By Murat Ali DULUPÇU and Onur DEMİREL
Süleyman Demirel University
2/25
 Defining
Globalization
 Impacts
 The
Debate
 Theories of International Trade
 Regulating Globalization and
Internationalization
 Future: Qua Vadis?
3/25

Globalization
-conceptual origin-

3D Figure-geometric
Entirety-Total?
Homogeneity-similiar
The origins :

“Global Village” by Marshall McLuhan in 1960-main starting point

“Corporate Giants” by Charles Taze Russell in 1897-the earliest

“Globalization” by Ronald Robertson
Definition:
“Fast and continuous inter-border flow of goods,
services, capital (or money), technology, ideas,
information, cultures and nations.”
 Covers so many concepts

4/25

Milestones:






Globalization since Neanderthal Human
The Silk Road
The Golden Age of Islam
Pax Romana/ Pax Ottoman then towards Pax Britannica
Two significant World Wars and competition between the
United States of America (USA) and the Union of Soviet
Socialist Republics (USSR)/Blocs/Perestroika-Glasnost
Stages of Globalization:

Colonization, slave trade, church constructions abroad,
inventions in the high-capacity transportation,
industrialization, high constructions among provinces and
countries, electrical and electronic infrastructure.
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Stages
First Stage
1490
(overseas discoveries)
Second Stage
1890
(West extension)
Industrialization
requirements
and
Third Stage
1990
(economism)
Multi-National Companies in 1970s,
its Communication Reform in 1980s,
Disappearance of Competitors of the
West in 1990s
Impulse
Nautical developments
Process
Evangelists,
then
Profit
and
then
Cultural-Ideological effect, therefore
explorers, then companies
military occupation
countrywide spontaneous effect
and finally occupation
Medium
Highest
level
of
civilization,
Burden of the white man, governance
of
international
To get the God’s
humane mission, racialist community, “invisible hand” of the
religion to the pagans
theories
market, globalization: for everyone’s
interest
Political
Structure
Empires
Colonization
Result
Colonialism
Source: Yaman 2001.
and
Nation States
Regional and Economic Integrations
Imperialism
Globalization
A commonly accepted division of the globalization process
World trade volume of $380 billion in 1950 has
increased to $21.2 trillion in 2005.
 Catalysts of the increase:









Decrease in tariffs
Trade agreements signed among countries and regions
Regional integrations
Developments in and cheapening in communication
and transportation technologies
The mass and just-in-time production
The standardization of tradable goods
Convergence of human needs
The creation of new needs for humankind (“New
World Order”)
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 Multinational
Companies (MNCs) ate the
companies that make FDI and produce value
added in more than one country and own the
process.
 Theories


of MNCs:
Location Theory (focus on resources)
Internationalization Theory (Instead of various
companies only one-company-production is
advantageous. Focus on technology transfer and
vertical integration)
7/25

Product Life Cycle Theory
By Vernon, 1966, Where to produce? Developed vs. developing
economies, focus on standardization and production cost

Internalization Theory
By Buckley and Casson, 1976, How to produce? By licensing or leasing vs.
FDI, focus on transportation costs, trade barriers, foreign market
information, information asymmetries

OLI (Eclectic) Paradigm
Ownership (Focus on patent, trade secrets, trademarks, economies of
scale and synergy, diffusion of geographical risk, cross-country
arbitrage)
Location (Production efficiency, transportation cost, chep labor,
proximity to customers, local image, trade applications)
Internalization (Imperfect competition)

Other Theories
Caves Economies (Focus on firm advantages)
 Oligopolistic Reaction Theory (By Knickerbocker, Follow-the-leader)
 Hymer and Kindleberger’s Theory (Focus on intermediate good
transfers of MNCs)

8/25
One day Traffic in 2003:
Total international telephone calls
1971
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Total air travel
1975
1984
Total cellular phones
1992
Total e-mails
1998
Total SMSs
Source: World Bank and Istanbul Technical University
COST
REDUCTIONS



Transportation costs  50%
Airline transportation  80%
Transatlantic Phone Calls  99%
 Debate
on the future of nation-states
 Structures such as European Union
R&D as a % of GDP increases
 Severe relationship among R&D, invention and
transformation of technology

1700 - 1900
Economics
Agriculture
Technology
Plow
Output
Food
Resource
Land
Unit
Family
Energy
Muscle
Competition
Local
Education:
Primitive
*Demand
Minimal
*Focus
"What?"
1900 - 2000
Manufacture
Machine
Good
Capital
Company
Fossil Fuels
National
Procedures
Remarkable
"How?"
2000 - …
Information
Computer
Information
Knowledge
Network
Brain
Global
Thought
Continuity
"Why?"
10/25
 Cultural
Integration  McDonaldization
vs.
 Effect of Local Cultures  Impossibility of a
single global culture


Creation of goods and services that are customized to
supply global markets but consistent with local values
(Hamburgers with local spices, meat, so on)
Globalization of the local and localization of the
global simultaneously
11/25
Information Technologies and Technology Flows
 Scientific invention and innovation
 Diffusion of pre-existing technologies
 Benefiting new technologies
 Labor Hyper-Mobility and Global Distribution of
Labor

# of Immigrants (Million
People)
The Ratio of Immigrants to the Population of the
Region
Europe
64.1
8.8
Asia
53.3
1.4
North America
44.5
13.5
Africa
17.1
1.9
Latin America
6.7
1.2
Oceania
5.0
15.2
Source: [Available at http://www.iom.int/jahia/Jahia/pid/255], (Accessed 10.02.2008).
12/25

Economic Issues

Income, Income Distribution and Poverty:





Huge income distribution inequality among people and
countries
Different income growth rates
Deterioration in the world income distribution
Reduction in absolute poverty
Capital, Finance, FDI and MNCs:
FDI INFLOWS
Source: UNCTAD, 2007, p. 3.
13/25
Production and
Competitiveness:
 Globalization of Knowledge:


Environmental Issues
International effects of
environmental problems, Limited
natural resources, Lack of global
management of environment

GLOBAL COMPETITIVENESS INDICES
2005
2006
Germany
6
8
20072008
5
Czech Republic
29
29
33
Lithuania
34
40
38
Turkey
71
59
53
Singapore
5
5
7
Korea
19
24
11
China
48
54
34
Rank of Country
Source: WEF, 2007 and 2006.
Social Issues
Huge differences in;
Level of education, infrastructure, gender discrimination, life
expectancy at birth, infant mortality, health expenditure per
capita
14/25
 Advocates

World Economic Forum




of Globalization: Neo-Liberal View
Established in Sweden, 1971.
Members  1000 largest firms & 200 relatively small
firms from developing countries
Its motto  “Entrepreneurship in the global public
interest”
The Washington Consensus



Initiated by John Williamson in 1989
Has 10 special economic policy recommendations for
the countries that experience economic crises.
These recommendations are taught to be “standart”
reform package and criticized.
15/25

Opponents of Globalization: Anti-Globalist Movement

World Social Forum



International Forum on Globalization




Established in 1998, Geneva
Anti-capitalist
CorpWatch



Established in 1994
Criticizes the lack of “free trade” and “neo-liberalism”
criticism.
People’s Global Action


Members  Open to everyone
Its motto  “Another world is possible”
Established in 1996 and took this name in 2001
Drew attention with the analyses of poor working conditions
Friends of the Earth


Established in 1971
Deals with environmental issues
16/25

Smith and Ricardo: Classical View
Adam Smith, 1776 and David Ricardo, 1817
 Very restrictive assumptions
 First “win-lose” then “win-win”
 Absolute advantage then comparative advantage


Neo-Classical Theories of Trade
Opportunity-cost instead of labor theory of value
 Transformation curves, demand conditions
 Heckscher-Ohlin Theory (Factor Endowment Theory)




Factor Price Equalization
Income Distribution
Rybczynski Theory
17/25

Alternatives

Skilled-Labor Theory


Technology-Gap Theory






By Linder in 1961
Focus on the similarity of tastes and preferences-demand
Theory of Economies of Scale
Monopolistic Competition Theory


By Posner in 1961
Initial version of Product Life Cycle Theory
Product life Cycle Theory
Preference Similarity Theory


Focus on the differences in skilled-labor among countries
Focus on differentiated products
New Trade Theories

Internalizes the concepts of scale, network, innovation
and global competition
18/25

International Monetary Fund – IMF
Established in 1944
 Has 185 member states
 Promotes international monetary cooperation, exchange stability and
orderly exchange arrangements; fosters economic growth and high
level of employment; provides temporary financial assistance to
countries to help balance of payments adjustment
 Control and regulation process involves





Surveillance
Financial Assistance
Technical Assistance
World Bank – WB
Established in 1944
 Has 185 member states
 Worldwide poverty alleviation
 Made up of 2 unique development institutions



International Bank for Reconstruction and Development (IBRD)
International Development Association (IDA)
19/25

Organization for Economic Co-Operation and
Development – OECD




World Trade Organization – WTO




Formed as OEEC in 1947
Named as OECD in 1961
Has 30 member states
Has 151 members
GATT is the principle rule book for trade in goods
Promotes freer trade
United Nations – UN



Roots go back to 1865, International
Telecommunication Union
Has 192 member states.
Deals with the problems challenging humanity
20/25

European Union – EU




Established in 1951 as the European Coal and Steel Community
by six founding members
Today has 27 member countries
Acts in a wide range of policy areas – economic, social,
regulatory and financial
Asia-Pasific Economic Co-Operation – APEC
Established in 1989
 Has 21 members
 Works in 3 broad areas to meet the Bogor Goals:





Trade and investment liberalization
Business facilitation
Economic and technical cooperation
North Atlantic Free Trade Agreement – NAFTA
Came into effect on Januart 1st, 1994
 Members are Canada, Mexico and the USA
 Freer trade and the protection of intellectual property rights

21/25
 European



Established in 1960
Updated in 2001
EEA has 27 EU members and entered into force in
1994
 ASEAN


Free Trade Agreement – AFTA
Established in 1967 in Bangkok
Has 5 members
 Central
CEFTA


Free Trade Agreement – EFTA
European Free Trade Agreement –
Signed in 1992 and entered into force in 1994
Has 8 members
22/25
Both capitalism and communism lack absolute
success!
 But globalization is not a magic cure for the
problems of humanity either!
 World still has growth potential, mainly due to
developing countries
 The growth in developing countries depletes
natural resources and therefore future growth
potential
 The high growth rates in developing countries
decreases poverty
 However, imbalances still prevail!
 Divergences in incomes produce polarization and
therefore threat!

23/25
 Polarization
causes migration to be the only
salvation in developing countries
 Will
the world continue to rotate from west
to east or will it reverse?
 The
future of globalization and the world
depends on the process itself and how it is
managed.
24/25
25/25