Understanding Globalization's Characteristics and Challenges

Sep 16, 2024

Globalization: Characteristics and Causes

Definition of Globalization

  • Economic integration of countries through freedom of movement:
    • Goods
    • Services
    • Capital
    • People
  • Facilitated by technology and global media
  • Source: OECD

Key Characteristics of Globalization

  • Increased Trade Ratio
    • High value of exports and imports relative to GDP
    • Sometimes exceeds 100% for some countries
  • Capital Flow
    • Increase in financial capital movement
    • Includes acquisitions and foreign direct investment (FDI)
  • Global Brands
    • Rise in global brands from emerging markets
  • Specialization of Labor
    • Deep specialization embedded in global supply chains
    • Example: Apple's iPhone sourced from ~50 countries
  • New Trade and Investment Routes
    • Example: China's new trade initiatives
  • Cross-border Labor Migration
    • Greater connectivity of people, businesses, and communities

Evaluation Points

  • Inevitability
    • Globalization is not inevitable; "deglobalization" is a discussion topic
  • Varied Globalization Levels
    • Dynamic globalizers: Malaysia, Vietnam, Ethiopia, Rwanda, EU countries
    • Less globalized due to policy or geography
  • Unequal Benefits
    • Gains from globalization are unevenly distributed
  • Regionalization
    • Increase in regional trade agreements
  • Multipolar World
    • No single economic center; multiple dynamic regions

Factors Driving Globalization

  • Containerization
    • Reduced cost of ocean and air shipping
  • Technology
    • Advances in communication and digital platforms
  • Transnational Activities
    • Rise of global corporations like Apple, Google
  • Trade Policies
    • Historical reduction in tariffs, though reversing recently

Tracking Globalization

  • Economic Indicators
    • Trade to GDP ratios
    • Foreign Direct Investment (FDI) values
    • Overseas visitor numbers
    • Global retail presence (e.g., Nike stores)

Shift in Global Economic Power

  • Emerging Markets
    • 20 emerging markets account for 30% of global Fortune 500
    • Increased presence of transnational corporations from these markets
    • Example Brands: Alibaba, Tencent, Huawei, Samsung
  • World GDP Share
    • Emerging markets: ~60% of world output
    • Advanced economies: ~40%
    • EU: 16%
    • Sub-Saharan Africa: 3%

Threats to Globalization

  • Trade Tensions
    • Tariff wars, especially between China and the USA
  • Protectionism
    • Increase in non-tariff barriers and managed exchange rates
  • Debt Levels
    • High public, household, and corporate debt post-financial crisis
  • Labor Movement
    • Backlash against free labor flow, e.g., Brexit
  • Environmental Risks
    • Energy security, water scarcity, biodiversity loss

Conclusion

  • Globalization brings both opportunities and challenges
  • Benefits and costs are unevenly distributed
  • Key challenges in 2019 include geopolitical tensions and environmental issues

This lecture covered the essence, characteristics, driving factors, and threats of globalization, providing a comprehensive overview for exam preparation.