Economic Globalization

/Global Trade & Finance

Presented by Zeeshan Afzal
Barakallah Khan

What is it?
Economic globalization is the increasing economic integration and
interdependence of national, regional, and local economies across
the world
Trade/ Investment
Goods/ Services
Labor/ Technologies

Economic Globalization Impact

Economic
Cultural
Political

Pros of Globalization
Economic
Cheaper prices of products & services
Better availability of products & services
Easier access to capital & commodities
Increase competition

Cultural
Access to new cultural products
Better understanding of foreign values and
attitudes
Instant access to info from anywhere in the
world

Political
Access to international aid and support
Smaller countries can work together and gain
more influence
Govts can learn from each others

Cons of Globalization
Economic

Cultural

Countries struggle for compete

Danger of cultural homogenization

Extraction behavior of some foreign companies

& investors
Contagion effect is most likely in tomes of crisis

Westernization, cultural
imperialism/colonialism

Political
State sovereignty is reduced
Big countries can shape decision in super
national organizations
Coordination is difficult and expensive
Countries can veto decisions & slow down
decision making process

Economic Globalization History

Industrialization 1800
Qing Empire in China fell (1911)
Russian Revolution (1917)
Ottoman Empire was dissolved (1918)
WWI (1914-1918) & WWII (1939-1945)
Soviet Union collapsed (1989)

Economic Globalization History

British Empire 1850-1914

American century 1914-1990
Multipolar world 1990-Present

Stages of economic growth

1st Stage:
Intensive Growth From the 18th Century
Western European countries, facing rapid increase in population
Growth begin industrializing Intensive growth = wealth production surpasses basic needs
of the population
Capitalism established in the 19th c. in Europe
Contributes to this trend Despite the rise in global population, economic growth enabled
improvement in standard of living

Stages of economic growth

2nd Stage:
Increasing world growth after the industrialization accompanied by weak growth rates
even for the most advanced countries
Newest technologies extremely dynamic (e.g. textile, steel, railroads)
Continued importance of agricultural sector into the 20 th
Low domestic consumption
After 1945, world growth rate increases Stimulated by the gradual liberalization of trade
From 1970s by acceleration of globalization Between 1945 and 1975, growth originates
mostly in the industrialized nations (North America, Western Europe and Japan)

Stages of economic growth

20th/early 21st century
Early 21st highest economic growth rates in emerging countries BRIC nations (Brazil,
Russia, India, China) + South Africa since 2011 Known for rapid growth of their
industrial sectors Capitalizing on their advantages (e.g. natural resources, labour,
infrastructure)

Stages of economic growth

3rd Stage:
Capitalism in Crisis Early signs of instability in 1929

Series of financial/economic crises highlight the limits of capitalism and the

interdependence of the world
Stock market crash 1929, end of period of strong growth of US economy

Stages of economic growth

Periods of Crisis enable capitalism to adapt and for new powers to emerge
Slowing down of growth in Europe Birth of multinational corporations
Progression of international trade Appearance of new competition in Europe (Germany)
and outside of Europe (U.S. / Japan)

Financial crisis in 2008 leads to growing intervention of international regulatory

organizations IMF ,G20 Economic recession in More Recent Financial Crises and Economic
Recessions

Global finance
Global
finance refers
to
the financial system consisting of
regulators
and
various
financial institutions that conduct
their business on an international
level.

Cont.
Example
International institutions (such as the bank for International
Settlements or the International monetary Fund)
Agencies and Government departments (central banks, finance
ministries)
Private companies who act on a global scale.

Cont.

Globalization of nancial
markets is the very backbone of
the new global economy

The growth of nancial

globalization provides new
opportunities for wealth
creation and democratizes
investment opportunities.

Critics
The speed and uncontrollability of global nancial ows is
an urgent problem.
An enormous amount of money can move in and out of
markets at a very fast pace.
This may be protable for some investors, but it is
potentially harmful for many countries.

Advantages
More opportunity
Large pool of investor
Competition
Even accelerate the businesss growth plans and
funding requirements

Global Trade

Global trade
Global trade is the exchange of goods between different countries.
Through trade, countries are able to obtain goods they need from
other countries.
Countries can also earn money by selling goods or services

Example
A country may import wheat because it doesn't have much arable
land, but export oil because it has oil in abundance.

Comparative theory
The ability of an individual or group to carry out a particular
economic activity (such as making a specific product) more
efficiently than another activity

Advantages
Comparative
advantage
Specialize
labor
Competition
More variety
of goods

Multinational corporation
MNCs have increasingly relocated production and
outsourced to developing countries in the hope of
benetting from
The differential costs of labour
Raw materials
Transport

Cont.
The characteristics of MNCs in the following way: MNCs
Control economic activities in two or more countries
Maximize the comparative advantage between countries, proting
from differences in factor endowments, wage rates, market
conditions and political and scal regimes
Have geographical exibility, that is an ability to shift resources and
operations between different locations on a global scale
Operate with a level of nancial, component and operational ows
between different segments of the MNC greater than the ows
within a particular country
Have signicant economic and social effects at a global level

Criticisms of MNCs
They can simply relocate their facilities to
overcome barriers to protability
These barriers might include decent wages or
environmental protection regulations

Cont.
Example

Nike originated in Phil Knights plan to introduce low-cost

Japanese-produced athletic shoes into the US market in
the 1970s.
As labor costs rose, Nike moved production to South
Korea and Taiwan in 1972, then, as workers organized, into
Indonesia, China, and Thailand in 1986, and, nally, into
Vietnam in 1994
Nike now subcontracts 100 per cent of its goods
production to 75,000 workers in China, South Korea,
Malaysia, Taiwan, Vietnam and Thailand