Globalization Unit 5

Key Terms Capital - cash or goods that are investments to the worth of an individual and/ or corporation Capitalism - is defined by Merriam-Webster as an "economic system characterized by the following: private property ownership exists; individuals and companies are allowed to compete for their own economic gain; and free market forces determine the prices of goods and services. Such a system is based on the premise of separating the state and business activities. Capitalists believe that markets are efficient and should thus function without interference, and the role of the state is to regulate and protect" Comparative advantage - the opportunity cost is lower for one country to produce a good/ product than another Eurocurrency - money that is outside of its domestic usage and handled in Europe Human capital - the value of an employee's skills and ability Industrialism - a construction where industries are most prevailing Monopolies - a company that has complete control over a specific commodity NAFTA (North American Free Trade Agreement) - North American Free Trade Agreement established by the United States, Canada and Mexico. It encourages free trade between North American countries. PPF curve - a Production Possibility Frontier shows the combinations of goods that can be produced with the given resources that society has. It also shows that the increase of any good occurs by sacrificing another good. WTO (World Trade Organization) - an organization that manages global trade policy

What is Globalization? Globalization is: the increase in economic activities between countries, specifically in international trade, foreign direct investment (FDI), and capital market flows The goods, services and capital produced in one country are integrated in markets worldwide, thus causing a single global market.

What is Globalization? Globalization affects: 1. trade 2. investments 3. immigration

What is Globalization? Brainstorm….. Trade: allows a wider variety of goods readily available for consumers. Foreign Direct Investment: when corporations or individuals invest in foreign countries Immigration: free migration offers an opportunity to attain employment.

What is Globalization? Globalization can also be defined as internationalization Internationalization is spreading and implementing cultures and views worldwide. (Cultural Diffusion) When it is seen as modernization, globalization defines the dominance of modern social ideas, such as capitalism, industrialism, etc., over countries.

What is Globalization? Some people feel that internationalization may: cause a country’s own culture and customs to be destroyed. Currently the big participants in globalization are: United States EU (European Union) Japan China

Globalization on the Rise Causes for an increase in Globalization: 1. Technology and telecommunication 2. Government regulations on international trade and investment were loosened 3. Private corporations were able to communicate with international businesses. 4. Technology advancements created an easier environment for financial transactions to occur in a global market. Funds were easily transportable from one country to another.

NAFTA The North American Free Trade Agreement or NAFTA: An agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. There is much concern in the United States over the provision that if something is sold even once as a commodity, the government cannot stop its sale in the future. Commodity= an economic good such as a product of agriculture or mining . Examples: water, oil, metals, etc… This applies to the water from America’s lakes and rivers, fueling fears over the possible destruction of American ecosystems and water supply.

Benefits of Globalization 1. Breaks the inefficiency of monopolies and creates a competitive market for goods. 2. Forces firms to produce at minimum average cost. This causes higher productivity within a firm and lower prices for consumers. 3. Lower input costs which in affect creates more investment opportunities and leads to more output being produced. 4. Cost savings produced by off-shoring.

Drawbacks of Globalization 1. Cultural diversity within skilled workers is decreasing as jobs are being outsourced (overseas). 2. Capital is drawn in from investors. 3. The United States economic future growth depends on the countries relationship to markets overseas and ability to outsource.

Drawbacks of Globalization 4. Undeveloped countries are at risk of global isolation. Their lack of resources causes the ability for foreign private investment to be extremely small, yet it does give them the access to foreign goods. 5. Traditions and culture may be destroyed. 6. Increase of available immigrant workers which may create the workforce within a country to experience unemployment.

Globalization and the U.S. In the U.S. we see: 1. An increase in international goods due to trade. 2. Change in import prices. 3. Increasing demand for exports and for the availability of variety

Globalization and the U.S. A single country can not produce and manufacture the variety of goods consumers demand. Trade allows: 1. countries to specialize in markets where they have a comparative advantage (which allows them to trade their products for the goods of other countries). 2. An increase in the elasticity of substitution. Some countries produce a specific good with better quality than does another. 3. Efficient use of a countries resources which are available.