Economic Globalization

• Globalization is the spread of ideas, knowledge, information, goods, and services around the world.
• In business, globalization refers to integrated economies via free trade, capital flow, and access to foreign resources.
• The goals of globalization are to maximize returns and benefit the common good.

3 Components of Economic Globalization

• Academic literature divides globalization into three major areas.
• Economic
• Cultural/Social
• Political

Economic Globalization

• Focuses on widespread international movements of goods, capital, services, technology, and information.
• Economic globalization comprises the globalization of:
• Production
• Finance
• Markets
• Technology
• Organizational
• Regimes
• Institutions
• Corporations
• Labour
• Economic Globalization is the most mentioned in the media.
• It is associated with massive amounts of financially traded daily on stock markets, known as "NEW ECONOMY".
• There are three economic institutions monitoring the economy.
• The International Monetary Fund (IMF): Oversees the international monetary system.
• The International Bank for Reconstruction and Development (IBRD), later named World Bank (WB): Provides loans for European reconstruction and expanded to the developing world.
• The General Agreement on Tariffs and Trade (renamed World Trade Organization in 1992): Oversees multilateral trade agreements.

Cultural Globalization

• Refers to the transmission of ideas, meanings, and values across national borders.
• Migration is an important aspect of cultural globalization spanning centuries. Some cultural aspects are:
• Languages
• Religious beliefs
• Values spread through military conquest
• Missionary work
• Trade.
• Food is an obvious example of cultural globalization with unique diets around the world.
• Fast-food giants like McDonald's, Coca-Cola, and Starbucks have promoted it.
• Sport is also a globalizing entity such as the World Cup and The Olympics.
• These bind millions in a shared, global leisure experience.

More on Cultural Globalization

• Converging global consumption patterns are emerging where you can go to pretty much any major city in the world and share in a similar 'consumption experience'.
• More and more countries in Asia and South America are coming to enjoy a high-consumption lifestyle.
• Central to this is the growth of similar styles of shopping malls, and leisure parks which provide a homogenous cultural experience in different regions across the world.
• Homogeneity comes into society in several ways - ethnically (Japanese), religiously(many Arabs), culturally (Indians). politically(communism).
• Study suggests ethnicity is most prominent type of homogeneity.
• Ethnicity is where everybody shares similar physiological characteristics and cultural behavior.
• Financial homogeneity exists in many countries, was prevalent in communist countries, but this type of homogenous society is in decline.
• North Korea is a great example of financial homogeneity, at an extreme level, another good example is Scandinavian countries.
• The government makes sure that every citizen of their country enjoys high-level living standards.
• The global village/Global Consciousness individuals and families are now directly plugged into the news from the outside world

Cultural Globalization Theories

• Detraditionalisation is where people question their traditional beliefs about religion, marriage, gender roles, and so on.
• Originated from Anthony Giddens
• His classic 1999 text, Runaway World
• Global risk consciousness, from Ulrich Beck (1992), is a fundamental feature of globalization.
• This consciousness emerges due to shared global problems, which threaten people in multiple countries.
• Some examples are, Threat of terrorism, international nuclear war, the threat of global pandemics, the rise of organized crimes funded primarily through international drug trafficking, the threat of planetary melt-down due to global warming.

Political Globalization

• Refers to the absence of absolute sovereignty of a state's political borders, increased government interaction, and external intervention based on democracy, NGOs, human rights, and freedoms.
• Advantages include establishing international norms where nations agree to norms when signing treaties.
• Ease of movement includes agreements between nations that relax labor movement across boundaries.
• Ease of Trace through creating better trade routes around the world to support and promote economic globalization.
• Disadvantages include, the Loss of power at the nation-state level when making concessions to reach agreements.
• Bureaucracy emerges by adding layers to business/citizen activities due to standards.
• Decreased political accountability is a critique of bodies like the WTO, EU, and UN because they're full of unelected bureaucrats.
• Examples of Political Globalization:
• The European Union comprises 27 nation-states on the continent of Europe as a successor to political agreements after WW2.
• NATO contains Russian aggression by creating a, if one nation is attacked the rest will defend them.
• The Belt and Road Initiative by China aims to spread China's sphere of influence.
• War Games is where allied nations engage to strengthen military ties and protect interests.
• NAFTA decreased labor standards and blue-collar jobs from the United States

The Global Economy

• The global economy refers to the interconnected worldwide economic activities between multiple countries.
• Globalisation describes the process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration, and transportation ultimately improving their performances.
• International trade is considered to be an result of globalization.
• Specialization on comparative advantages has helped countries too.
• International finance is where money can be transferred at a faster rate between countries compared to goods, services, and people.
• It consists of topics like currency exchange rates and monetary policy.
• Global investment refers to an investment strategy that is not constrained by geographical boundaries, mainly via foreign direct investment (FDI).

Importance of the Global Economy

• The global economy can be understood by looking at it in relation to emerging markets.
• Economic importance at a micro and macro level: Emerging markets have grown economically due rising populations,
• Microeconomics studies resource allocation and decision-making of households, individuals, and firms.
• Large firms, rich individuals, and income distribution have come from emerging markets.
• Poverty still needs to be eradicated.
• The long-term world economic outlook projects an increase in GDP in emerging market economies in 2019.

Control of the Global Economy

• Big banks and large corporations essentially fund and control governments, giving financial institutions dominance.
• The global economy offers benefits like economies of scale/lower prices, increased global investments, free movement of labor, and reduced global inequality.
• It also poses costs such as, environmental impacts, tax competition/avoidance, brain drain from some countries, and reduced cultural diversity.
• Key factors affecting the global economy:
• Natural resources
• Infrastructure
• Population
• Labour
• Human capital
• Technology
• Law

Market Integration

• Market integration occurs when prices among locations or goods follow similar patterns over time, indicating integrated markets.
• This happens when groups of goods often move proportionally to each other.
• Impacts of market integration on the global economy include; reduced trade costs, improved goods/services availability, and increased consumer purchasing power.
• Employment opportunities tend to improve via trade liberalization, market expansion, technology sharing, and cross-border investment.

Goals of Market Integration are:

• To remove transaction costs
• To foster competition
• To provide better signals for optimal generation and consumption decisions.
• To improve security of supply
• Benefits of market integration include increasing market share, reducing competition, and creating economies of scale.
• Disadvantages include regulatory scrutiny, less flexibility, and potential to destroy value rather than create it.

The Global Interstate System

• The global interstate system represents the whole of human interactions structured politically as a system of competing and allying states.
• The international system is the focus of International Relations.
• United Nations was coined By FRANKLIN ROOSEVELT on Jan 1st 1942.
• UN means allies to fight against Axis Powers in WWII.
• Only 26 nations pledged to employ full resources against tripartite pact members and cooperate, not make separate peace.
• International Financial Institutions Include:
• World Bank
• International Monetary Fund
• Asian Development Bank
• African Development Bank

Trade Agreement

• A trade agreement occurs when nations agree on trade terms.
• They determine tariffs/duties on imports/exports, affecting international trade.
• Pros of Trade Agreement:
• Increased Economic Growth
• Lower government spending
• Technology transfer
• Cons of Trade Agreement:
• Increased job outsourcing
• Poor working conditions
• Degradation of national resources
• Imports are goods/services produced in a foreign country and bought by domestic residents, including items shipped by a foreign subsidiary of a domestic firm.
• Exports are goods/services made in a country and sold outside its borders, including anything shipped from a domestic company to its foreign affiliate/branch.

Global Governance

• Global governance encompasses activities transcending national boundaries at international, transnational, and regional levels, based on rights/rules enforced via economic/moral incentives.
• Global governance is needed because national policies directly affect a country for good or bad, and other countries cannot be ignored.
• Global governance stresses conflict management, helps nations develop capacity for globalization, and includes citizens' participation in global decision-making.
• Making global governance work is a defining challenge to address pressing transnational problems at the intersection of peace, security, and justice.