Lecture Eighteen

Stopped at free press

Globalization

process int trade and fin flows integrate world econ leading to spread tech biz culture and politics 

What are the three periods that Tom Freidman of the NYT believes globalization had occured in?

• 1492 to 1900 country's globalizing = globalization 1.0 shrunk from large to med  

• Early 1800s to early 2000 = globalization 2.0 shrunk world from med to small = corp globalizing 

• Globalization 3.0 size small to size tiny flattening econ going to be build around indivs and groups  

  • Global web connected irrespective of differentiating factors to share knowledge and work  

    • Ex: Tods nephew paid Indian programers to build out a website for him  

Future Prices

what people agree to pay now for something that'll be delivered later 

• Usually it’s a fungible item like corn  

Can you give me an examples of free press

• EX: 2018 60 min aired a segment on stormy daniels who went on nat TV and said had affair w/Trump after melania had just had barron while she was nursing  

  • There was nothing the pres of US could do to stop CBS from airing this  

• If a foreign gov doesn't allow for free press you may have sanctions 

  • Ex: 2012 NYT story tracked money of high ranking CCP mems publishes story about Wen jai bao focused on his mother how she rose to be a farmer to have 120M dollars  

We have now seen some constraints or backslides on globalization what are tod’s thoughts on what led us here?

• COVID = we realized we did not have factories that could produce masks so we had to rely on those assembled in other pts of the world  

• Russia invasion of Ukraine  

• Friend-sourcing

• tariffs and trade wars

Friend-Sourcing

term economist magazine came up with. Puts another gloss on the econ bottom line. When choosing btw countries to outsource to you put a premium on those countries that are your friends  

Tell me some things about free trade

• Up until trumps inauguration in 2017 the policy of the US by dems and repubs since WWII has been we want to move to FTA  

• Concept of comparative advantage  

• tensions around comparative advantage/free trade

  • From a utilitarian perspective it is a great idea to have free trade BUT from dif angles not so much  

• It's poli question what we do w/people who lose their job bc of free trade  

• free trade has exacerbated income differences

Tell me about the tensions around comparative advantage

• Costs = much more noticeable  

  • Downside has hurt the people in the US = left behind  

  • Hours cut back/jobs lost  

• Consumer happiness about low prices is very broad but not deep  

  • Ex: go to a store and buy something not expensive it benefits others elsewhere bc labor costs lower and that money is a lot more to them also you benefit bc its cheap BUT benefit is super small you wouldn't write a letter to a congress person  

    = savings are constant  

  • Benefits are very broad then  

What can we do w/people who lose their jobs?

• Do nothing  

• Do something w/money we have saved to train them in new skillsets  

What are the three historic purposes to impose tariffs

• Protect local indo and jobs from less costly foreign comp  

• To punish foreign producers when local gov assist manu in producing products below the price of production (anti-dumping tariffs)  

• To address indirect gov support local bizs through tax policy (this is known as countervailing tariff) 

  • Ex: tax break from WA for boeing and airbus was unhappy about this went to trade court  

Tell me about trump and tariffs

• Trump loves tariffs: key to creating more jobs, helping people care for kids, help deficit = money from tariffs goes to treasury 

• Last week tariffs on canadian and mexico  

• Tariffs will increase cost of goods weren’t helpful in 2018 in creating jobs despite trumps reasoning

Quotas

lim amt or number of specific products that a country will allow to be imported each yr  

Who pays when quotas are imposed

If you constrain supply and demand the price of products will go up  

Can you give me an example about quotas?

Ex: giant price hike in gas in the 80s, people wanted smaller car with better miles per gallon but auto indo not able to quickly shift production. American car co.s couldn't compete so amt of cars sold in US were plummeting so lots of people switched to japanese cars and the americans went to gov and screamed that this wasn't good so gov put in place quotas that restricted the imported cars from Japan to 1.68M cars if you were the owner of a Japanese franchise you could buy from the factories and sell at a price whatever the mkt will bear  

•  So how much more did americans pay when the quotas were imposed 

  • Avg price of new car rose by $2600 and added $1000 to price tag total of $1.85B extra consumer costs, and the aggregate cost to consumer was $5B 

Civil Society + ex

not gov or biz but entities like social orgs that are neither pro gov or biz.  

• Ex: 60 min report about computers being sent out of the US outside of US Jim Pucket own an org that reported on that E-waste thing  

 

What are challenges to MNCs

• lack of predicatability

• lack of independent judiciary

• corruption

• host countries laws may make operating there prob

• biz cap diverted from biz

• the enviro

• tech transfers

Tell me about the lack of predicatability + ex

• Cap costs more when there are question marks/risks  

• changes in the rules = risk

• Ex: UK votes for Brexit city of London lost thousands of jobs during this time  

Tell me about why lack of independent judiciary is hard for an MNC

Reality and even perceptions of no independent judiciary make it difficult for biz to have faith that gov will play by the rules

Tell me about how biz cap could be diverted from biz

• countries have high tax rate

• poorly trained workforce

• inadequate infra to support MNC

Tell me about some examples of tech transfer

• GM forced to JV SIAC trained engineers and chinese w/drew their engineers to chinese companies that competed  

• Honeywell and another airliner JV chinese made a plane super similar to airbus and boeing planes  

 

What are the positives from the perspective of the host country?

• employment

• retain fair share profits

• train and ed local workforce

• retain control over econ

• protect natural enviro = if done right

• maintain social and poli stability

What are the negatives from the perspective of the host country?

• Destruction of enviro bc EPA like regs don't exist elsewhere 

• Poli interference  

• issues in supply chain lead to accidents

Tell me about the video in bangladesh that we watched

• Rana plaza garment factory collapsed  

• About 4M work in clothing indo in Bangladesh  

• Needs more reg  

• Chain starts with consumer  

• Make $68 a month  

• People still missing, one or both fam providers killed = 1.1k died  

How does bangladesh differ fropm the triangle shirtwaist fire

Bangladesh dif from triangle shirtwaist bc foreign cap so what respons do they have that they are working in the same place, regs not as quick to go into play  

 

What did the FCPA result from?

Scandal in US jet manus were paying bribes to gov officials in korea and japan to get them to buy their jets = like lockeheed  

• US senate investigates this and decides we need to have laws on the books that make it a crim for US biz to bribe gov officials to purchase our products = FCPA 

What are the key elements of FCPA?

• US biz and their agents 

• From bribing  

• Foreign officials  

• To influence an official act 

• To gain or retain biz  

How is the FCPA being used today?

Prosecutional discretion = trump and FCPA today