Financial Globalization Overview and definition of terms: Globalization (general) Financial Globalization Economic Globalization Economic Disparity Extreme Poverty Transnational corporations Official Development Assistance (ODA)
Globalization the trend toward greater interconnectedness of the world’s financial, economic, technological, political, cultural, sociological, ecological and geographical systems an ongoing, evolving process some argue that it improves living standards throughout the world, while others say that its effects are more harmful than beneficial
Financial Globalization the world’s financial systems have become intimately interconnected reflects what happens in a network of world cities that have significant financial markets
Economic Globalization one of the most controversial in the past, a corporation tended to be identified with one particular country now a growing number of huge companies are multinational or transnational in nature. Eg. Coke, IKEA, Shell, Alcan etc these companies seek markets anywhere in the world that will benefit the company
Economic Globalization con’t supporters argue that it brings efficiency and produces greater global wealth others argue that it only increases the difference between the world’s haves and have-nots and produces a situation in which transnational corporations become more powerful and influential than most countries (corporate colonialism)
Economic Disparity an inequality in which some people or countries are much better off economically than other people or countries
Extreme poverty the condition of a person living on less than $1.25/day - U.S. currency - United Nations definition
Theorized Causes of Extreme Poverty: 1. Colonialism – most poor countries were at one time or another, colonies Colonization produced distortions in economic structures 2. Lack of Investment – most Periphery nations have not been able to fund an economic take-off as described in Rostow’s Stages of Economic Development
Theorized Causes of Extreme Poverty continued: - 3. Population growth – rapid population growth in some developing countries - 4. Disease - In Core countries, disease may actually aid economic growth since the healthcare industry is an important part of the economy in poor countries where people and governments do not have much money to spend on healthcare, disease has a major negative economic impact.
Theorized Causes of Extreme Poverty continued: 5. Foreign Debt – little $ is left to invest in economic development, education, healthcare etc 6. War – some conflicts have been going on for decades 7. Leadership Issues – many of the poorest countries in the world have had leaders who had little interest or skill in improving the economic lot of their citizens
Transnational corporations (TNCs)– a commercial organization that operates on a large scale, does business in multiple countries, and does not have one particular “home base” Advantages and disadvantages will come from these arrangements
Possible negative impact of TNCs: With economic colonialism, demands of huge TNCs replaced those of imperial powers many developing countries rely on the export of 1 or more raw materials (lumber, cocoa, etc) other developig nations rely on income from products manufactured in factories by cheap labour these products are produced for foreign owned companies and are exported to richer countries hence the developing countries have no control over their own economies
Official Development Assistance Term to measure aid that is provided for developing countries First used in 1969 List of countries that are recipients of ODA: http://www.oecd.org/dac/stats/daclist.htm
Discussion Questions In a broad sense, what kinds of distortions would historic colonialism produce in a colonized country’s economic structure? Developing nations must find a way to control their economies for their own benefit. What are the limitations that this statement should account for?