Ge 3 (The Global Economy)

organic system

Szentes: 'In economic terms globalisation is nothing but a process making the world economy an "_______________" by extending transnational economic processes and economic relations to more and more countries and by deepening the economic interdependencies among them

The "Golden Age" of Globalization

Peaked in 1914, after WWI

Transportation,

Communication,

Capital

Significant Developments that Drive Economic Globalization

Transportation

Steamships, Railroads, Airplaine

Communication

Telegraph, internet

Capital

Capital and immigration, remittances, free trade

Problems in Global Economic Development

1. Poor nations and the peoples who inhabit them were and are subjugated by the operations of the global economy

2. Not all parts of the world gain/gain equally from the growth of the global economy.

3. Not only were or are there losers in this economic competition among geographic areas, but also certain industries and social classes lose out, at least in comparison to the winners.

4. Within nations, the poor tends to suffer most, especially when those nations are forced to repay their debts to other, more developed nations.

Trade surplus

Exports exceed imports.

Trade deficit

Imports exceed exports

Supply chains

value-adding activities in the production process

International Production Networks

The networks of producers involved in the process of producing a finished product.

Global Commodity Chains

Value-adding chains and the global organization of industries.

Walmart and amazon

Buyer-driven Chains examples:

Global Value Chains

"These highlight the relative value of those economic activities that are required to bring a good or service from conception to, through different phases of production (involving a combination of physical transformation and the

input of various producer services), delivery to final consumers, and final disposal after use."

(Gereffi, 2012)

Scrap metal

2/3 of steel made in the US comes from recycled steel

INCREASING COMPETITION FOR COMMODITIES

Increase competition reflects the increasing demand for commodities around the world:

• Massive development and rapid industrialization

• Emergence of expanding consumer society

Global commodities

_________________________ ranging from oil to base metals to grains are moving higher as billions of people in China and around the world get wealthier and are consuming more as they produce products for us, and increasingly for themselves." (Krauss 2008:C1)

Outsourcing

is the transfer of activities once performed by an entity to a business in exchange for money.

Macro-level

Ex. Corporations outsourcing work in other countries (Offshore outsourcing)

Micro-level

Ex. Parents outsourcing care of children or aging parents to other individuals or institution.

Meso-level

Ex. Companies outsourcing HR functions to other countries

CONSUMPTION

Globalization of Consumption is often tied to Americanization

• Traceable to the affluence of the US after the close of WWII and the economic difficulties encountered by most other societies in the world.

• The emphasis in the economy is to greatly increase global flows of everything related to consumption and decrease barriers to those flows.

hyperconsumption; hyperdebt

Globalization is characterized by _____________ and ______________, as well as the problems associated with them.

Consumer Objects and Services

• Revolves around shopping for and purchasing not only objects of all kinds but also various services

• Brands and branding have become more important than ever

Consumers

Increasing numbers of people throughout the world are spending more and more time as consumers.

Consumption Processes

The knowledge of working one's way through a shopping mall, using a credit card, purchasing online.

Consumption Sites

From physical stores to online shops

the modern world-system theory

Immanuel Wallerstein developed ______________________, which is an approach, analytical tool, and basic framework for studying reality through the global economic activity that divides countries according to their economic power

modern capitalist world-economy

The modern world-system is also known as the:

Capitalism

Defined as a system that gives priority to the endless accumulation of capital.

THE MODERN WORLD-SYSTEM (holistic approach)

Actors such as individuals, states, firms, etc., "are not primordial atomic elements, but part of a systemic mix out of which they emerged and upon which they act. They act freely, but their freedom is constrained by their biographies at the social prisons of which they are a part."

Core,

Periphery,

Semi-periphery

division of labor (the modern world-system)

Core

Areas that dominate the capitalist world economy and exploits the rest of the system.

Periphery

Areas that provide raw materials to the core and are heavily exploited.

Semi-periphery

A buffer zone between core and periphery, sharing characteristics from both and can do the exploiting or be the exploited.

The Pressure of Incorporation

The pressure for incorporation into the world economycomes not from the nations being incorporated but 'rather from the need of the world-economy to expand its boundaries, a need which was itself the outcome of pressures internal to the world economy.'"

(Wallerstein 1989:129)

Race to the bottom

- The idea that for less developed countries to compete and succeed in the global economy, they must undercut the competition in various ways.

- Countries that get the work are those that win the race to the bottom.

Industrial Upgrading

economic actors—nations, firms, even workers—"move from low-value to relatively high-value activities in global production networks."

(Gereffi 2005:171)

• Assembly

• Original Equipment Manufacturing (OEM)

• Original Brand Name Manufacturing (OBM)

• Original Design Manufacturing (ODM)