GECCON Module 4

• Economic Globalization


  A historical process, the result of human innovation and technological progress, increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders, and the movement of people (labor) and knowledge (technology) across international borders
• Dimensions of Economic Globalization

  • Globalization of trade of goods and services
  • Globalization of financial and capital markets
  • Globalization of technology and communication
  • Globalization of production
• Global Market


  • Proliferation of the Internet and the emergence of market places like eBay
  • Tramp shipping, international shipping industry, a certain market segment in which vessels that operate do not trade regularly between certain fixed ports
  • The market for foreign exchange is the largest market in the world in terms of turnover
• Globalization has been around since the 15th century when European exploration & colonization created global empires & markets, but most historians and economists agree that today is special by the extent of interdependence and the speed by which it has occurred
• Drivers of Globalization


  • Decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II
  • Technological change
• During the 1920s and '30s, many nations erected formidable barriers to international trade and foreign direct investment
• Advanced industrial nations of the West committed themselves after World War II to removing barriers to the free flow of goods, services, and capital between nations
• Multinational corporation (MNC)


  A large corporation incorporated in one country which produces or sells goods or services in various countries, characterized by their large size and the fact that their worldwide activities are centrally controlled by the parent companies
• Types of international companies

  • International companies are importers and exporters, typically without investment outside of their home country
  • Multinational companies have investment in other countries, but do not have coordinated product offerings in each country
• Technology is the vital force in the modern form of business globalization, has revolutionized the global economy and has become critical competitive strategy, and has helped a lot in creation and growth of global market
• Lowering of trade barriers made globalization possible, and technology has made it a transforming movement
• The "World Wide Web" has exploded in last 20 years, and computers can move money around the world = "finance capital"
• Silicon Valley is 9th largest economy in world
• Silicon Valley


  A region on the San Francisco Peninsula in California where the miniaturized electronics industry is centered, so called because most of the devices built there are made of semiconductors such as silicon
• Economic Globalization


  The increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies
• The first stage of capitalism came about during the 17th century, when merchants gradually became more involved in the production of goods by supplying materials and paying wages. The merchant made the transition to capitalism by making profits from the ownership and control of the means of production
• Early Capitalist Ideas


  • Free-market Economy proposed by Adam Smith in his book, Wealth of the Nations, 1776
  • Division of labor - the separation of a work process into a number of tasks, with each task performed by a separate person or group of persons
  • Competition - serves as the driving force for creative innovation, the mechanism by which market supplies and demands are brought into coordinated balance
• Economies are increasingly linked together, as seen in the North American Free Trade Agreement (NAFTA) which went into effect on January 1, 1994