MGMT 1035 - WEEK 12

What did the global GDP composition by sector show in 1991?

agriculture > service > industry

What does the global GDP composition by sector show in 2019?

service > agriculture > industry

Why did people initially believe industry was the most important for an economy?

• industrialization & trade

• easier to boost productivity by making things more efficient

What are 2 examples of services that supported textile production?

• bank insurance

• legal counsel

What takes place in the 1950s-1970s as more people live in cities?

deindustrialization

Why did deindustrialization happen?

mechanization & mass production freed up labour

What are the Big Three?

• Ford

• General Motors

• Stellantis

Where was the Big Three’s birthplace?

Detroit

What else was Detroit known as?

deindustrialization poster child

What occurred as a result of Detroit’s deindustrialization?

depopulation

Why did Detroit’s deindustrialization occur in the 1970s-1980s?

didn’t pay attention to Japan competition

What was happening to the auto industry in the 1940-1950s?

job loss

Why did auto industry job losses happen in the 1940s-1950s?

manufacturing slowed down

What happened to Detroit in 2013?

went bankrupt

Of what was Pittsburgh a prominent producer?

steel

What steel company was created in 1875?

Edgar Thompson Works

Who created Edgar Thompson Works?

Andrew Carnegie

What did Edgar Thompson Works join?

US Steel Corporation

What was the largest private company in the world in 1910?

US Steel Corporation

What did Pittsburgh experience in the 1970s-1980s?

rapidly lost steel jobs

What system rapidly grew in Pittsburgh in the 1980s-1990s?

healthcare

Why did healthcare grow in Pittsburgh in the 1980-1990s?

younger people left city, leaving older people (former industrial workers)

What became Pittsburgh’s largest employer in 1980?

healthcare

What could Pittsburgh’s 2010 healthcare system be compared to in relation to its steel industry?

1950 peak

What was the biggest difference between steel & healthcare jobs?

steel : unionized & stable & well paid

healthcare : non-unionized & precarious & not well paid

Who was usually hired in Pittsburgh’s healthcare system?

women

Why were women usually hired in Pittsburgh’s healthcare system?

made up for spouse’s lost wage

What are some examples of other service industries that have grown in Pittsburgh?

• education

• finance

What shape does a service economy’s returns look like?

U-shape (extremely well paid or not well paid at all)

What are some examples of global cities that rose in the 1980s?

• London

• New York

• Tokyo

What are some examples of advanced services that grew in the 1980s?

• accounting

• finance

• law

What decisions came to be made in global cities?

• investment

• production

• trade

What effects did globalization have on global cities?

looked towards each other

Why did global cities look towards each other?

global economy effect > national economy effect

What is offshoring?

locating facilities out of home market to make goods & selling in home market

What is the difference between offshoring and FDI?

sale: offshoring → home market v.s. FDI → foreign market

production: offshoring → single MNE v.s. FDI → independent parties’ transactions

What is outsourcing?

purchasing goods from independent foreign supplier that could be domestically boughtW

What is the difference between offshoring and outsourcing?

corporate control: offshoring → managing facilities in foreign location v.s. offsourcing → relying on supplier in foreign location

What did the IMF do?

• promoted currency stability

• encouraged international capital flow

What does IMF stand for?

International Monetary Fund

What did the World Bank do?

• supported Global South economic development

What were some post-war transport improvements?

• radar

• air travel

• improved ship design

• streamlined port logistics

What were some post-war communications improvements?

• direct dial

• teletype tech

• undersea cable

• transatlantic telephone cable

In what industry did offshoring start, in the 1960s?

electronics

Which country in which area was the primary manufacturing destination in the 1960s?

Japan in East Asia

What were some starting examples of consumer electronics?

• radio

• semiconductor

What happened in America as a result of importing large consumer electronics quantities?

protectionism

What did Japan companies do in response to America protectionism; why?

set up East Asia factories; lower wage

What did Japan companies do in Hong Kong in response to America protectionism?

took advantage of British colonial trade preferences to export to America

What did America companies do in East Asia, beginning in the mid-1960s?

offshored production

By the late 1970s, where were high tech tasks done?

developed countries

By the late 1970s, where were labour intensive tasks done?

low-wage countries

By the 1980s, what method replaced which traditional method?

global production replaced backward integration & low-wage facilities

What is global production?

production stage spread across countries

What are some global production fragilities?

• custom product focus

• offshore R&D = difficult

• consistent tech = difficult

• 1 part goes wrong = everything goes wrong

• splitting production stage wage = inefficient

• companies prefer being close to customers

What is offshore finance?

What is the 1906 case that had international tax implications?

De Beers

Where was De Beers founded in 1888?

South Africa

Where were De Beers’ director meetings?

Britain

What happened to De Beers because it was considered a Britain resident?

liable to British tax on all income

What did the Egyptian Delta Land and Investment Company do, after being set up in London in 1904?

moved HQ to Cairo

What is offshoring finance?

moving banking out of country control to avoid tax

What is tax neutrality?

country that doesn’t levy tax/duty

What is an offshore financial centre?

country providing financial services to non-residents on disproportionate scale with domestic economy

What are cross-border banking assets?*

financial activities headquartered in developing economies

What are some offshoring finance fragilities?

• lost tax revenue

Where did offshore finance infamously spark controversy in 2016, and why?

Panama; leaked docs showed wealthy figures using offshore entities to hide assets/evade tax/launder money

How can one connect offshore production & offshore finance?

• accelerated post-Bretton Woods

• decolonization

• tech