Global Top-20Politica Measures of Globalization Political Engagement Technology Personal Contact Economic Integration

Kentucky Exports NAFTA OTHER France Braz. Germ. Japan UK $ 9.6 bill in 1999 … 9% Growth

Orange = Percentage of exports to the U.S. by intra-firm trade to total exports (This is NOT volume of total exports)

What is Globalization? Perspective of Firms and Shareholders F Are customers culturally/nationally diverse? F Large percent of foreign revenue? F Large percent of foreign assets? F Are competitors global? F Are owners, partners, suppliers global? F How big is globalization? Who’s doing it? Why? F Are all markets equally attractive? Why?

What is Globalization? Perspective of Workers, Consumers, and Regular Joes F Better prices and quality for products and services? F Jobs and wage rates? F Does globalization lead to “happiness?”

Merchandise Exports (In $bill, 1999) U.S. Germany Japan France UK Ire MexKor

Merchandise Imports (In $bill, 1999) U.S. Germany Japan France UK Ire MexKor

Foreign Direct Investment - Out (% of World Total, 1996) U.S. Germany Japan France UK

Foreign Direct Investment - In (% of World Total, 1996) U.S. Germ Japan France UK

Growth in Trade and FDI Indexed: 1950 = Trade GDP FDI

Extent of Globalization for MNCs Foreign Sales as Percent of Total Foreign Assets as Percent of Total Exxon72%64% IBM57%44% Ford31%44% General Electric32%48% Citigroup35%41% Hewlett-Packard55%52%

Comparative Advantage F Germany: –10 units of factor inputs (labor & capital) to produce 1 keg of beer –2 units of factor inputs to produce 1 box of pretzels F United States: –15 units of factor inputs to produce 1 keg of beer; –5 units of factor inputs to produce 1 box of pretzels; F Which country should export beer? F Which country should export pretzels?

Comparative Advantage Germany: 10 labor  pretzels = 5 pretzels per beer beer 2 labor US: 15 labor  pretzels = 3 pretzels per beer beer 3 labor

Comparative Advantage Germany: 10 labor  pretzels = 5 pretzels per beer beer 2 labor US: 15 labor  pretzels = 3 pretzels per beer beer 3 labor F Germany has absolute advantage in both beer and pretzels F U.S. has comparative advantage in beer, and should specialize in and export beer to Germany

What is Globalization? Perspective of Workers, Consumers, Regular Joes, The Poor, Terrorists, and People Who Worry about Terrorists F Better prices and quality for products and services? F Jobs and wage rates? F Does globalization lead to happiness? F Does globalization cause or reduce poverty? F Does globalization fuel or reduce terrorism?