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The Global Economy

The Global Economy. Chapter 21. Global Integration. Global integration- interdependency among countries (relying on one another) One reason for this increase Improved telecommunications- long distance electronic communications (uses satellites and fiber-optics)

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The Global Economy

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  1. The Global Economy Chapter 21

  2. Global Integration • Global integration- interdependency among countries (relying on one another) • One reason for this increase • Improved telecommunications- long distance electronic communications (uses satellites and fiber-optics) • First transatlantic telegraph cable- 1866 • Shortened communication times from two weeks to two minutes • Semiconductor- computer chip • Internet, Television • All of this has increase the variety of products and sharing of cultures and preferences (Japanese food, English as the world’s most popular language)

  3. Globalization of Financial Markets • The world has become one financial market • U.S. created worldwide branch banks in the 1970’s • U.S. government securities and stocks are sold worldwide • Foreign exchange- buying and selling of foreign currencies • U.S. economy is a major part of the world economy • U.S. stocks influences markets around the world • U.S. financial panics can be felt worldwide

  4. Foreign Investments Who owns whom? • Burger King • Target • Sony • Nestle • Shell (Gas) • Royal Caribbean • Carnival • Samsung • Bayer • Nokia • France • Denmark • Liberia • Germany • Britain • Finland • Switzerland • South Korea • Panama • Japan

  5. Foreign Investments • Direct foreign investment (DFI)- purchase of real estate and business by foreigners • Billions annually invested • More prominent in the U.S. because of our stable government • Foreigners own 30% of U.S. securities • 6% of American industries are foreign owned • (compared to Britain’s 20%) • American investors own over 40% of worldwide businesses • Economic imperialism- People fear that U.S. culture has taken over their own (“pushing our culture”)

  6. Multinationals • Multinationals- firms that do business or own offices or factories in many countries (Fujifilm, Exxon, BMW) • By 2003, there were 60,000 multinational corporations with 620,000 foreign affiliates (branches of multinational firms) • Largest 500 multinationals are worth over $9.2 trillion worldwide • America, Japan, Germany, and Switzerland own half of the multinationals; with Taiwan, S. Korea and Malaysia growing

  7. Regional Cross-Border Investments • Most multinationals invest in regions close to home • American firms focus on the U.S., Canada, Mexico, and S. America • European countries on W. Europe • Japan on Southeast Asia • Allegiance- loyalty to something, someone, or some group

  8. Alliances • Alliances- working together as multinational firms • Usually as joint ventures or licensing deals • Ex.- IBM (machine) with Microsoft (software), Intel (CPU) • Strategy is to find success where companies may be weak

  9. Tolerance • The social result of globalization is increased immigration • This has made the U.S. truly multicultural • Increase immigration leads to more diverse public schools, which leads to the need for more tolerance and open-mindedness • More languages and diverse friendships

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