Three Worlds of Globalization

Three Worlds of Globalization - Three Worlds of...

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Unformatted text preview: Three Worlds of Globalization March 11, 2008 IR 101 Globalization boosters Economics: Globalization is good for growth & development Good for labor in LDCs Dislocates labor in the OECD, but only in the short term (in long run, they benefit) Politics economic freedom drives political freedom and peace Critics: too few haves, too many have nots "Soviet-style communism failed, not because it was intrinsically evil but because it was flawed. It allowed too few people to usurp too much power: 21stcentury market-capitalism, American-style, will fail for the same reasons." (Roy, Guardian 9/27/2002) The global income distribution 40,000 1980 2000 US, 2000 35,000 30,000 Real Per Capita GDP ($1995) Japan, 2000 25,000 20,000 15,000 United States 1980 Japan, 1980 Mexico 1980 Brazil 1980 Mexico 2000 10,000 5,000 China, 2000 India, 2000 0 0.0 0.2 0.4 India,1980 China, 1980 0.6 0.8 1.0 Cumulative Population (Normalized to 1 in Both Years) Ireland: a manufacturing marvel! manuf X/ GDP ( % ) 80 70 60 50 40 30 20 92 95 98 83 86 89 19 80 19 19 19 19 19 20 01 35000 30000 25000 20000 15000 10000 19 manufactures exports GDP per capita http://www.intel.com/ireland/about/thesite/index.htm GDP per cap ( 1995 US$) So is China ... Manuf X/ GDP ( % ) 25 20 15 10 5 0 86 88 92 84 90 94 96 98 20 19 19 19 19 19 19 19 20 00 02 1000 800 600 400 200 0 19 manufactured exports GDP per capita http://www.huawei.com/about/AboutIndex.do?nls=en&webColType=abouthuawei GDP per cap ( 1995 US$) Q: What happens if the employees at a Nike SweatshopTM demand higher pay or better working conditions? A: At Nike, we're devoted to keeping our investors happy. That's why when our workers demand any of those things, the first thing we'll do is say hell no ... That means we have to find an area with record unemployment, so our workers have no choice but to work at Nike! In the rare case that the subsistence salary is driven too high, we simply close shop, let the local economy flounder, and set up a new SweatshopTM somewhere else in the world--there's plenty of poverty to go around! Q: Athletes like Michael Jordan and Tiger Woods earn millions in endorsement dollars from Nike. Given that, how does Nike justify what it pays its workers? A: We work to ensure the people contributing to Nike's success story are paid fairly ... we have asked outside organizations to study the issue, ... we find the people working in Nike contract factories are paid a fair wage ... Nike contract factories set the cash wage for entry-level workers using the standards set by local governments or trade unions. For example, in Indonesia, Nike's entrylevel contract workers make at least 10 to 25 percent more in cash and allowances than the local governments in each region require 25 20 15 10 5 0 0 3 6 9 2 5 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 1 1 1 1 1 1 2 0 0 1 9000 8000 7000 6000 5000 4000 3000 1 manufactures exports GDP per capit a http://welcome.hp.com/country/mx/es/welcome.html GDP per cap ( 1995 $US) Why not Mexico? Manuf X/ GDP ( % ) 3 worlds of globalization High income countries "innovation economy" Import cheap goods & services Offshore production Export technology-related production Requires institutions of innovation (education, legal system, banking, IP protection) Good for high skilled labor, bad for low skilled labor Import technology Export low wage goods and services Requires easy tech transfer Sweatshops are good Labor costs too high for low wage economy Educ. & institutions not good enough for innovation econ Economic stagnation, political instability, mass emigration low income countries "low wage economy" Middle income countries "missing middle" What about the US? The steel industry Employment: 1980 450k; 1998 150k Demographics Pittsburgh: 1970 600k; 1990 370k Phoenix: 1970 580k; 1990 980k US Imports: 1991 16m; 2001 39m US Tariffs Up to 30% in 2002 because of "unfair" foreign competition Q: should the US protect the steel industry, or autos, or agriculture? The "Giant Sucking Sound" in US Manufacturing? 31 30 11.0 29 28 27 26 25 24 23 22 19 80 19 82 19 84 19 86 19 88 19 90 19 94 19 96 19 98 20 00 19 92 9.0 8.0 7.0 6.0 5.0 4.0 Employment in industry (% of total employment) Manufacturing imports (% GDP) manufacturing imports 10.0 industrial employment Where are the American jobs? Forklift vs. Microphone ...
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