Defining Globalization Economic globalization is a “set of processes leading to the integration of economic activity in factor, intermediate, and final goods and services markets across geographical boundaries and the increased salience of cross-border value chains in international economic flows.” Source: Introduction to Aseem Prakash and Jeffrey Hart, eds., Globalization and Governance (Routledge:1999)
Value Chain Concept invented by Michael Porter A value chain is more comprehensive than a supply chain because it extends backward to R&D and innovation and forward to commercialization Michael Porter Harvard Business School
The Role of ICTs in Globalization Reduced time, cost, and effort to coordinate activities across great distances Similar to the impact of the introduction of new transportation and communications infrastructures in the past (telegraph, railroads, ocean shipping) BUT also continuing relevance of international regimes (e.g. WTO, World Bank, IMF, global monetary system)
Estimated users at theend of 2011 = 2.2 billion
Broadband Penetration, June 2011
Other Ways of Thinking aboutGlobalization Deterritorialization, e.g. of diasporic communities MNCs Cultural Convergence leading toward a universal “sameness” Globalization as a Myth or Fad See, for example, Arjun Appadurai, Modernity at Large.
Appadurai’s Cultural Landscapes Ethnoscapes Mediascapes Technoscapes Finanscapes Ideoscapes “The suffix scape also allows us to point to the fluid, irregular shapes of these landscapes, shapes which characterize international capital as deeply as they do international clothing styles.”
Diasporic Communities any people or ethnic population forced or induced to leave their traditional homelands, the dispersal of such people, and the ensuing developments in their culture examples: Jews, Cubans, Chinese, Pakistanis, Indians, etc.
Examples of Globalized Culture Corporate logos Who Wants to be a Millionaire MTV World Music, e.g. Reggae or Ska Anime, Manga, Pokemon (J-pop) Disneyland, Disneyworld theme parks Action movies with little dialogue
Will Territorial Based SystemsBecome Obsolete? No (short answer) Territorial-based systems may become less important relative to others but it is more likely that more complex relationships among governance systems at different levels of aggregation -- local, national, regional, etc. -- and nonterritorial governance systems will have to be established.
Coping Strategies: NationalGovernments Many coping strategies are still possible. Downsizing the state is not always desirable (e.g. the case of the formerly centrally planned economies). National governments are likely to play a role in reducing inequalities accentuated by globalization.
Theoretical approaches: Neoclassical (industrial policy is bad and counterproductive) Regulatory State (regulation necessary for markets to work properly, but industrial policy is still bad) Developmental State (industrial policy is useful for catching up) Competition State (industrial policy has to take globalization into account)
The Developmental State vs. the RegulatoryState Developmental RegulatoryType of Elite, Insulated Transparent,Bureaucracy AccountableSupport for New Extensive LimitedIndustriesUse of State- Extensive LimitedControlled BanksStance w/regard Tutellary Regulatoryto Private Firms
Industrial Policies Includes a wide variety of policy instruments that are intended to advance the international competitiveness of “national champion” firms, such as: Investment subsidies Public R&D expenditures Science parks and free trade zones Export incentives
The Impact of Globalization onNational Economic Strategies Greater volatility in global financial markets requires changes in financial market regulations in all countries To remain internationally competitive, firms have adopted global production strategies Even regulatory states have to compete for inflows of foreign direct investment Developmental states cannot succeed with pure national champion strategies
Examples of Coping Strategies Promotion of inward FDI Raising the skills of the workers via education and training programs Scholarships and fellowships for college Increased spending on research and development (R&D) Regional development efforts
Example of GM in China 2010 sales of 2.3 million vehicles in China World-class production facilities (joint venture with SAIC) Modified Buick as a chauffeur-driven luxury car Not competing with low-end national champions like Geely
Example of LG LCD Production Joint venture with Philips Only major competitors globally are Samsung and Sharp Production facilities use best materials and tools from global suppliers (e.g. Corning and Canon) Have to worry about China