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CHAPTER 4: THE GLOBAL ECONOMY b. C apital Intensive- it is a type of production method...
CHAPTER 4: THE GLOBAL ECONOMY b. C apital Intensive- it is a type of production method that requires alarge of machineries, Objectives: equipments, & technology to produce To define economic Globalization To explain attributes of economic globalization. To articulate a stance on global economic 4 Factors of Production (Inputs) integration. . land(god given resources) a Approaching globalization purely through the lens “ b. labor(man power; any kind of work) of economies is a mistake”-Benczes 2014 c. capital(goods) equipments machine we must consider the other approach of technology;man made resources globalization since it is amultidimensional d. entrepreneur( organizer, all decision made by phenomenon. the production is made by entrepreneur, decision maker) Economic Globalization It is amajor facilitatorand thedriving forcein DISADVANTAGE OF TECHNOLOGY the globalization process. (quiz) It is a historical process demonstrating theresult . R 1 eplacement of workersby machines/robots. of technological progress and human innovation 2. Privacy and Security(hacking) (International Monetary Fund, 2008) 3. Rise of Fake News(dissemination of false Economics can improve living standards by information) giving poor countries an access to foreign 4. Loss of Culture; markets, promote foreign investment and open international trade”-Stiglitz (2008) 4 ELEMENTS OF ECONOMIC GLOBALIZATION 2. Movement of Foreign Direct Investments When aninvestor establishes foreign business 1. Diffusion of technology operations or acquires foreign business assets spread and movement of technological in a foreign company. advancementsacross borders FDIisan investment in the form of a controlling plays avital role in expediting the ownership in a business in one country by an process of globalization entity based in another country. technology:progress and innovation United Nations Conference on Trade and modern exchange Development (UNCTAD) reports concluded that Examples: FDI has become an important engine of health sector- improves medical economic growth. facilities/equipments, online consultation/check According to OECO, FDI takes place when an up through phones individual or a companyowns at least 10%or financial sector -purchasing online, easy more of a foreign company. paying of bills (ecommerce) digital devices -strengthen our relationship lement of Control- control to manage an international E with our people firm. education sector -convenience of computation of grades . investment a online shopping sites b. expand of a corporation/company to universal barcode various countries, “Economics is concerned with consumption, Facilities production and distribution.” An American technology company builds and operates a data center in Canada. This is a foreign direct investment from America to ADVANTAGES OF TECHNOLOGY Canada. 1. C reatesmore services, industries and business Manufacturing innovation. A Canadian sporting goods manufacturer builds 2. It increases theGDP growth rate. (economic a factory in Thailand. growth) 3. It increases theefficiency of the factors of Sales Office production. A French software company opens a sales office 4. Reduction of poverty; in Brazil to reach the Brazilian market with their services. Types of Production Method Retail A Japanese fashion brand opens a retail a. L abor Intensive- it is a type of production location in London. method that requires alarge number of workersto produce goods + services Logistics A Czech furniture company opens a warehouse - fixed exchange rate/currency(1994-1971) in Rotterdam. - US Dollar - Gold Standard - 1 ounce of Gold = 35$ Other Example: - 2 pesos = 1USD, A Japanese fashion brand opens a retail store in - 2 International Organization were established Canada. World Bank & IMF A Canadian manufacturer company expands its operation in the Philippines. International Economic Financial Institutions Institution of Globalization D:FDIincreases economic activity and growth; A World Bank increases job opportunities. International Monetary Fund DA:lost of local business World Trade Organization Multinational corporation vs. Foreign Direct WORLD BANK Investment History of World Bank NC is a business, corporation, and an entity while,FDI M In1947- Francereceived the first World Bank is a process/operation of expansion and investment of a Loan.(those affected by www) person to another country. In1950and1960’s-funding large infrastructures property(roads, dams, electric mendments of the Foreign Investment Act of 1991 A grills, irrigation systems) (change of existing law; revision) quiz In1970- theagricultural sector became the Before: at least60%owned by Filipinos primary focus.(developing countries) After: 100%foreign capital investmentis Offers along term loan. allowed Minimum Share Capital Two missions of World Bank Before:$200,000 After: $100,000 1. t o end extreme poverty(1.90$ a day to no more than 3 percent by 2030) 3. Migration 2. to promote spread prosperity(equality) [Asia, movement of people across borders Africa, Latin America](b ottom 40 percent of the 702$ billion- World Remittances population in each country) 540$ billion- Remittance among developing countries According to the World Bank, the Philippines rankedfourthamong the world's top “REMITTANCES RECIPIENTS.” . 1 India 2. China 3. Mexico 4. Philippines D: Theshort economic advantageis found in A remittances. DA:lose skilledandtalented workers. 4. International Trade transactions made between countries exchange of goods and services INTERNATIONAL MONETARY FUND CHAPTER 5: MARKET INTEGRATION the international organization aims topromote stabilityin the international system bjectives O stable exchange rate, To identify the actors that facilitate economic short term loans when an emergency occurs. globalization. To explain the role of economic and financial institutions in the creation of an integrated global economy WORLD TRADE ORGANIZATION To identify the attributes of global corporations. former:General Agreement on Tariffs and Trade rules of tradebetween countriessettles trade Intro:In1994,44 countriesassembled the Bretton disputes and conduct straight negotiations Woods Conference to help manage the postwar global policies, agreement, disputesduring trading economy. (tariffs & quotas) Bretton Woods Agreement - to establish anew monetary system hemajor players of global economyare the T DA:Job losses multinational corporations or MNCs and transnational corporations or TNCs onclusion:According to the World Bank,Globalization C can indeed reduce poverty, but itdoes not benefitall Multinational Corporations nations. enterprises whichown or control production or service facilities outside the country in which “Capitalism under economic globalization creates they are based. inequality.” any enterprise thatundertakes foreign direct investment,owns or controls income-gathering assets in more than one country,produces goods or services outside its country of origin, or engages in international production"(Biersteker 1978). ccording toCorporate Finance Institutions (2015) A There are various reasons companies to become MNC’s: 1. A ccess to lower production costs-installing a production warehouse and manufacturing plants in developing countries usually leads to a lower production cost. 2. P roximity to target international markets- it is beneficial to set up business in countries where the target consumer market of a company is located. 3. Access to a larger talent pool- when you become multinational, you can access the broad and deep talent pool that the globe has to offer and reap the rewards. 4. A voidance of tariffs- when a company produces or manufactures its products in another country where they also sell their products, they are exempt from import quotas and tariffs. ultinational/Transnational Corporations are constantly M evolving as a result ofoutsourcing. Outsourcing: - hiring person outside of the country - obtaining goods and services from a foreign target - going out to find the source of what you need. D:It helps to reduce cost&greater efficiency A (economic growth)
