05 - GLOBALIZATION

Geo Economic Changes

Part 4

  • This section focuses on the evolving landscape of the global economy, its structures, and dynamics.

Global Economy: Genesis, Structure, and Dynamics

Overview

  • A new economy has emerged in the last two decades, characterized as both informational and global, emphasizing the intertwining of these features.

Informational Economy

  • Dependence on knowledge-based information for productivity and competitiveness is crucial for firms, regions, and nations.

Global Economy

  • Core activities of production, consumption, and circulation are organized globally, through networks linking economic agents.

  • Productivity and competition occur through a global interaction network.

Historical Linkage

  • The relationship between the knowledge information base, global reach, and the Information Technology Revolution defines this new economic system.

Components of the Global Economy

Key Components

  1. Capital

    • Managed continuously via integrated financial markets, facilitating rapid transactions globally.

    • New communication technologies enable prompt capital movement, linking savings and investment globally.

    • Corporate centers provide necessary resources for managing financial networks.

  2. Labor Markets

    • Global labor markets are limited; however, professionals and scientists can work internationally.

    • Companies can locate operations based on labor supply across regions, while skilled labor can be sourced globally under favorable conditions.

    • Migration driven by poverty or conflict contributes heavily to labor markets.

  3. Science, Technology, and Information

    • These areas are organized in a global flow, albeit asymmetrical in nature.

  4. Trade Markets

    • Despite protectionism, markets for goods and services are increasingly globalized due to advanced communication and transportation technologies.

    • However, domestic markets remain significant contributors to GDP, especially in developing countries.

  5. Management and Production

    • A shift in management strategies is pivotal, with production processes now incorporating global components from various locations.

    • This involves high-volume, flexible, customized production systems, enabling companies to adapt to changing demands.

    • Includes strategic alliances and networks connecting small and medium enterprises with larger corporations.

Sources of Competitiveness

Factors Influencing Competition

  • The structure of the global economy results from competition dynamics among economic agents and locales.

  • Four main processes determine competition:

    1. Technological Capacity

      • Involves the science base for production, R&D strength, and resource availability for innovation.

    2. Market Access

      • Firms benefit from access to large affluent markets (e.g., EU, US Trade Zone).

    3. Production Costs Versus Market Prices

      • Assessment beyond labor costs, including land, taxes, and regulations.

    4. Political Capacity

      • National and supranational institutions' ability to guide economic strategies plays a crucial role.

Limits of Globalization

Critiques of Globalization

  • The notion that the economy operates entirely on a global scale is challenged:

    • Not all markets and strategic industries are fully integrated.

    • Capital flows are restricted by regulations and labor mobility is impacted by immigration controls.

  • Corporations often maintain strategic centers in their home nations, reflecting national influences on corporate behavior.

Role of National Governments

  • Government policies shape the global economy's structure.

  • Evidence shows that nationalism and the influence of government persist, suggesting that significant regional distinctions will remain.