GLOBALIZATION

WHAT IS ECONOMICS?

📌 It is the study of human economic behavior: the production and distribution of  the goods and services we need and want.

WHAT IS GLOBALIZATION?

📌 INCREASING OF ECONOMIC LINKAGES BETWEEN COUNTRIES

IT IS NOT NEW – PEOPLE FROM DIFFERENT COUNTRIES  OR EVEN CONTINENTS HAVE BEEN TRADING WITH EACH OTHER FOR CENTURIES.

“DRIVERS OF GLOBALIZATION”

FACTORS CONTRIBUTING TO THE  GROWTH OF GLOBAL COMMERCE:

✓ Communications technology 

✓ Transportation technology 

✓ Improvements in management 

✓ Unilateral opening 

✓ Political “stability” 

✓ Free-trade agreements 

COMMUNICATIONS TECHNOLOGY • New computer and communications technologies have reduced the cost, and enhanced the capacities, of global communications. 

TRANSPORTATION TECHNOLOGY • Similarly, international transportation (including merchandise shipping and travel) has become easier and cheaper. 

IMPROVEMENTS IN MANAGEMENT • Business executives have become more adept at identifying far-flung supply, production, and marketing opportunities; outsourcing particular functions to reliable suppliers (including those in far-off places); and implementing strategies to maximize global profits. 

UNILATERAL OPENING • Quite apart from the impact of international agreements and institutions (like the WTO and regional free trade agreements), many countries have unilaterally reduced barriers to foreign trade and investment during the neoliberal era. 

For various reasons – including the failure of previous, more inward-oriented economic strategies; pressure from international agencies like the World Bank and the International Monetary Fund (IMF); and sheer desperation for investment – governments (especially in developing countries) have dismantled regulations which once limited foreign trade and capital flows.

POLITICAL STABILITY • Companies once worried about investing in other countries (especially developing countries) because of potential political turmoil that could result in lost profits (and even, in many cases, lost businesses).

FREE-TRADE AGREEMENTS 

• The growth and deregulation of global commerce would have occurred anyway as a result of these changes. But globalization has been mightily reinforced, and given a starkly pro-business character, by international agreements which cement free-trade rules and limit government powers to interfere with trade and capital flows. 

• Some of these agreements are regional (like the European Union and the North American Free Trade Agreement); some are global (like the WTO). They promote freer trade in merchandise and services – for example, by eliminating TARIFFS (taxes imposed to limit imports) and other trade barriers.

• Less obvious, but ultimately more important, are provisions aimed at opening and protecting investment flows, granting special legal protections to foreign investors, and generally limiting government intrusions into the private sector. For example, the General Agreement on Trade in Services (GATS), which is a trade treaty overseen by the WTO, has a blanket provision which limits governments’ ability to regulate service industries, even if exactly the same regulations are applied to local and foreign companies.

“FORMS OF GLOBALIZATION”

✓ Merchandise trade

✓ Services trade

✓ Foreign direct investment

✓ International financial flows

✓ Migration

✓ International institutions

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EXPORTS are products which a country produces and then sells to purchasers in another country; 

IMPORTS are products that are made elsewhere, but purchased and used at home. 

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SERVICES TRADE •  Customers may purchase services from providers in another country, in order to access unique features or skills which can’t be purchased closer to home. 

FOREIGN DIRECT INVESTMENT • A MULTINATIONAL CORPORATION is a company which operates productive facilities in more than one country. 

INTERNATIONAL FINANCIAL FLOWS •  In most countries, investors can freely convert financial wealth from one currency into another.

Exchange rate – the “price” of buying another country’s  currency.

MIGRATION • Cross-border human flows, motivated by both economic and non-economic factors, have been important throughout human history.

INTERNATIONAL INSTITUTIONS • The globalization of governance and policy is another important dimension of the current world economy.

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IMF – was to focus on stabilizing and freeing international financial flows

WORLD BANK – was to assist poor countries with economic development. 

WTO – Founded in 1995, It has a special “dispute-settlement system” which can order countries to dismantle policies and programs which violate free-trade principles.

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ACTIVITIES IN AN ILLICIT ECONOMY :

Smuggling

Trafficking

Money Laundering

Tax Evasion

Counterfeiting

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“THE ILLICIT GLOBAL ECONOMY: THE DARK SIDE OF GLOBALIZATION” 

A glimpse to the Dark Side: Tunnels of trade 

El Grande tunnel linking warehouses in Tijuana, Mexico, and Otay Mesa, California. Agents suspected that it was used for drug smuggling: They found two tons of marijuana inside.

Palestinians in the Gaza Strip dug dozens of tunnels under the border with Egypt to bring in everything from gasoline and cement to medicine and missiles. 

700-meter tunnel under the Ukraine–Slovak border equipped with a small train. It was used to import “death sticks” into the European Union without paying customs duties.

THE ILLICIT GLOBAL ECONOMY: THE DARK SIDE OF GLOBALIZATION 

The illicit global economy consists of markets that states cannot easily regulate or tax. A variety of adjectives are commonly used to describe these global markets: illicit, illegal, informal, black, gray, shadow, extrastate, underground, and offshore. 

The processes going on in these markets generally fall into categories such as smuggling, trafficking, money laundering, tax evasion, and counterfeiting. The actors conducting these transactions make profits by breaking laws, defying authority, ignoring borders, and often using violence to exploit other people. 

The Illicit Economy in Historical Perspective

Illicit transactions did not suddenly appear a decade or so ago; there have been many illicit activities in history that have fundamentally shaped relations among states.

European rulers and Barbary Coast potentates authorized pirates to seize other countries’ ships and split the booty with them. European countries colonized many parts of the world, seizing the territory and the property

The Illicit Economy in Historical Perspective

Historians Kenneth Pomeranz and Steven Topik argue that violence used to be an important way to gain “comparative advantage” and important commercial benefits in the world. Great Britain, Spain, other European countries, and the United States moved up the rungs of the ladder of development by engaging in land grabbing, slavery, looting, and dope peddling in what we now call the less developed countries (LDCs).

As both authors argue, “Bloody hands and the invisible hand often worked in concert: in fact, they were often attached to the same body.” They recount how Britain once forced China to buy opium; Belgium brutalized millions of Congo inhabitants and slaughtered elephants for ivory; Spain and Portugal literally plundered the Aztec and Inca civilizations; and U.S. entrepreneurs trafficked in slaves for decades.