International Finance Bugaychuk Ann 26/03/2019 ACTIVITY 3. GLOBALIZATION AT HISTORIC CROSSROADS: DEGLOBALIZATION OR REGLOBALIZATION 1. What are the main challenges of globalization? To strengthen the major global institutions (f.e. the WTO, the IMF), which were created after the 2nd World War and surely supported the current wave of globalization. To achieve better distribution of the overall benefits. Loss of cultural identity While globalization has made foreign cultures easier to access, it has also begun to meld cultures together. The success of certain cultures throughout the world have caused other countries to emulate these lifestyles and culture. When cultures begin to lose their distinctive features, we lose our global diversity. 2. What are the benefits of globalization on economic growth? Cultural exchange of ideas and values (refers to the benefits generated by the fact that knowledge gained in one country can be used in other countries) The “scale effect” (derived from the larger market which is instinct to a more globalized world) The growth of multi-national companies (increased communication and improved transport, effectively reducing barriers between countries). 3. Who are the losers of globalization in advanced countries? Surely, globalization is able to improve countries’ well-being through productivity, lower prices and greater variety in the products that are available. However, it generates significant adjustment costs for those workers who suffer the most from the direct competition. When the company faces the possibility to relocate a part of their production to emerging countries, with much lower labor costs, the certain group of workers suffer. The ones who suffer are generally low-skilled workers. So, this situation can result in reduction in the demand for local workers and, of course, their salary. 4. Please enumerate how these changes in trade agreements will affect international trade and globalization. The shock of this kind would come in the form of a reduction in trade flows, disruption to global supply chains and higher prices of imported goods. It is the direct impact. The indirect impact would materialize in the deterioration of business and consumer confidence and in the tightening of financial conditions. 5. What are the challenges of financial globalization? Financial globalization increases the risks of international financial operations, considerably amplifies the impact of local financial crises. For example, crisis of state finance or stock exchange collapse, that happens in borders of one country, in conditions of a single global financial system may spread to whole regions, and, and can lead to world financial shocks. In other words, financial problems, pressures and mistakes of one country may easily spread outside of its borders and could lead to negative consequences globally. Globalization is intensifying inequality between countries, and perhaps even worsening welfare of the poor by eroding their incomes, increasing their vulnerability, and adding to their disempowerment.