Macro economics – Globalization

Globalization & Discontent


Prepared By: Manohar M. M. Iyer
VAS2010XMBA15P005

Introduction

• Globalization
– Extending or reaching to other parts of the world
– to tap Resources & Market available there
– and fulfill the socio-economic Need or Greed
– of the home country or region or company.

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Content or discontent?

• Does the globalization activities
– strictly adhere to ethical principles?
– Provide welfare to all the stake holders involved?

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Is it Positive?

• Outsourcing lowers the production costs.
• Developing countries get employment.
• Access to the latest technology are shared.
• Quality of goods are world class.
• Improvement in human rights as any
violations draws the attention of world media.

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Isn’t it Negative?

• Increased competition forces local companies
to lower prices.
• Developed countries loses employment.
• Investments made on technology loses value
far quickly as it becomes obsolete very fast.
• To provide world class products, companies
need to invest in APing of each other.
• Job security is an issue as cheap labor
dominates decisions.
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Unfortunate Facts

• Nike has been accused of using child labor in
the production of its soccer balls in Pakistan
where a typical person survives barely on $5
per day.
• Since 1960s United States began losing
automotive manufacturing jobs to Japan.
• Since fuel prices are driven by global markets,
the cost of living in one part of the world is
affected by price changes in another part of
world
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Facts from History

• We can even say vital events of world history like:
– European sailors discovering new lands
– exploring resources there
– Trading goods between the nations
– Settling in the discovered land
– Conquering the Land
– Favoring needs of people in home land
– Violating rights of people in the foreign land
– resulting wars of independence, rebellions and world wars
were some negative effects caused by globalization
though this word was not coined at that time.
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Recent Facts

• US president Obama who came to Mumbai yesterday
(06/11/2010) along with 200 CEOs from US. He was more

like a salesman than a statesman. Per him:
– “no reason why India cannot be our top trading partner”
– “Boeing is going to sell dozens of planes to India”
– “GE is going to sell hundreds of electric engines”
– “The deals are worth USD 10 billion and will create more
than 50,000 jobs in the US”
– “India is a market of the future where US was willing to step
up investments”
– “Ease of export rules, ending the technology denial regime
against Indian entities such as DRDO and ISRO”
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Ironies

• US president Obama has come to India to create more
than 50,000 jobs in the US using the purchasing
power of India i.e. transfer of Indian money to US.
• On 22/10/2010 US pledged to provide $2.29 billion to
Pakistan as a long term military aid i.e. transfer of US
money to Pakistan
• There are evidences to prove that Pakistan is using US
aid to enhance defence against India and to prove
that it is spreading terrorism in India

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Has Globalization actually brought Discontent?

Case Study follows………

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Victim of Globalization
Decline of once World’s super Power:
US

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Some reasons

• Insecurity: Competition with foreign workers,
resulting in decrease in wages and general standard
of living.
• Fiscal crisis of the state: Less dependency on one
nation, resulting in a shrinking tax base - Govt.
expenses to outrace revenues.
• Double standards: TNC’s got basically everything
they wanted: the collapse of communism, free trade
agreements, deregulation, lower taxes, the
weakening of trade unions and the pushing down of
wage rates and deregulation.
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Insecurity: Examples

• General Motors
– has laid off 70,000 workers since 1993
– General Motors now ranks as the wealthiest U.S. corporation, with
$168 billion in revenues in 1995 alone
– Equal to the annual wages of more than 19 million Americans earning
the minimum wage.
• The Times pointed out :
– "between 1991 and 1995, nearly 2.5 million Americans had lost their
jobs because of corporate restructuring“
– “the top pay for corporate executives has soared to nearly 200 times
that of the average worker.”
– “stock prices keep rising on Wall Street while Main Street is littered
with the bodies of workers ”
• Between 1983 and 1993 banks in the U.S. replaced 179,000 human tellers
with automated teller machines Prepared By: Manohar M. M. Iyer
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Fiscal crisis

• Unemployment hits the income tax revenue of the Govt. At the
same time the demand for unemployment insurance and food
stamps increases.
• Federal govt. debt stood at $4.9 trillion in early 1996.
• The interest US paid to the owners of that debt is $232 billion in a
single year.
• The corporate share of the tax load was cut.
• In the early 1950s, corporations paid 76 cents in taxes for every one
dollar paid by families and individuals
• By 1992 corporations were paying just 21 cents for every one dollar
in taxes paid by families and individuals
• Tax load was pushed onto the workers. However some of it was
financed through deficit spending: issuing government bonds to
borrow from the capital markets.
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Casino Economy

• Shift from productive investment to
speculative investment.
• Annual value of Global merchandise trade is
about $4 trillion.
• The global derivatives market equals this
dollar volume of transactions in just two days!
• This has weakened the power of many
government to control national economies
and protect people's jobs.
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US: A third world country?

• The gap between high- and low-income families has widened
steadily since about 1980, hitting a new high every year since
1985.
• In 1992, average weekly earnings in the private, non-
agricultural part of the U.S. economy were 19 percent below
their peak in the early 1970s.
• Nearly one-fourth of the U.S. workforce now earns less in real
terms than the 1968 minimum wage it has a significant
portion of the population living in poverty
• Yet corporate profits and the salaries of top management
have soared. The average pay of Chief Executive Officers at
the 362 largest companies in the U.S. jumped 30 percent
during 1995 to an average of $3,746,392
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Thus we can see that
Globalization has generated
lots of Discontent among all
stakeholders involved due to
transformation of need into
Greed

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I thank one and all who have provided me the knowledge &
support to prepare this Presentation.

Please feel free to forward your valuable feedback, comments,
queries and suggestions related to this presentation at
mumbai_man1977@yahoo.com.

Thank you,

Warm regards,

Manohar M. M. Iyer

VAS2010XMBA15P005

Macro economics – Globalization

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