Writing assignment 9 - PA 315

PA 315 Government Business

Relations Chapter 11

What’s left…

• Globalization

• Neoliberalism and Protectionism

• North American trade agreements (examples of regional trade agreements) –NAFTA – North American Free Trade Agreement

• Free Trade vs. Fair Trade –

• European Union (regional economy and political integration) –

• IFO: International Finance Institutions –

What is globalizatio n?

• When you think of globalization, do you think of it in positive terms or negative terms?

Globalization

• Globalization is an umbrella term • It is the free movement of goods, services, and people across the world in

a seamless and integrated manner

• Things to consider… • Most regions are self sufficient – locally produced foods, fuels and raw materials

are generally processed for local consumption. • Even though trade has been around for centuries (silk traders), trade between

regions was limited. • Today, economies of most countries are interconnected creating a single,

interdependent global economy. • The term globalization includes change through the spread of ideas, information and

perceptions which lead to cultural and social changes.

Types of Globalization

• Economic – Countries that trade with many others and have few trade barriers are economically globalized.

• Political – The amount of political co-operation there is between countries.

• Social - A measure of how easily information and ideas pass between people in their own country and between different countries (includes access to the internet and social media networks).

• Cultural – transmission of ideas, meanings and values around the world.

Economic Globalization

Advantages and Disadvantages

Advantages – Increase in productivity

Economic growth

International peace

Increased standard of living

Access to new markets

Introduction to newer technologies

Disadvantages Depletion of local resources

Violation of human rights

Widening disparity in income

Lack of fair trade

Examples

Parts of automobiles being assembled in the United States while originating in Japan

Avocados being sold all year long in the United States – seasonal at one time

Asian restaurants in the United States

Fashion trends in Europe end up in Brazil

Political Globalizatio n

• Political globalization refers to the growth of the worldwide political system that includes national governments, their governmental and intergovernmental organizations.

Examples

• The European Union (EU) – • The European Union is a unified trade and monetary body of 28 member countries. Its purpose is to be more

competitive in the global marketplace. At the same time, it must balance the needs of its independent fiscal and political members.

• Intergovernmental agencies like the: • International Monetary Fund (IMF)- is an organization of 189 countries, working to foster global monetary

cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world

• World Trade Organization (WTO)- deals with rules of trade between nations. Goal is to ensure that trade flows as smoothly, predictably and freely as possible.

• United Nations (UN)- established to confront issues such as peace, security, climate change, sustainable development, human rights, terrorism, humanitarian and health emergencies, gender equality, food production, etc.

• World Health Organization (WHO)- primary goal is to direct and coordinate international health

Pros of Political Globalization

Access to international aid and support

World peace Smaller countries can work together and gain more influence internationally

International organizations are often committed to spread values like freedom and to fight abuses within countries

Governments can learn from one another

Cons of Political Globalization

State dominance is reduced

The functioning of international organizations is not always democratic in nature

Larger countries can dominate decisions within organizations

Smaller countries are not as represented

Social Globalization

Pertains to human interaction within countries

Defined as the intensification of worldwide social relations

Links distant localities in a way that local happenings are shaped by events occurring many miles away

The use of communication technologies, and the Internet in particular, has been widely credited as contributor to the mobilization of protests

Social Networking

• Facebook – has more than 900 million active users allowing for a real world social connection

• Communication can be delivered in the form of text, audio, or video • Global exchange of views, opinions, and ideas • Encompasses topics –

• Family – • Religion – • Education –

Family – transfer of family values and concepts of people of different societies around the world

Role of women in society

Perception of a perfect life can have a negative affect

Religion – ideas and beliefs of different religions are portrayed to people around the world

Allows for greater religious tolerance and understanding

Can also portray negative images of religion

Education – ideas, values and knowledge, changing the roles of students and teachers

Increase access to the world

Introduction of technology changing the nature of delivering education

Western ideas are creeping into societies that want to appear more modern

Cultural Globalization

• Refers to the transmission of ideas, meanings and values around the world in such a way as to extend and intensify social relations.

• Comes through internet, popular culture media, and international travel.

Examples

Food Fashion

Festivals

Westernized consumer culture – McDonalds and Coca Cola are examples of dominance of American products in foreign countries

Positive Influences

• Acceptance of other cultures • Communication

• People of different cultures

• People of one culture can adopt other cultures

• Cooking, music, and fashion

Negative Influences

• Local cultures are ignored as people want to become more westernized

• Song • Dance • Food

• Exploitation of workers and markets

• Influence of societal values

• Cultures are diminished

Neoliberali sm

• Globalization has been accelerated by the adoption of free market principles

• Neoliberalism – advocates for transferring control of the economy from the public to the private sector

• Belief that it will lead to improved economic health

• Create a more efficient government • Society should be shaped by the free

market

• Smaller government and more robust role for the market

• Basically, what works in the private sector will work also in the public sector.

Neoliberalism

• Policies Advanced by Neoliberalism (John Williamson's "Washington Consensus“) :

• Free trade: removal of trade barriers, like tariffs, subsidies, and regulatory trade barriers

• Privatization: transfer of previously-public-owned enterprises, goods, and services to the private sector

• Fiscal restraint: governments would cut expenditures and/or raise taxes to maintain a budget surplus

• Competitive exchange rates: governments would accept market- determined exchange rates, as opposed to implemented government- fixed exchange rates

• Undistorted market prices: governments would refrain from policies that would alter market prices

• Limited intervention: (exception for promoting exports, education or infrastructural development)

Source: Wikipedia

Neoliberalism policy implications…

• enticement of foreign investment;

• reduction of inflation;

• reduction of public spending;

• privatization of public services;

• deregulation of industry and finance;

• reduction and flattening of taxes;

• restriction of union organization; and, finally,

• enforcement of property and land ownership.

Politicians don’t necessarily have to profess faith in all of these norms to be considered neoliberal. Rather, they have to buy into neoliberalism’s general market-based logic and its attendant promise of opportunity..

Free Trade

Free Trade

• Pro-Free Trade Arguments • A wider variety of goods to

choose (choice) • Specialization in production

of goods and services with advantages (efficiency)

• Maximize consumer welfare (welfare)

Theories of Trade

• David Ricardo • Absolute advantage

• When a nation can produce a good or service more efficiently than another nation, the latter should buy from the former

• Comparative advantage • If a nation has an advantage over

another nation in production of several goods, it should produce the good in which it has the greatest comparative advantage and buy the good in which it has the least advantage from the other nation.

Absolute Advantage, Comparative Advantage, and Opportunity Cost

• Absolute Advantage = produced at lowest cost • Comparative Advantage = produced at lowest opportunity cost • Opportunity Cost = a benefit that a person could have received, but

gave up, to take another course of action

https://www.youtube.com/watch?v=RpfV0Oerfr8

Advantages of Free Trade

1. Increased economic growth

2. More dynamic business climate

3. Lower government spending

4. Foreign direct investment

5. Expertise

6. Technology transfer.

Disadvantages of Free Trade

1. Increased job outsourcing

2. Theft of intellectual property

3. Crowd out domestic industries

4. Poor working conditions

5. Degradation of natural resources

6. Destruction of native cultures

7. Reduced tax revenue

Free Trade vs.

Fair Trade

Free Trade vs. Fair Trade

Free Trade or Protectionism

• Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic systems.

• Autarky exists whenever an entity can survive or continue its activities without external assistance or international trade.

https://www.youtube.com/watch?v=5ITyd1Pzek0

Protectionism

Protectionism

• Protectionism refers to economic policies that restrain trade between nations, through methods such as

• tariffs on imported goods, • restrictive quotas, • a variety of restrictive government regulations designed to discourage imports, • anti-dumping laws in an attempt to protect domestic industries in a particular

nation from foreign take-over or competition.

Source: Wikipedia

Forms of protectionism

• Subsidies: • Tax credits, direct subsidies (loans) • Infrastructure subsidies or free

resources such as water or use of public lands at little cost

• Exchange controls: • currency values can be controlled and

that affects the trading relationship. • Currencies with low valuation can

encourage low imports and high exports by keeping value of money low against other currencies.

• e.g., China today

• Dumping: selling a product in another country at a cost lower than its production cost

*These three forms “unfairly” promote domestic goods in foreign markets.