Very Important Final Paper-7pages
ZachFinken
7.pdf
TWO SIDES OF GLOBALIZATION
6.1 INTS 2370
Agenda
• Enron • Capturing value within GPNs • Where you live matters • Digital America: The Haves and the Have-‐Mores
Enron inside trading
• Kenneth Lay, Chairman and chief executive: Sold 1.8 million shares for $101 million
• Jeffrey Skilling, former chief executive: Sold 1.1 million shares for $66.9 million. • Andrew Fastow, former chief financial officer: Sold 561,423 shares for $30.4 million.
• Jeff McMahon, chief financial officer: Sold 39,630 shares for $2.7 million. • Lou L. Pai, chief executive of Enron Accelerator: Sold five million shares for $353 million.
• Kenneth D. Rice, chief executive Enron Broadband Services: Sold 1.1 million shares for $72.7 million.
Enron inside trading
• Rebecca P. Mark, vice chairwoman and director: Sold 1.4 million shares for $79.5 million.
• Ken Harrison, director and former chief executive, Portland General Electric: Sold one million shares for $75.2 million.
• Mark A. Frevert, chief executive of Enron Wholesale Services: Sold 830,620 shares for $50.2 million.
• Robert A. Belfer, director and member of executive committee: Sold one million shares for $51 million.
• Stanley C. Horton, chief executive Enron Transportation Services: Sold 734,444 shares for $45.4 million.
• Joseph W. Sutton, vice chairman: Sold 614,960 shares for $40 million.
Enron inside trading
• Clifford Baxter, vice chairman: Sold 577,436 shares for $35.2 million. • Joseph M. Hirko, chief executive, Enron Broadband Services: Sold 473,837 shares for $35.1 million.
• Richard A. Causey, chief accounting officer: Sold 197,485 shares for $13.3 million.
• James V. Derrick, general counsel: Sold 230,660 shares for $12.6 million. • Mark E. Koenig, vice president: Sold 129,153 shares for $9.1 million. • Cindy K. Olson, vice president: Sold 83,183 shares for $6.5 million.
Enron inside trading
• Steven J. Kean, director: Sold 64,932 shares for $5.1 million. • John H. Duncan, director: Sold 35,000 shares for $2 million. • Richard B. Buy, chief risk officer: Sold 54,874 shares for $4.3 million. • Michael S. McConnell, president, Enron Global Markets: Sold 30,960 shares for $2.3 million.
• Norman P. Blake, director: Sold 21,200 shares for $1.7 million. • Joe H. Foy, director: Sold 31,320 shares for $1.6 million.
Enron inside trading
• J. Mark Metts, vice president and director: Sold 17,711 shares for $1.4 million. • Charles A. LeMaistre, director and member of compensation committee: Sold 17,344 shares for $841,768.
• Robert K. Jaedicke, director and member of audit committee: Sold 13,360 shares for $841,438.
• Ronnie C. Chan, director and audit committee member: Sold 8,000 shares for $337,200.
• Wendy L. Gramm, director and audit committee member: Sold 10,256 shares for $276,912.
Concept of Value Definitions: • ‘Economic rent’ • Value is surplus above cost in performing the transformations at that stage (value-‐added)
• Raises issues beyond firm competitiveness and profitability (e.g. power)
GPNs and value: • Location dependence in where value is created, enhanced and captured • A place’s involvement in GPNs creates net benefits/ costs • Concern over firms transferring activities out of home countries • Defensive investment: taken to protect markets and ensure that the firm prospers, which consequently helps the domestic firm
Value and Diffusion Knowledge Transfer and GPNs: • Knowledge transfer to local population in terms of training • NO guarantee of knowledge diffusion through the host economy: mixed evidence of tech transfer in developing countries
• Knowledge transfer requires absorptive capacity on the part of locals • Both codified and explicit knowledge required for knowledge diffusion
GPNs and the Host State: • Balance between creating the right conditions to attract GPNs and tying oneself too closely to specific GPNs
• Problems of dominance of local economy by foreign-‐based firms
Value and Employment Impact of GPNs on jobs: • Offset jobs created by those displaced in host country • Home-‐country operations impacted in home country • Quantity of jobs, quality of jobs and location of jobs
TNCs and Local Labour Relations: • Dispersed nature of TNCs makes it difficult for labour to organize against them • Possible counters: global union federations, networks of workers • Contracts: core and non-‐core workers • Needs: measurable standards and enabling rights
Development and Underdevelopment
• A person’s place of birth or residence determines their range of life chances • These are unevenly distributed across the globe • Archipelagos: economic activities as variably interconnected ‘islands’ • 20% in developed world own 80% of income • The poorest 20% have 1% • Not everyone in the developed world is a winner
Income Distribution Income and Poverty • Income is key to material well-‐being but poverty gap is increasing • Income as a means not an end (Sen)
Uneven Income Distribution • Geographically based • Within country inequalities • Reflect different histories and social policies
Income: Winners and Losers • Gini coefficient • Emergence of transnational capitalist class and the 1%
Gini coefficient and the Lorenz Cure. Gini = A/(A+B), where A leads to rising INEQUALITY
Three cases on income inequality
Issues with inequality?
What explains inequality?
Kuznet’s Curve
Kuznet’s Curve
Global Shifts Developed economies • Move from manufacturing to service economy (deindustrialization) • Rising participation of women in the workforce • The two shifts are related; women’s presence greater in service jobs • Demographic shifts: greying population
Developing economies • Competition from cheaper manufactured goods • Increased skill development • Variable governance • Resource curse
What can be done about inequality?
Employment and Labour
Employment • Most people rely on employment income
• Scarcity of jobs leads to lower (stagnant) wages
• Scarcity of jobs leads to lower labor force participation
• 1995-‐2005 HIC labour force inc. by 17%, falling to 1% by 2005-‐2025 labour force
• Higher education may not help with unemployment
Unemployment • No single cause • Cyclical effects but also technological/ structural shifts
• Variable/ differentiated effects by sector
• Women, youth are most vulnerable • The end of work?
Migration • Migrants are 3% of total global population now (were 10%) • Majority are migrant workers • Benefits for sending country: – Reduces pressure on labour markets – Produces remittances
• Negative consequences for sending country: – Migrants often youngest with greatest economic potential – Reinforces the conditions that create migration
• Benefits for host countries: – Balances out the ageing of the population
• Negative consequences for host countries: – Xenophobia, fear of loss of jobs
Digital America: The Haves and the Have-‐Mores
• Wage growth for workers in digitized sectors is double the national average • Digitized sectors include: ICT, media, financial services, and professional services • Increased inequality from “winner take all” economics and lagging sectors • Job displacement and jobless recoveries are accelerating – Displacements rates will double over next decade – From 15 to 35 months (1991 vs. 2008) to restore jobs
• Disproportionate allocation of consumer surplus – 20% of users capture 60 percent – Bottom 50% capture just 20 percent
