Globalization

Globalization Definition: Although there is no one precise definition, the term mainly refers to the increased flow of trade, people, investment, technology, culture and ideas among countries. (Interconnectedness!)

Globalization Free Trade: The voluntary exchange of goods and services in the absence of trade barriers and restrictions Trade between countries creates competition between countries as well as interdependence

Globalization Multinational-Corporations: companies have offices and/or factories in different countries and usually have a centralized head office where they coordinate global management. Examples: Nike, Wal-Mart, Shell, McDonalds Top 100 multinationals are all US-owned companies!

Anti-Globalization Isolationism: a policy of remaining apart from the affairs or interests of other groups, especially the political affairs of other countries (the opposite of globalization)

Advantages and Disadvantages of Globalization

Globalization: Advantages #1. Partnerships between countries Creates stable relationships between countries Economic interdependence Reducing the probability of beginning a war

Globalization: Advantages #2. More efficient markets Technology creates faster communications More efficient = more affordable goods

Globalization: Advantages #3. Creates Jobs (at least for some) Some countries have seen an increased standard of living because of the jobs created by global markets Many Third World Countries have seen higher incomes, longer life expectancy, and better schooling

Globalization: Disadvantages #1. Unemployment While jobs are created in some places, they are lost in others Outsourcing is a practice used by companies to reduce costs by transferring portions of work to outside suppliers rather than completing it domestically

Globalization: Disadvantages #2. Countries are dependent on each other While this can also be an advantage, it can become a disadvantage when some countries are exploited by others Can also cause an economic “domino effect”

Globalization: Disadvantages #3. Harm to the Environment Many production and transportation practices are not environmentally friendly Deforestation, climate change, etc.

Can the world become increasingly interconnected, or will globalization’s negative effects encourage more isolationism? 

How do Governments respond and effect markets? Protectionism: the theory or practice of shielding a country's domestic industries from foreign competition (prevent domestic job loss) Tariffs: taxes on imported (foreign) goods Subsidies: aid to domestic industries

Embargos Trade Embargo: the partial or complete banning trade with a particular country or a group of countries. Embargos are often used for political and human rights issues United States imposed an embargo on trade with Cuba in the 1960s. While still partially in effect, restrictions were eased by the Obama Administration