Globalization and Its Economic Impact After 1900

Overview of Globalization in Economics

• Globalization has led to an interconnected global economy.
• Historically, during WWI and the Great Depression, governments took an active role in the economy.
• From the 1980s, there was a shift towards neoliberalism, favoring free market policies.

Neoliberalism

• Definition: Emphasis on free market, reducing trade barriers, deregulation, and privatization.

Examples of Neoliberalism

1. United States under Ronald Reagan

   • Reduced taxes on wealthy, decreased business regulations, cut social welfare spending.
   • Increased military spending despite overall cuts.

2. United Kingdom under Margaret Thatcher

   • Deregulation, tax reductions, privatization of state-owned assets.
   • Mixed legacy: reduced inflation and spurred economic growth but increased income inequality and weakened labor unions.

3. Chile under Augusto Pinochet

   • Transitioned to a free market with help from "Chicago Boys."
   • Reforms were unpopular, enforced brutally, but set groundwork for economic balance.

Geographical Distribution of Economic Activity

• Shift from industrialization to knowledge economy in developed nations.
• Developing countries became manufacturing hubs due to lower labor costs.

Knowledge Economy

1. Finland

   • Invested in communication technology and education.
   • Shifted from agrarian society to leader in cell phone and software markets.

2. Japan

   • Invested in education, transitioned from manufacturing to knowledge economy.
   • Faced challenges with low wages and strong labor unions.

Manufacturing in Developing Countries

• Concentration in Asia (Vietnam, Bangladesh) and Latin America (Mexico, Honduras).

Global Economic Institutions

• Necessary for managing global trade.

World Trade Organization (WTO)

• Regulates global trade, negotiates trade deals, moderates disputes.
• Supports developing countries along development scales.

Regional Trade Agreements

1. European Union (EU)

   • Political and economic bloc of 27 countries.
   • Originated from post-WWII economic agreements.

2. Association of Southeast Asian Nations (ASEAN)

   • Facilitates trade among Southeast Asian countries, leading to economic growth.

Multinational Corporations (MNCs)

• Corporations with operations in multiple countries, employing knowledge workers locally, manufacturing abroad.

Examples of MNCs

1. Nestlé

   • Headquartered in Switzerland, manufactures in West Africa using low-wage labor.

2. Mahindra & Mahindra

   • Indian company based in Mumbai with operations worldwide including North America and Australia.