1. Chapter15 Notes Continued

2. Foreign Exchange and Rates
If we buy a great deal of Mexican goods, then we increase the
Demand for pesos. So instead of $1 equaling 10 pesos, you only
Get 9 pesos for a dollar. The value of the dollar has depreciated
Strong Dollar
Number of pesos per dollar increases
Imports to the United States increase
Exports from the United States decrease
Better for the consumers
Weak Dollar
Number of pesos per dollar decreases
US imports decrease but
US exports increase
Better for the producers

3. Exchange Rate System Floating Exchange Rate
Changes with the supply and demand
Dominant in today’s world
Unpredictable
could be bad because it might disrupt trade
Fixed Exchange Rate
Set by the government
Allows the government to make plans
Government is readily involved in the market

4. Imports, Exports and the Balance of Trade
Difference between the value of exports and imports (those items leaving the country and those items coming into the country)
Exports are greater than imports
We have a trade surplus
Strengthens our currency
Value of the dollar will increase
Exports are less than imports
We have a trade deficit
More money is going to our trading partners and foreign investors
Value of the dollar will decrease

5. Ch. 16: The Costs and Benefits of Globalization

6. Players in Globalization
World Trade Organization (WTO)
Critics – does this group work to help the wealthy nations more?
Do they endanger the environment?
Do they endanger the rights of workers?
United Nations
Created Post World War II
Aid to poor countries
Agreements to protect the environment, defend human rights, protect cultural traditions

7. Players Continued World Bank International Monetary Fund (IMF)
Non government organizations
Sierra Club, Greenpeace and the World Wildlife Fund
Oxfam International, CARE, Global Fund for Women and Save the Children

8. Multinational Corporations Play a Role
Promote globalization by moving goods, capital, information and people across borders
In 2002, 29 of the top 100 large economies belonged not to nations but corporations
Exxon/Mobil equals that of Pakistan
Toyota is two times the economic worth of Guatemala
GE is greater than Kuwait, Romania and Morocco combined
CONS
Harm environment
Take advantage of workers (low wages and poor working conditions)
PROS
Generate trade which increases country’s revenue
Investments made into the country
Jobs are created – unemployment decreases
Train people in technology and business sense

9. Final Players Sovereign nation-states
Full authority over borders and people
In charge of the capital flow (money coming in and out of a nation)
Limit trade barriers –
WTO v. national sovereignty

10. Measuring Economic Development
Developed Countries
Wealthiest
Advanced Industrial, high per capita GDP
Stable political and legal institutions
Public services
US, Canada, Japan, Australia, New Zealand, Israel, Western Europe, Singapore, South Korea, Taiwan and South Africa
Developing Countries
Most nations fall into this category
Process of modernization is taking place
Less access to goods and services
Newly industrialized countries
Large gap between the rich and the poor
Rapid change from agricultural base to industrial base
China, Brazil, Saudi Arabia and Kuwait (their high GDP is due to oil)

11. Measuring continued Least Developed Countries Wide spread poverty
Subsistence farming
Liberia, Ethiopia, Mali, Cambodia, Afghanistan, Nepal

12. Human Development Index
Used by the United Nations
Based on:
Life expectancy
Education (adult literacy and enrollment in schools)
Standard of living (look at the per capita GDP)
2008
Number 1 – Iceland
Number 12 – United States
Middle ranked countries – China and India
Low ranking – countries found in Africa

13. Globalization Costs Benefits
2008 approximately 1/6 of the world’s population lived in poverty
Making less than $1.25 a day
Do we import their food and clothing?
Benefits
GDP will grow faster than in wealthy countries
Per Capita GDP might decrease
HDI will increase (human development index)

14. Four Asian Tigers Includes nations of:
South Korea – focus on clothing and sneakers
Singapore
Taiwan – focus on electronic goods
Hong Kong
1970s: Exports led development of the nations
Money into capital – machines, which increased the number of goods which increased economic growth
Government placed a high tariff on imports
: 7-10% GDP growth v. the norm of 3-4% found in the world
Invested in Education

15. Has Globalization Helped or Hurt the Environment?
Natural Resources are being used for manufactured goods – what about scarcity?
Pollution and the endangerment of wild species?
Climate change
In 2007, the United Nations predicted that average temperatures would increase between 3.5 and 8 degrees by the end of the century
Sustainable Development
Is there enough to meet the needs of today without harming the needs of the future?
“Tree for Tree”
Pollution Havens
Countries without strict environmental laws – who should make the decision?

16. Benefits of Globalization
“Environmental Kuznets curve”
Income increases so does the care for the environment
Speed up economic development
International Cooperation to address the issues
1987: Montreal Protocol on substances that deplete the Ozone Layer
1970: Save the Whales

17. Does Globalization Enrich or Threaten Local Cultures
Costs to local cultures
Loss of languages (3500 of languages will disappear by the end of the century)
Traditional clothing, foods, music and folklore – what happens to them?
Benefits to local cultures
Global village for sharing
Larger markets for goods
Cultural diffusion
Global reach of the American culture
“Americanization” – McDonalds’s, music, television
Is this cultural imperialism?

18. Adam Smith picture: http://www. brainpop
Wealth of nations picture
Oprah
Simon
Bill Gates:
Circular Flow:
Karl Marx
Friedrich Engels
Regulations:
Public goods
Interdependence