Introduction to Globalization
Class 1: Introduction
(i) Course objectives
The objective of this course is to provide students with an overview of:
-- the main aspects and issues in globalisation;
-- empirical evidence on the effects of globalisation; and
-- the challenges for the successful governance of globalisation.
(ii) Course evaluation
The overall course grade will be based on the following three elements:
-- final course examination (40% of total grade).
-- 10 short papers (40% of total grade).
-- attendance and participation, including one presentation (20% of total grade).
Class 1 -- Introduction to Globalisation What is globalisation ? A simple definition of economic globalisation is the arrival of a global economy where all countries in the world participate, can participate or have the potential to participate in international trade, investment, finance, migration, etc. Some people talk about the integration of national economies into a global economy through international trade, investment, finance and migration. Important to stress that globalisation is not the only thing happening in the world today. Even though it is difficult to separate globalisation from many other phenomena, three important phenomena are democratisation, technological change and population ageing. National geography also shapes economic performance.
How we started getting globalised -- the political and policy factors.
First half of the 20th century was the bloodiest period in world history -- two world wars, a failed peace and a global economic recession. It was also a period of "deglobalisation" as world trade and investment declined.
The period from 1946 to the 1980s saw the gradual building of a global economy --
(i) reconstruction of Europe after the war through the Marshall Plan and creation of the Europe Union.
(ii)
dynamic development of Japan.
(iii) the creation of a number of international organisations to help manage the global economy like the United Nations, the International Monetary Fund, the World Bank, the World Trade Organisation (before it was the GATT) and the Organisation for Economic Co-operation and Development.
Important factors in this development were the liberalisation of trade, investment and finance through the GATT (WTO predecessor) and the EU. The period 1946 to 1989 could be regarded as a period of mini-globalisation between North America, Western Europe, Japan, Australia and New Zealand.
There was virtually no international trade, investment and migration between these countries and the communist countries of central and eastern Europe, and also China. Economic co-operation with developing countries was mainly in the form of developing country exports of raw materials and western country exports of manufactured goods.
In the period around 1990, the world started to change dramatically:
(i) end of the Cold War in central and eastern Europe -- these countries commenced a transition to open market economies and democracy;
(ii) progressive democratisation and stabilisation of Latin America, following a period of dictatorships and economic instability (hyperinflation).
(iii) dynamic development in East Asia, starting with the dragons of Korea, Taiwan, Hong Kong and Singapore, then South East Asia and China.
(iv) regional economic co--operation between developed and developing countries through NAFTA and APEC.
All of these regions opened their economies through reducing the barriers to trade, investment and finance -- thereby joining the global economy. Technology has also helped open the global economy as the cost of transport has fallen and Internet and other information technologies has made international transactions much easier.
We therefore see the arrival of a global economy -- the "era of globalisation". Africa is the only region which is not participating substantially in the global economy, although in very recent years a number of African countries have benefited from the commodities’ boom.
The problems of these poor countries is well described by Paul Collier in his book, “The Bottom Billion” – see http://users.ox.ac.uk/~econpco/
Developing and emerging economies have become the main drivers of globalisation and economic growth.
The period from about 2000 has seen another new development whereby the "BRICs" -- Brazil, Russia, India and China -- has emerged as very major players in the global economy and global politics. See -http://www2.goldmansachs.com/hkchina/insight/research/pdf/BRICs_3_12-1-05.pdf .
How we started getting globalised -- the technological factors.
According to Thomas Friedman, sometime in the late 1990s a whole set of technologies and political events converged--including the fall of the Berlin Wall, the rise of the Internet, the diffusion of the Windows operating system, the creation of a global fiberoptic network, and the creation of interoperable software applications, which made it very easy for people all over the world to work together--that leveled the playing field. It created a global platform that allowed more people to plug and play, collaborate and compete, share knowledge and share work, than anything we have ever seen in the history of the world. This flattening of the world means something more than just "outsourcing". The flattening of the world and the latest phase of globalization enable is a whole new level of "sourcing." That is, companies and individuals can now source so much more easily whatever knowledge, production, innovation, research, or advice they need. It may come from the company next door, it may come from the state next door, or it may come from the country that is 1,000 miles away, but now it feels like it is right next door.
See -- http://www.thomaslfriedman.com/bookshelf/the-world-is-flat
What have been the effects of globalisation ?
(i)
dramatic increases in international trade, investment, finance and migration;
(ii) countries that participate in the global economy have seen very strong growth in GDP and important reductions in poverty. 450 million people have been lifted out of poverty since 1990.
(iii) democracy and more open societies are now spreading around the world, thanks in part to growing middle classes in developing economies.
Some of the challenges of globalisation:
(i) Rise in international economic crime – bribery and corruption, tax evasion, money laundering, counterfeiting and piracy, and human trafficking. (ii) Environmental problems at the global (like climate change), regional, national and local levels. (iii) Widening gaps between rich and poor.
But to maximise the benefits of open markets and globalisation, it is necessary to have other factors like a well educated work force, social safety nets and good clean governance.
But "money can't buy you love" -http://www.lyrics007.com/The%20Beatles%20Lyrics/Can't%20Buy%20Me%20Lov e%20Lyrics.html
GDP cannot necessarily buy you happiness ...
Robert F. Kennedy on what GNP means -- Address, University of Kansas, Lawrence, Kansas, March 18, 1968.
" Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product ... if we should judge America by that - counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
" Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans."
Growth in GDP has been very important, but ...
-in many developing countries, like China, rapid economic growth has caused environmental degradation;
-in countries the world over, globalisation and technological change has been associated with widening gaps between rich and poor;
-open borders and technological change have facilitated the growth of international economic crime like bribery and corruption, money laundering, tax evasion, counterfeiting and piracy, and human trafficking.
While economic growth is important, sustainable development is perhaps more important -- this is development which balances economic, social and environmental factors. At the same time, high levels of GDP can provide the resources to solve other problems like social and environmental problems.
When assessing economic growth and development, governments should develop systems for "measuring societal progress" that include, but go beyond GDP.
There are many attempts to do this:
--
human development index -- http://hdr.undp.org/hdr2006/statistics/
--
Millennium Development Goals -- http://www.un.org/millenniumgoals/
-Gross National Happiness -http://en.wikipedia.org/wiki/Gross_national_happiness
-Happiness in Nations -http://worlddatabaseofhappiness.eur.nl/hap_nat/nat_fp.htm
Measuring the Progress of Societies -http://www.oecd.org/site/0,3407,en_21571361_31938349_1_1_1_1_1,00.html .
Managing the Next Wave of Globalisation -- according to the World Bank
Globalization could spur faster growth in average incomes in the next 25 years than during 1980-2005, with developing countries playing a central role. Broad-based growth in developing countries sustained over the period would significantly affect global poverty. "The number of people living on less than $1 a day could be cut in half, from 1.1 billion now to 550 million in 2030. However, some regions, notably Africa, are at risk of being left behind. However, unless managed carefully, it could be accompanied by growing income inequality and potentially severe environmental pressures. Moreover, income inequality could widen within many countries, compounding current concerns over inequality between countries. Globalization is likely to bring benefits to many. By 2030, 1.2 billion people in developing countries-15 percent of the world population-will belong to the "global middle class," up from 400 million today. Is globalisation good or bad ?
Is globalisation good or bad ? This question is too simplistic. There are many dimensions of globalisation -- economic globalisation, globalisation of society, cultural globalisation and political globalisation. And within economic globalisation, there is the globalisation of trade, investment, finance and migration. When people say that they are for or against globalisation, it is important to ask them to define what they are talking about. Some references
The World Is Flat: A Brief History of the Twenty-first Century, by Thomas L. Friedman In Defense of Globalization, by Jagdish Bhagwati Making Globalisation Work, by Jo Stiglitz Why Globalisation Works, by Martin Wolf Trade and Structural Adjustment: Embracing Globalisation, by OECD Global Economic Prospects 2007: Managing the Next Wave of Globalization, by the
World Bank
The End of Poverty: Economic Possibilities for Our Time, by Jeffrey Sachs La France et la mondialisation, by Hubert Védrine Globalization and Its Enemies by Daniel Cohen