1. Globalization: The Ups and Downs of Globalization or World economic integration Globalization: The Ups and Downs of Globalization or World economic integration

2. Globalization results  Increase in the importance of international trade  Increase in the movement of capital  Increase in labor migration  Increase in regional integration

3. Benefits of Trade  Specialization of production

4. Jose the Wheat Farmer  Specialize

5. Teresa the Baker  Specialize

6. Specialization leads to efficiencies. The Law of Comparative Advantage

7. Where does Comparative Advantage Come From? Differences in: Differences in: Climate and natural resourcesClimate and natural resources Relative abundance of labor and capitalRelative abundance of labor and capital TechnologyTechnology External economiesExternal economies (External economies are a reduction in a firm’s costs that result from an expansion in the size of an industry)

8. How technology affects Global Trade:  Information Technology collaborative work collaborative work communication communication  Transportation Technology of people of people of goods and services of goods and services

9. The Gains of Globalization  Who gains?

10. The Balance of Payments: Linking the United States to the International Economy Learning Objective 29.1 The Current Account FIGURE 29.1 Trade Flows for the United States and Japan, 2006

11. Does it raise all Boats?  Are you better off?

12. The International Sector and Learning Objective 29.3 FIGURE 29.4 U.S. Imports and Exports, 1970–2006

13. An Overview of International Trade U.S. International Trade in a World Context The Eight Leading Exporting Countries

14. An Overview of International Trade U.S. International Trade in a World Context

15. The Unintended Consequences of Banning Goods Made with Child Labor Would eliminating child labor in developing countries be a good thing?

16. Government Policies That Restrict Trade The Argument over Trade Policies and Globalization “OLD-FASHIONED” PROTECTIONISM Protectionism The use of trade barriers to shield domestic companies from foreign competition.  Saving jobs  Protecting high wages  Protecting infant industries  Protecting national security

17. Trade Agreements NAFTA – North America Free Trade – soon AFTA? Amero? European Union – 28 countries - 12 Euro CAFTA - Central America Free Trade

18. The Current Exchange Rate System The Euro Countries Adopting the Euro

19. International Capital Markets Learning Objective 30.3 FIGURE 30-6 The Distribution of Foreign Purchases of U.S. Stocks and Bonds by Country, 2006

20. Summary: Benefits of Trade Specialization Foreign Investment Competition Higher Standard of Living

21. Costs of Globalization  Who loses?

22. What about the sinking ships?

23. Household income Working more and getting less.

24. The Lorenz curve and the Gini Coefficient (http://en.wikipedia.org/wiki/Gini_coefficient)

25. In the US  1967: 0.397 (first year reported) 1967  1968: 0.386 (lowest coefficient reported) 1968  1970: 0.394 1970  1980: 0.403 1980  1990: 0.428 1990  2000: 0.462 2000  2005: 0.469 (most recent year reported; highest coefficient reported)[3] 2005

26. Compared with other countries...  Country1980 Gini2000 Gini China.320.403 India.320.378 USA.403.462

27. Hot off the presses... “Gap between rich, poor seen growing Income disparity reaches highest since 1920s, paper reports, with recent Wall Street boom partly to blame.” (CNNMoney.com)  The figures, based on "adjusted gross income" which incorporates certain deductions such as contributions to individual retirement accounts, revealed that the income level for the tax filer in wealthiest 1 percent of Americans grew 3 percent...between 2000 and 2005, according to the Journal.  At the same time, the median American income, however, slipped 2 percent during that same period... ...was due a combination of factors including globalization and technical advances...

28. Another measure of well being: Wages

29. A Race to the bottom?

30. Real Median Wage in 1973: $12.45 Real Median Wage in 2000: $12.90 Up nearly 1/3 of a percent! Is that good? Well...

31. Factors That Affect the Equilibrium Exchange Rates  A difference in income growth rates  Differences in relative inflation rates  Changes in real interest rates

32. In the same time period  GDP per person went up 72%  Global Trade as a percent of GDP doubled

33. To put it in perspective  Between 1948 and 1973 real median wage increased 80%

34. The Environment

35. Deforestation

36. Avoiding Pollution Regulations

37. We are all affected

38. Acceleration of Global Warming

39. Adaptation

40. Homogenizing Properties of Globalization

41. Questions?Comments?