may impact on exchange rate and interest rates locally.

6. Arguments in support of globalisation • The lowering of trade barriers makes free flow of goods, services and capital possible. In this free trade environment, it is argued that inefficient producers would find themselves being driven out of the market. Also increased efficiency in production process would lead to increased production of goods and services, a reduction in cost to the consumer, and overall improvement in welfare.

7. Arguments in support of globalisation • International division of labour and economies of scale have been cited as positive benefits to accrue from globalisation. Some also point to the wider availability of various technologies, this has allowed many developing countries to ‘catch up’.

8. Arguments in support of globalisation • A recent IMF report suggests that globalisation paves the way for countries to take advantage of economic opportunities, whatever their level of development. As a counter to the view that globalisation leads to increased unemployment, the report suggested that it was the level of technological development that was the main contributory factor in the short term.

9. Arguments in support of globalisation • As far as the IMF is concerned, the experience of the North American Free trade Area (NAFTA); US, Canada & Mexico, jobs lost through relocation of US industries to Mexico have been offset by the creation of jobs with a higher value within the USA itself. The report rejects the notion that liberalisation of trade results in a loss of economic control ( sovereignty).

10. Arguments against globalisation • Current evidence does not support the view that countries will always benefit from integration in the world economy. • Reality of globalization is that benefits have been unevenly distributed, particularly among developing countries. • Many developing countries have become marginalised.

11. Arguments against globalisation • While developing countries kept pace with the rate of global trade, the ratio of GDP fell in 44 out of 93 developing countries since 1995 to present. • There is sharp imbalance in the distribution of foreign direct investment: eight developing countries accounted for two-thirds of foreign direct inflows in 1990-93 , while half of all developing countries received none. WHY?

12. Arguments against globalisation • The disparity in the flow of foreign direct investments (FDI) can be traced to another discriminatory feature of globalisation: production and trade are highly concentrated. 17 percent of the world’s inhabitants account for 80 percent of total production and 83 percent of world trade.

13. Arguments against globalisation • 40 percent of world exports are controlled by just 100 companies. • In economic terms , it is the multinational companies that profit from globalisation rather than countries and in particular, developed countries. • There is sectoral arrangements between companies leading to the emergence of global oligopolies ( few very large companies operating like monopolies), e.g. Pepsi, Microsoft

14. Arguments against globalisation • While there has been lowering of trade barriers on exports from developing countries, significant obstacles in the form of non-tarrif barriers continue to restrict the volume and value of exports from developing to developed countries. One significant non-tarrif barriers is linked to setting standards. E.g. ISO 9000 and ISO 14 000

15. Arguments against globalisation • There is the strong perception in developing countries that the aim of these international Standards are not simply to ensure that exports are of an acceptable quality, rather it is felt that they are used as barriers to trade. • In contrast, it is felt that exports from developed countries not only have relatively easy access to the markets of developing countries; there is also increasing evidence of goods being dumped

16. Arguments against globalisation • The large size of the companies of developed countries means that they are able to produce large volumes of a product at a low cost to serve large markets. • The economies of scale that such large firms enjoy make it possible for them to sell their products either below cost of production or below a fair market price to developing countries.

17. Challenges posed by Globalisation • Firms need to develop global strategies in order to compete in the global market place. E.g offering superior customer service, low prices, innovative and quality products. • Firms/companies must become internationally competitive in both domestic and foreign markets.

18. Challenges posed by Globalisation • The need for social cohesion, from the standpoint that solid economic relationships within one and the same living space become strained. Social cohesion can no longer be founded on shared economic interests. • The need for policies to be redefined, since isolated, short-term policies may not be able to withstand the impact of globalisation

19. Challenges posed by Globalisation • The reconciliation by policy makers of national interests and cultural differences with the forces unleashed by gobalisation

20. YOUR REACTION What is your view on the impact of globalisation on employment, the relationship between multinational corporations and the, and the impact of the MNC’s on the lives of ordinary people.