The Global Economy Chapter 21

Global Integration Global integration- interdependency among countries (relying on one another) One reason for this increase Improved telecommunications- long distance electronic communications (uses satellites and fiber-optics) First transatlantic telegraph cable Shortened communication times from two weeks to two minutes Semiconductor- computer chip Internet, Television All of this has increase the variety of products and sharing of cultures and preferences (Japanese food, English as the world’s most popular language)

Globalization of Financial Markets The world has become one financial market U.S. created worldwide branch banks in the 1970’s U.S. government securities and stocks are sold worldwide Foreign exchange- buying and selling of foreign currencies U.S. economy is a major part of the world economy U.S. stocks influences markets around the world U.S. financial panics can be felt worldwide

Foreign Investments Who owns whom? Burger King Target Sony Nestle Shell (Gas) Royal Caribbean Carnival Samsung Bayer Nokia France Denmark Liberia Germany Britain Finland Switzerland South Korea Panama Japan

Foreign Investments Direct foreign investment (DFI)- purchase of real estate and business by foreigners Billions annually invested More prominent in the U.S. because of our stable government Foreigners own 30% of U.S. securities 6% of American industries are foreign owned (compared to Britain’s 20%) American investors own over 40% of worldwide businesses Economic imperialism- People fear that U.S. culture has taken over their own (“pushing our culture”)

Multinationals Multinationals- firms that do business or own offices or factories in many countries (Fujifilm, Exxon, BMW) By 2003, there were 60,000 multinational corporations with 620,000 foreign affiliates (branches of multinational firms) Largest 500 multinationals are worth over $9.2 trillion worldwide America, Japan, Germany, and Switzerland own half of the multinationals; with Taiwan, S. Korea and Malaysia growing

Regional Cross-Border Investments Most multinationals invest in regions close to home American firms focus on the U.S., Canada, Mexico, and S. America European countries on W. Europe Japan on Southeast Asia Allegiance- loyalty to something, someone, or some group

Alliances Alliances- working together as multinational firms Usually as joint ventures or licensing deals Ex.- IBM (machine) with Microsoft (software), Intel (CPU) Strategy is to find success where companies may be weak

Tolerance The social result of globalization is increased immigration This has made the U.S. truly multicultural Increase immigration leads to more diverse public schools, which leads to the need for more tolerance and open-mindedness More languages and diverse friendships