Core
Module
20
International Interdependence
Foundation part: Consequences of
Economic Globalization
1.
What are the factors that promote
economic globalization?
2.
Who
will
benefit
from
economic
globalization? What should be done so
that more people may benefit from
economic globalization?
1
Students are expected to understand the fact that economic globalization is
so closely related to our daily life through the pre-lesson activity.
Pre-lesson Activity: How is economic globalization related to us?
1.
What are the products or services provided by international corporations/multi-national
companies that we will come into contact with in our daily life? Complete the following table based
on the observations made from your daily life.
Scope
Products/services
Company/Brand name
Clothes
Sneakers, sportswear
Nike, adidas
Food
Hamburgers, chocolates
McDonald’s, Cadbury
Electronic
Televisions, mobile
products
phones
Entertainment
Sony, Samsung
The country where the
company based in
Nike: US
adidas: Germany
McDonald’s: US
Cadbury: UK
Sony: Japan
Samsung: South Korea
Foreign films, online
20th Century Fox
20th Century Fox: US
games
(Hollywood), Blizzard
Blizzard: UK
2
2.
With reference to the information in part 1, do you think Hong Kong possess some
characteristics of a global city?
I think Hong Kong possesses some characteristics as a global city. It is because we always come
into contact with products or services provided by multi-national companies in our daily life.
3.
What are the benefits brought by globalization to our daily life?
We can gain easy access to more products and services through globalization so that we can
have more choices and a more convenient life.
3
Students may compare family life nowadays with that in the 1970s
to understand the characteristics of economic globalization.
Worksheet 1: Characteristics of economic globalization
Compare the two comics below and answer the following questions.
Comic 1: Family life in Hong Kong in the 1970s
4
Source 2: Family life in Hong Kong nowadays
5
1.
Compare the products and services in the 1970s with that nowadays. What are the differences
between them?
1970s
1.
2.
Products
(e.g. clothes,
3.
(e.g.
entertainments,
Clothes were made in China or 1.
Clothes are of international
Hong Kong
brands
Toys were rather simple and were 2.
Toys for children are electronic
made locally e.g. toy blocks
games of foreign brands
Food products included a variety
3.
of local snacks
toys and food)
Services
Nowadays
Food products are those from fast
food restaurants such as
McDonald’s
1.
Mother did the housework
2.
Entertainment included watching
traditional Cantonese operas and
1.
Foreign domestic helpers do the
housework
2.
local TV productions
Entertainment includes watching
Hollywood films
3.
domestic
People get information and shop
online through websites
services and
shopping
services)
6
2.
Hong Kong people are greatly affected by globalization. With reference to these phenomena in
the comics, summarize some characteristics of globalization.
Suggested answers:
1)
We always use products and services provided by multi-national companies.
2)
There is labour mobility across countries.
3)
We can invest internationally easily and capital flow has grown rapidly.
4)
We can easily get access to information of other places through technologies such as
internet and achieve a rapid flow of information.
What is economic globalization?
Economic globalization means cross-boundary economic activities, by which people from different
countries may do business. Driven by free economy and technological advancement, there has been a
huge transaction volume of goods and services across countries. That brings collaborative production
of goods and services by different countries for the consumption of people all over the world.
Meanwhile, the rapid flow of factors such as labour, capital, information and technology across
countries has further promoted economic globalization.
With economic globalization, there are frequent economic activities across countries. With the
technological advancement in logistic, electronic media and the internet, companies today may link
up with the world for trades across countries and forming multi-national
corporations is possible. In a globalized world, multi-national
corporations may participate in real-time transactions across countries.
The concept of “international time zone” becomes less important and
the world becomes smaller as time and space are “squeezed”. Therefore,
international trades are getting faster and there are more opportunities
for the development of international corporations.
7
Worksheet 2:Factors contributing to economic globalization
Teachers may divide students into four groups and use jigsaw reading strategy, i.e. each group
focuses on one of the materials and analyzes the factors contributing to economic globalization.
Source 1:
With
the
development
of
communication
technologies, time and space are no longer problems
when we want to promote our products. People can
get access to our latest information through channels
such as TV and internet instantly. Our products can
then draw their attention. In addition to promotion,
our company has launched an online shopping
platform so that consumers can buy our products
comfortably at home.
Head of Marketing Department
of a multi-national company
Source 2: Milestones of IT development
1940s
The first electronic digital computer was developed
1950s
The first satellite was launched by the former Soviet Union
1960s
The first fax machine came into the world
1990s
World Wide Web
2000s
Web 2.0 came into being
2010s
More than 2 billion Internet users all over the world
Source: Xinhuanet.com, local news roundup
8
Source 1:
Transportation becomes more and more convenient
when transportation cost is getting lower and lower.
That makes us to be able to reach different places
easlier and faster. While we have established our
production bases in places where production costs
are much lower, huge volume of products can be
transported to all parts of the world for sale
conveniently. Moreover, we can conduct frequent
on-site inspection to ensure the quality of products.
Head of Logistics Department
of a multi-national company
Source 2: Development of transport technologies
The following table shows the speed of transport in different periods:
Period
Major transport
Hourly rate
1500s-1840s
Horse-drawn coaches and sailing ships
1.6km/hr
Steam locomotive
104km/hr
Steam ships
58km/hr
1930s-1950s
Propeller aircraft
480-640km/hr
1960s-21st century
Jet passenger aircraft
800-1120km/hr
1850s-1930s
Source: Harvey (1989). The condition of postmodernity. p. 241
(translated and edited).
9
Source 1
To boost our business, we invest worldwide and attract
more talents to our company. We have published
recruitment ads around the world in the hope of attracting
top talents around the world to our US headquarters.
Moreover, we will hire workers and supervisors from
places where we operate our factories. As their wage level
is lower, our production cost is substantially reduced.
Head of HR of a
multi-national company
Source 2 Global Wage Report (Extract)
Ranking
Country / Region
Monthly average wages per person (US$)
1
Luxembourg
4089
2
Norway
3678
3
Austria
3437
4
United States
3263
30
Hong Kong, China
1545
57
China
656
70
Philippines
279
71
Pakistan
256
72
Tajik
227
Source: Integrated report (2012)
10
We had been operating most of our factories in the US in the past.
However, as a number of new international organizations have
been provi ding st rong support t o cert ai n developing
countries/territories in their economic development by ways such
as policies favorable to foreign investors and improvement in
infrastructure, we actively invest in these countries. By doing so
we reduce our production cost and provide support to economic
development of these countries. It’s really a win-win situation.
Head of Production Department
of a multi-national company
Source 2: Functions of organizations for international cooperation (Extract)
Organization
Functions
World Trade Organization
Establish trade agreements; resolve trade disputes; review trade
(WTO)
policies.
World Bank
Provide loans and technical support to developing countries.
International Monetary Fund
(IMF)
Foster global monetary cooperation; stabilize exchange rates;
provide financial assistance to countries that have trouble.
Organization for Economic
Provide a forum in which governments can work together to share
Co-operation and
experiences and seek solutions to common problems, and look at
Development (OECD)
issues that directly affect the lives of ordinary people.
Source: Xinhuanet., local integrated report
11
With reference to the information above, summarize and explain the factors contributing to economic
globalization.
Reading
Factors contributing to
Material
economic globalization
Explanation
With internet communication services, time and space
are no longer problems in communications among
people. People can get to know the cultures of different
regions, spread information, promote their products or
even run businesses through these new technologies. We
A
Information technology is
can access to the latest information instantly from
well developed
channels such as TV and internet. Meanwhile,
international corporations may bring their products to
the world through mass media.
Through mass media
such as internet, TV stations and radio stations, people
around the world can understand different cultures and
bring regions closer to each other.
Sea, land and air conveyances have been improving in
terms of goods and passenger capacity as well as speed,
B
Development of transport
technologies
it helps to stimulate the flow of population, capital and
resources across countries/regions and promote the
development of globalization. Different kinds of
conveyances have been improving in terms of speed and
carriage capacity and become more and more popular.
12
In a globalized world, companies can raise funds in
different regions and invest them into other countries
C
Mobility of labour and
conveniently. With business networks around the world,
capital across countries
multi-national corporations may hire labour or
experienced talents from all parts of the world at lower
wages.
Intergovernmental bodies and international
Emergence of
D
international
organizations
non-governmental organizations that promote free trades
and economic development strengthen international
cooperation at different aspects. They also serve as a
bridge to global communication that promotes the
development of globalization.
Factors contributing to economic globalization
Economic globalization has appeared many years ago. However, it has been growing rapidly from
the 1990s onwards. In addition to the change in the mode of doing businesses and worldwide
division of labour, we may also understand the factors that contribute to economic globalization from
the aspect of political and technological developments.
1.
Political factors
For political factors, during the period between the end of World War II and early 1990s, the world
was divided into two major camps, the capitalist and the socialist. The gaps and conflict of interest,
13
between the two camps had been an obstacle to global economic cooperation and development. In
the early 1990s, the collapse of the Soviet Union and the gradual shift of the communist countries to
capitalist market economies which had brought communications and trade between countries from
the two camps. In addition, the establishment of a number of international economic organizations
had promoted the development of globalization. For example, the World Trade Organization and the
Asia-Pacific Economic Cooperation Conference have been established to eliminate trade barriers
across countries and strengthen the cooperation among countries for a better economic cooperation.
2.
Technological factors
For technological factors, the rapid development of internet as a global information network during
the 1990s made the global one world. People around the world can exchange ideas, communicate and
promote global economic trading through internet. For example, with technological development,
people can participate in financial or commercial transactions through a variety of online transaction
platforms. Every individual or multi-national companies can use those online platforms and a variety
of electronic money to deal with people all over the world. This convenient mode of transaction has
promoted economic globalization and the operations of various trading companies.
In addition to internet, the development of transport and logistic services had promoted the rapid
flow of talents and goods across countries. Trade and negotiations can be conducted in a more
efficient and time-saving manner. On the other hand, the reform and opening up of China and the
relaxation of controls on financial systems in the US are also factors contributing to economic
globalization.
14
Students may read the following information and understand the positive and negative effects of
economic globalization from the perspectives of developing countries and developed countries.
Case study: Positive and negative effects of economic globalization
Guidelines for teaching activities:
1. Divide students into two groups, one focuses on the materials of developing countries and the
other on developed countries.
2. Further divide each group into four small groups. Each group represents a particular type of
stakeholder and is responsible for completing the related worksheet.
3. Hold a forum on the topic of positive and negative effects of economic globalization. Each
group expresses their opinions for the respective stakeholder.
Positive and negative effects of economic globalization
(Materials for developing countries)
: Worldwide production and sales network of iPhone
Note: There is no specific or single definition of “developing countries” and “developed
countries”. Different international organizations have complied their own glossary and criteria
for the classification. For example, the World Bank classifies economies by their GNI per
capita as low income (US$ 1,005 or below), lower middle (US$ 1,006-3,975), upper middle
(US$ 3,976-12,275) and high income (US$ 12,276 or above) in 2010.
(http://data.worldbank.org.cn/about/country-classification)
15
The Foxconn suicide incidents which occurred one
after another were unusual. It’s just because the
management treats the young employees in a military
way and didn’t care about their mental wellness.
Moreover, a report shows that workers in Foxconn
have to work for more than 60 hours a week and
sometimes have to work seven days a week
Political commentator
consecutively. This will certainly cause negative
impacts to their physical and mental wellness.
My hometown is famous for its pottery. Our peers had stayed in the
village to produce pottery together in the past years. However, more
and more of my peers migrated to cities now. Some peers told me
that you can earn higher wages if you work in factories in cities.
Foxconn, for example, pays a wage that is 3 times of my current
wage. Many pottery factories in my hometown closed down now
and I am thinking of working at Foxconn’s factory in Shenzhen.
Migrant worker
: Details of Foxconn’s pay rise
Date
Details
June 1, 2010
Minimum wage of workers increased by 30% from RMB 900 to RMB 1200
October 1, 2010
Workers at Foxconn’s Shenzhen hub can have a wage increase to RMB 2000 if
they pass a performance review
February 1, 2012
16%-25% Pay rise for basic wages of all employees all over China to RMB
2200
Proposed
In May 2012, Terry Gou, Chairman of Foxconn, announced the plan to double
the wage of employees in China to RMB 4400
Source: Local integrated report, 2012
16
: News headlines
Greater demand for budget smart phones will push smart phone market to price
war
Smart phone market is big and a variety of latest models of smart phones have been launched by
manufacturers. However, market saturation began in some developed countries. Some manufacturers
forecast that the growth of smart phone market would be recorded mainly in developing countries in
the coming few years. In order to explore these markets, manufacturers have been working hard in
developing relatively cheaper smart phones.
We cannot expect these smart phones to have the same features as those of high-end phones, given
their lower prices. They, however, attract a number of consumers who cannot afford high-end phones.
An example is China. Huawei, a company mainly engaged in the development of budget smart
phones, saw its market share increased to 12% in 2011 from 7.4% in 2010. ZTE, another
manufacturer of budget smart phones, was able to increase its market share from 3.6% to 11%.
Facing the challenges of budget smart phones, certain multi-national brands are expected to lower the
prices of their products. It is believed that consumers can buy smart phones at a lower price in the
future.
Foxconn offers stimulus for the Chinese economy
Following the expansion of the smart phone market, Foxconn as an original equipment manufacturer
(OEM) of smart phones has been expanding its market. With a turnover of not more than RMB 800
million during its early years in Shenzhen, Foxconn had seen its revenue jumped to about RMB 420
billion and had been among the Fortune 500 for a few years time.
The development of Foxconn also fosters the economic growth of China. Foxconn’s products
accounted for over 4% of China’s total exports in 2011 and had been among the top 200 Export
Enterprises in China for consecutive eight years. Meanwhile, according to Foxconn’s announcements,
the company hired 1 million workers from all parts of the world in 2010 when more than 0.9 million
workers are working across China, providing a lot of job opportunities for the people in China. Many
migrant workers had switched to Foxconn’s factories. This fosters China’s economic transformation
and development.
17
In addition, multi-national corporations had brought advanced technologies to manufacturers in
China when they engaged manufacturers in China as their OEMs. In addition to OEM productions,
many manufacturers in China are now working on developing their own smart phones and bringing
their products to the world.
Source: Local integrated report (2011)
Meaning of OEM: Generally, it refers to a manufacturer
produces goods by applying purchasing company’s technology
and according to the required standard. Goods will then be sold
under the name of the purchasing firm.
Record sheet by groups
Group one
Stakeholder: Consumers in developing countries
With reference to the information above, analyze the positive and negative effects of
economic globalization from the perspective of the following stakeholder.
Stakeholder
Positive effects
 More choices
 Local specialty products/services may
 Prices of products drop as
Consumers in
developing
countries
Negative effects
vanish gradually
competition increases
Hint: What are the impacts to local traditional/specialty industries by
imports of a huge volume of quality goods at a low price? How will
this affect the consumers?
18
Group two
Teachers have to guide students to think if these negative effects are caused
by economic globalization or by a particular factor in the backdrop of
economic globalization (e.g. incomplete labour law) so that student will not
go against economic globalization without careful consideration. This also
helps them find out the core problems and explore possible solutions.
Stakeholder: OEM’s workers in developing countries
With reference to the information above, analyze the positive and negative effects of
economic globalization from the perspective of the following stakeholder.
Stakeholder
OEM’s workers in
developing
countries
Positive effects
Negative effects
 Income would be higher
 Change of working environment
 More job opportunities
 Longer working hours to cope with
the needs of global production
 Challenges in basic welfare and
protections for labour
Hint: If (i) the social system (e.g. labour law) of those developing countries fails to catch up with
the rapid economic development; or (ii) OEMs only focus on maximizing profits by curbing
costs; or (iii) the government of the developing country fails to enforce the law, how will these
affect those OEM’s workers?
Group three
Stakeholder: OEMs in developing countries
With reference to the information above, analyze the positive and negative effects of
economic globalization from the perspective of the following stakeholder.
Stakeholder
Positive effects
 More business opportunities
 Better business performance
OEMs in
developing
countries
and goodwill
19
Negative effects
 Competition will intensify
Hint: Do you think OEMs in
developing country can maintain
their interests in the long run? As
profit is the king in the world of
commerce, what will the OEMs
from other countries/territories do?
Group four
Stakeholder: Government officials of developing countries
With reference to the information above, analyze the positive and negative effects of
economic globalization from the perspective of the following stakeholder.
Stakeholder
Positive effects
Negative effects
 Support the country in its
economic transformation from
primary production to secondary
production
Government
officials of
developing
countries
 Accelerate economic growth
 Bring more job opportunities for
the country and enhance living quality
of the people
 Learn advanced manufacturing
technologies
 Develop good relationships with
other countries
20
 May worsen the problem of
uneven distribution of income
Hint: Does everyone in the
developing country has the same
education level, skills and
productivity? Does economic
globalization benefit everyone ?
Positive and negative effects of economic globalization
(Material for developed countries)
: Worldwide production and sales network of iPhone
: Opinions of different people
Increasing relocations of production lines from the US to other
countries had caused material impacts to the livelihood of people
in the US. Let’s take iPhone as an example. Nearly 700,000
workers engage in the production and assembly of iPhone and
other Apple’s products. However, most of them are not working
in the US. On the contrary, over 90% of them are hired by
overseas companies in Asia, Europe or other regions. It is such
outsourcing mode of production that pushes up the U.S.
unemployment rate. I think the manufacturers should relocate
their production lines back to the US.
21
A member of the
United States Congress
Nowadays, we have more and more choices of smart
phones in the market, but less and less choices of
traditional mobile phones. You should understand that
I don’t know how to use smart phones as I am old. My
friends and I want to talk to our family members on
phones that are user-friendly and portable. The phone
manufacturers simply ignore our needs.
A consumer
: Distribution of cost and profit of iPhone
as a percentage of its selling price
Cost or profit
%
Profits of Apple Inc., a US company
58.5%
Profits of other US companies
2.4%
Profits of companies in South Korea, European Union, Japan
6.8%
and Taiwan
Uncategorized profits
5.3%
Cost of raw materials
21.9%
Labour cost in China
1.8%
Labour cost in other regions (excluding China)
3.5%
Source: Capturing value in global networks: Apple’s iPad and iPhone (2011)
: News headlines
New smart phones rushed to market in fierce competition
Smart phones have now become the major trend in mobile phones. While the market of smart phones
has been expanding, manufacturers from all parts of the world have been launching new models to
provide more choices for consumers. A survey report in relation to a study on online search traffic for
the latest smart phones shows that “iPhone” ranked first in terms of online search traffic over the past
22
six months, while the search traffic for “HTC” and “Samsung” had increased by 250% and 400%
respectively. The data reflects shows that there’s still keen competition in the smartphone industry.
Manufacturers rush to launch smartphones with new features such as gesture control and 3D camera
to attract the consumers.
Innovative industries as the way out for the US economy
The gains made by products such as iPhone and iPad have pushed the profit of Apple Inc. up to
record highs. Despite the uncertainties in the US economy in recent years, the gains made by Apple
Inc. shows that there is still a huge potential in the market of innovative industries.
When the business of a company is expanding, their employees may earn higher salaries. When a
company grows, it offers more job opportunities for the domestic workers, including those engaging
in the manufacturing industry. In 2010, Apple Inc. hired over 8,000 workers. When the
unemployment rate reached record high in the US, it had been reported that US president Barack
Obama had asked why iPhone cannot be manufactured in the US. However, the management of
Apple explained that they cannot do so, not only because of wages to the workers, but also because
of the fact that local manufacturers are less competitive than overseas contractors in terms of
efficiency and flexibility. Nevertheless, Apple retains its high value-added industries such as
customer services and R&D in the US. Accordingly, Apple has created a lot of quality jobs for the
people in the US, including entrepreneurs engaged in the businesses of developing and selling iPhone
and iPad applications. In the past two decades, it is beyond controversy that developing countries
such as China has taken away a lot of manufacturing jobs in the US. However, some people said that
US workers are not willing to do low-skilled jobs as those in Foxconn’s factories in China, it is
understandable that the US will outsource these jobs to developing countries.
Source: Xinhuanet.com, local news roundup (2010)
23
Record sheet by groups
Group five
Stakeholder: Consumers in developed countries
With reference to the information above, analyze the positive and negative effects of
economic globalization from the perspective of the following stakeholder.
Stakeholder
Positive effects
 More choices
 Local specialty products/services may
 Prices of products drop as
Consumers in
developed
countries
Negative effects
vanish gradually
competition increases
Hint: What are the impacts to local traditional/specialty industries
by imports of a huge volume of quality goods at a low price? How
will this affect consumers?
Group six
Stakeholder: Workers in developed countries
With reference to the information above, analyze the positive and negative effects of
economic globalization from the perspective of the following stakeholder.
Stakeholder
Positive effects
 Workers who are skilful and
are capable of acquiring
Workers in
developed
countries
new knowledge and skills
are more competitive. They
are more likely to have job
offers within and outside
their countries
 Their salary packages and
pay would be more
attractive.
24
Negative effects
 As manufacturers relocate their
production lines to the developing
countries, the number of low-skilled
jobs available would be reduced
Hint: What are the effects of economic globalization on large
Group seven
scale multi-national corporations and SMEs?
Stakeholder : Manufacturers in developed countries
With reference to the information above, analyze the positive and negative effects of
economic globalization from the perspective of the following stakeholder.
Stakeholder
Positive effects
 For multi-national
 For SMEs, they might be less
companies, economic
Manufacturers in
developed countries
Negative effects
competitive than the overseas firms.
globalization can help
manufacturers lowering
their production costs
 Globalization of markets
 Increase in profits
Group eight
Stakeholder : Government officials of developed countries
With reference to the information above, analyze the positive and negative
effects of economic globalization from the perspective of the following
stakeholder.
Stakeholder
Positive effects
 Foster the development of
the high value- added
Government
officials of
developed
countries
industries across the country
 It may bring an increase in
GDP
 The country will be able to
outsource its low-skilled
jobs to developing countries
25
Negative effects
 Rise in unemployment rate
 Social instability
Forum: Does economic globalization bring positive or negative effects?
Listen to the presentation of your classmates. Jot down and summarize the points in the following
table.
Stakeholder
Positive effects
Negative effects
 More choices
 Prices
Consumers
of
 Local specialty products/services
products
drop
as
may vanish gradually
competition increases
 Income would be higher
 Change of working environment
 More job opportunities
 Longer working hours to cope
with
OEMs’workers
the
needs
of
global
production
 Challenges in basic welfare and
protections for labour
Developing countries
 More business opportunities
 Competition will intensify
 Better business performance and
OEMs
goodwill
(Positive effects on country)
 Support
the
economic
country
(Negative effects on country)
in
transformation
its  May worsen the problem of
from
primary production to secondary
production
Government
officials
 Accelerate economic growth
Bring more job opportunities for the
country
and
enhance
living
quality of the people
 People
may
learn
advanced
manufacturing technologies
 Develop good relationships with
other countries
26
uneven distribution of income
Stakeholder
Positive effects
Negative effects
 More choices
 Prices
of
 Local specialty products/services
product
drop
as
may vanish gradually
competition increases
Consumers
 Workers who are skillful and  As manufacturers relocate their
capable
Workers
of
acquiring
new
production lines to the developing
knowledge and skills are more
countries,
the
number
of
competitive. They are more likely
low-skilled jobs would be reduced
to get more job offers within and
Developed countries
outside their countries.
 Their salary packages and pay
would be more attractive.
 For
OEMs
multinational
companies,  For SMEs, they might be less
economic globalization can help
competitive than the overseas
manufacturers
firms.
lowering
their
production costs
 Globalization of markets
 Increase in profits
(Positive effects on country)
(Negative effects on country)
 Foster the development of the  Rise in unemployment rate
high value-added industries across  Social instability
Government
officials
the country
 It could bring an increase in GDP
 The country would be able to
outsource its low-skilled jobs to
developing countries
27
Class work
Does economic globalization bring more positive effects or negative
effects to the people and the countries?
Suggested answers:
Economic globalization may have different effects on different stakeholders. Some of them may
benefit more while some of them may suffer. As a result, it is hard to decide whether economic
globalization brings more positive effects or negative effects. Meanwhile, we should not decide the
matter solely based on the benefits or loses made to a particular stakeholder. What we can make sure,
however, is that economic globalization brings an increase in total goods and services produced in
the world, though there maybe an uneven distribution of benefits. Therefore, the thing deserves more
consideration is how to achieve a more even distribution of benefits among the stakeholders through
negotiations and cooperation.
Positive effects of economic globalization:
Economic globalization brings more job opportunities and improve the life of people in the
developing countries. It also brings technologies and capital to developing countries to help them
shake off poverty in the long run. From the perspective of developed countries, economic
globalization helps companies outsource the production processes to lower their production costs,
while consumers can buy what they need at a lower price. Outsourcing low-skilled production
processes helps developed countries to have economic transformation and to develop their high
value-added industries.
Negative effects of economic globalization:
While economic globalization brings job opportunities to developing countries, workers are usually
facing exploitation as manufacturers seek to curb their production costs. As a result, their pay and
working conditions are usually far from satisfactory. For the people in developed countries, even if
they can gain access to products at lower prices, their jobs may be taken away by people from the
developing countries. The operating costs of SMEs in many developed countries are far higher than
that in developing countries. As a result, many of them shut down simply because they are less
competitive. Thus, the developed countries may have to deal with the problem of serious
unemployment.
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Effects of economic globalization
Economic globalization brings positive and negative effects to both producers and consumers. We
can study the effects of economic globalization from the economic perspective in evaluating the
positive and negative effects of economic globalization. On the other hand, economic globalization
not only brings effects to individuals, but also brings positive and negative effects to the countries.
Positive effects
Through economic globalization, companies in the developed countries can engage certain
developing countries as the manufacturers of their goods for lowering their production costs and
having greater profits. Meanwhile, there would be business opportunities for the developing
countries. Consumers can buy products at a lower price and choose from a variety of goods around
the world. Developed and developing countries may cooperate and attain economic transformation
easier. There will be transfer of production technologies, greater flow of capital mobility and higher
GDP for accelerating economic development and lower unemployment rate, which bring positive
effects to the development of the developing countries.
Negative effects
International division of labour comes from economic globalization, workers who are less
competitive may find their wages lowered or benefits and protections deprived in such international
division of labour. International division of labour leads to competitions among countries, and lower
production cost is the selling point that attracts foreign investors. As a result, working conditions in
developing countries may be worsened. On the other hand, international division of labour means
that some jobs from the developed countries are taken by the developing countries. As a result, there
is a rise in the unemployment rates of developed countries. For consumers, products at low prices
flow across countries and compete with local products, and may even squeeze the local products out
of the market. As a result, consumers can only choose imported goods and their interests are affected
in that sense.
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Students can read the following
Worksheet 3: International organizations
contributing to economic globalization
news to understand the work of
the international organizations
contributing
to
economic
globalization.
The following news articles are related to international organizations. Read the following news
carefully and answer the questions below.
: International Monetary Fund
The International Monetary Fund (IMF) had announced that Cyprus, a country in Europe, had made
a formal request for financial assistance from the IMF.
The Cyprus Government had decided to apply for financial assistance from
the European Union to help it to deal with the country’s banking crisis.
Christine Lagarde, Managing Director of IMF, announced on the same day
that IMF stands ready to help Cyprus to attain stable and sustainable
economic growth and to restore its financial sector.
Source: Integrated report, June 2012.
: World Bank
The World Bank has recently officially launched its education project in Yunnan, China. The World
Bank would provide a loan of over 300 million dollars to support nine vocational training schools in
Yunnan in enhancing the quality of education and economic development.
Jim Yong Kim, president of the World Bank, stated that the World Bank will
continue to help developing countries such as China to fight poverty and
will provide developing countries with various kinds of support such as
personal training, financial management and funding.
Source: Integrated report, June 2012.
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: Organisation for Economic Co-operation
and Development (OECD)
According to the report recently released by OECD, the number of people in the US receiving higher
education as a percentage to the total population did not increase for the past 30 years. It was
reported that among the members, there were 22 economies which have higher percentages of
technological and engineering graduates than that of the US. OECD warned that it reflects a gradual
vanishment of the advantages of the US in its innovative industries, which will cause negative effects
to the long-term economic development of the US. The report further states that the gap between the
rich and the poor has been widening and has caused impacts to the improvement of quality of life of
the US people.
In that regard, OECD suggests that the US should strengthen the training of engineering and
technological talents to restore its status as a leader in innovative industries by training of top talents.
OECD had published a number of reports in relation to the developments of different countries as
part of its efforts in enhancing competitiveness of the countries and improving the quality of life of
their people.
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1.
Match the objectives and work of the following international organizations.
International
organizations
Organisation for 
Economic
Co-operation
and
Development
(OECD)
Objectives and work
‧
 A‧ specialized agency of the United Nations which is
responsible for stabilizing exchange rates and
promoting international cooperation on monetary
issues. It also grants various kinds of loans to
countries in trouble or potential difficulties, helps
members stabilize their monetary position, improving
international income and expenditure and supervises
members which apply for loans in launching fiscal and
financial reforms to solve their structural economic
problems.
World Bank

‧
 An
‧ organization with the mission of supporting
countries in reducing poverty and achieving
sustainable development. It comprises two institutions
managed by some 180 member countries: the
International
Bank
for
Reconstruction
and
Development (IBRD) and the International
Development Association (IDA). The IBRD aims to
reduce poverty in middle-income and creditworthy
poorer countries, while IDA focuses exclusively on
the world’s poorest countries.
It provides low-interest loans, interest-free credits and
grants to developing countries. These support a wide
array of investments in such areas as education, health
and infrastructure. It also offers support to developing
countries through policy advice, research and analysis,
and technical assistance.
International
Monetary Fund

‧
 It‧ is an inter-governmental international economic
organization formed by 34 countries of market
economy. It provides a forum in which governments
can work together to share experiences and seek
solutions to common problems.
It also looks at issues that directly affect the lives of
ordinary people, e.g. how much they pay in taxes and
social security, and how much leisure time they can
take. Furthermore, it recommends policies designed to
make the lives of ordinary people better.
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2.
Summarize the information above. What are the things these international organizations had
done in promoting economic globalization?
Suggested answer:
1)
Establish trade agreements, resolve trade disputes, review trade policies.
2)
Provide loans and technical support to the developing countries.
3)
Promote international cooperation on trade and financial matters.
Contributions of international organizations (OECD, the World Bank and IMF)
to economic globalization and their work
Countries around the world had established a number of international organizations to provide
essential platforms for joint efforts in achieving international trades and economic development,
fostering trade agreements across the borders and dealing with international economic issues. The
well known organizations among them are OECD, the World Bank and IMF.
OECD
Founded in 1961, OECD aims at enhancing the economic and social living
conditions of the people all over the world. Through a series of studies, OECD
works with governments from all parts of the world to see what can be done in
driving positive economic, social and environmental changes. OECD analyzes,
measures and applies various statistics for economic development in the aspects
such as trade, investment and productivity to set international standards for
different countries’ reference.
The World Bank
Founded in 1944, the World Bank aims at improving living conditions of the needy
countries. Through providing financial assistance such as low interest loans and
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borrowings, the World Bank offers financial support to poor countries in the aspects
of education, medical services, infrastructure and agriculture, helps these countries
in the transfer of technologies and knowledge and helps them in their economic
development.
IMF
Founded in 1945, IMF aims at helping people from all parts of the world to solve
their economic problems and offer support to the developing countries by giving
economic policy advice. IMF supports all financial policies that maintain the
stability of exchange rates and open financial policies. It helps the countries to
maintain sustainable and stable development in their international financial systems.
It also helps countries with difficulties in development and helps them improve
their conditions such as economic development, unemployment rate and income.
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Concept map of International interdependence
World Bank
OECD
End of cold
war, opening
up of markets
Internet promotes trades
at any time and any
place
International politics
Technological
development
IMF
International organizations
contributing to economic
globalization
Factors contributing to economic globalization
Huge transaction volume
of goods and services
Labour mobility across
countries
Economic globalization
Rapid flow of capital,
information and
technology
Effects of economic globalization
經濟全球化的影響
Positive effects
Producers
Negative effects
Relocation of production lines to regions The number of jobs in developed
where production cost is lower for greater countries
profits;
more
jobs
for
reduced
and
wages
to
developing low-skilled workers lowered
countries and higher wages to workers
Consumers
Products at lower prices
Fewer choices of products (particularly
local products that are less competitive)
Countries
Promote economic development
Number of jobs reduced; facing global
competitions
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