ECONOMICS TOPIC 10 LESSON 7

ECONOMICS TOPIC 10 LESSON 7

Globalization

ESSENTIAL QUESTION

How might scarcity divide our world or bring it together?

Transportation and Communication

Today’s communications revolution has also sped up the pace of globalization. Thanks to satellite communications, customers and suppliers on opposite sides of the world can talk quickly and clearly. Computers give people greater access to information about the availability and prices of products in distant countries.

Expansion of the Free Market

many nations have moved away from central planning. Even some communist governments have chosen to pursue free market policies. As a result, the proportion of the world that practices free market economics has more than tripled.

Open Ended

Latvia, once part of the Soviet Union, now practices free market economics. Analyze Graphs What does this graph indicate about the health of Latvia’s economy? Explain.

Trade Agreements

The United States is the world’s most productive single economy, with output far exceeding that of any single nation in Europe. However, the combined output of the 28 nations that make up the European Union (EU) is competitive with that of the United States. The democratically elected governments of the EU recognize the benefits of free enterprise and of trading blocs. 

Multiple Choice

Apply Concepts Which of the following words BEST characterizes the economies that take part in globalization?

• developed

• prosperous

• innovative

• interconnected

Closely Linked Financial Markets

Why do financial problems in one country affect people in another? The reason is that world financial markets are closely connected. Computerization has allowed investors around the world to watch the values of stocks in many different markets.

Multinational Corporations

the expansion of multinational corporations has sparked controversy. Some economists argue that these companies have a beneficial impact on the countries in which they set up operations.

Multinational Corporations

Critics, however, claim that multinationals do little to aid less developed countries. Some point out that most of the profits go not to the host LDC, but to the foreign owners of the corporation. Others say that multinationals create far fewer job opportunities than they claim. Many of the industries are highly mechanized, allowing high productivity with little labor.

Loss of Jobs

In the global economy, companies may move parts of their operations to other countries. This practice is known s offshoring. Offshoring may involve a single process, as when an American bank hires a call center in India or Kenya to handle its telemarketing. Or it can be total, as when a multinational manufacturer closes a plant in the United States to build one in another country, where labor is cheaper. In either case, the result is job loss. 

Multiple Choice

Support Ideas with Examples Which of the following describes offshoring?

• A multinational sets up restaurant franchises around the world.

• A multinational constructs a fertilizer plant in Brazil.

• A multinational buys spices from Grenada for its packaged rice dishes.

• A multinational transfers its tech support from the U.S. to a company in India.

Domestic Migration

Much of this migration takes place domestically, within a nation’s borders. In many less developed countries, cities offer more job opportunities than rural areas. As a result, large numbers of people in villages are streaming into cities. By 2012, more than 40 percent of the people in Africa and Asia lived in cities. Today, 22 of the world’s 30 largest cities are located in less developed countries. 

International Migration

Each year, millions of workers leave less developed countries in the hopes of finding jobs in developed nations. This international migration has an economic impact on both the source country and the destination country.

International Migration

Migration also affects the source country. Once they find work, many immigrants send regular cash payments to their families back home. These remittances provide an important source of income. The World Bank estimated that, in 2013 alone, the value of remittances to LDCs totaled $410 billion.

Open Ended

Analyze Charts Look at the remittances to Nigeria and Egypt. Which country’s economy is likely to benefit more, given that Nigeria has more than twice the population of Egypt?

International Migration

At the same time, many well-trained and educated people also leave LDCs for well-paying jobs in developed nations. This “brain drain” may hurt development by siphoning off vital human capital

Multiple Choice

Distinguish What is the MAIN reason people are moving from rural to urban areas?

• desire to join relatives

• lack of agricultural skills

• opportunities for jobs

• opportunities for education

A Greater Voice for the Developing World

Leaders in less developed countries argue that international trade and financial policies favor the wealthier nations. In an effort to give emerging economies a greater voice, 19 countries plus the European Union have formed an organization called the Group of 20, or G20.

Environment Versus Development

Environmental scientists—mostly based in developed nations—worry that rapid development can cause environmental damage. They seek to promote sustainable development, that is, the goal of meeting current development needs without using up the resources needed by future generations.

Environment Versus Development

On the other hand, government leaders in many less developed nations see an urgent need to exploit their resources now. They view combating poverty and creating modern economies as a higher priority than protecting the environment.

Environment Versus Development

One major issue is deforestation, or large-scale destruction of forests. Many developing nations are cutting down forests at a rapid rate. Cleared land is used for farming and industry, while timber sales fund other projects that create jobs

Competition for Resources

A related challenge is competition for scarce resources. In some regions, it is increasingly difficult to find enough clean water to meet the needs of a growing population

Different Perspectives on Resources

There are two types of natural resources. Renewable resources are resources that replenish themselves naturally over the course of years or decades. crops. Nonrenewable resources are resources that have a finite supply and that cannot be replaced or take millions of years to replace.

Multiple Choice

Support a Point of View With Evidence Why are some less developed countries unenthusiastic about protecting the environment?

• Protecting the environment is exclusively a goal of developed nations.

• The cost of protecting the environment reduces funds available for development. .

• The policies of the World Trade Organization and the International Monetary Fund are burdensome.

• The issues of deforestation and global warming will never affect these LDCs

A Changing Workplace

Manufacturing is still important, but information now drives the economy of the United States and the world. Workers need to gain the technical skills that are necessary to access, understand, and use all sorts of information. Education is more important than ever.

A Changing Workplace

Another feature of the changing American workplace is greater diversity. Generations of African Americans, Asian Americans, and Latinos have made major contributions to the culture and the economy of the nation. As a result of immigration, a growing percentage of American workers are foreign-born.

The Pressure to Compete

Globalization has made economic competition more intense. Consumers in developing nations are demanding a greater variety of products and services. More countries are competing to meet this growing demand.

The Pressure to Compete

Competition affects business relationships as well. One firm might have a long relationship with a local supplier. Yet, if a different supplier can offer lower prices or better service, the firm will make a deal with that supplier—even when that supplier is located on the other side of the world.

The Need to Innovate

The companies that develop new products or processes can quickly gain a large share of the world market. 

Multiple Choice

Apply Concepts Which of the following is a KEY factor that allows companies to continue to succeed in the competitive global economy?

• manufacturing

• migration

• diversity

• innovation

Open Ended

How might scarcity divide our world or bring it together?