Globalization has led to an increasingly interconnected global economy and community through factors like the end of the Cold War, spread of democracy and technology like the internet. This document discusses how the location of economic activities depends on available natural, human, capital and entrepreneurship resources, and how trade has developed globally over time as specialization according to comparative advantages has increased. Both benefits and costs of globalization are noted, such as increased standards of living but also loss of local jobs and cultural uniqueness.

1. CHALLENGES OF
GLOBALIZATION • Globalization – the
creation of a single global
economy & community.
– What has led to this?
– End of Cold War
– Spread of Democracy
– Creation of the Internet
– Outsourcing – process where a
company hires other
companies to perform some
work;
– Offshoring – practice of
moving production overseas.

2. CHALLENGES OF
GLOBALIZATION
Economic activities require 4
types of resources:
1. Natural Resources –
from nature; used to create
goods/services (air, water,
plants, minerals used for i.e.
cotton, lumber, iron ore,
water, etc.).

3. CHALLENGES OF
GLOBALIZATION
2. Human Resources –
human labor required to
produce something
(planning, studying, training
& work required to produce
a good/service).

4. CHALLENGES OF
GLOBALIZATION
– 3. Capital Resources – goods
made to make other goods &
services (not goods made to
consume). (Machines, tools;
i.e. a hammer is a capital good
used to build something;
Infrastructure (technology,
transportation routes,
communications, networks)
are also capital resources.

5. CHALLENGES OF
GLOBALIZATION
– 4. Entrepreneurship
– people who bring
together & organize
all productive
resources (business
owners or
managers).

6. CHALLENGES OF
GLOBALIZATION
• Location of
Productive
Resources –
location of
economic activity
depends on where
resources are
found. Physical
geography can
determine where
resources are
located...

7. CHALLENGES OF
GLOBALIZATION
• Examples:
– Large amounts of coal are
needed to make steel. Western
Pennsylvania has a lot of coal, so
Pittsburgh became the U.S.
center for the steel industry.
– Saudi Arabia has a lot of oil
reserves found in the Persian
Gulf. Many oil companies are
located there.

8. CHALLENGES OF
GLOBALIZATION
• Management of Resources:
because resources are essential
to many economic activities,
management of them is
important.
– Countries might require licenses
or permits to extract resources;
might have strict regulations.
– i.e. – Water – necessary for
drinking, farms, factories, etc.
Special permits/licenses are
necessary to use large amounts;
penalties are put on polluters,
etc.

9. CHALLENGES OF
GLOBALIZATION
• Climate affects location of
economic activities:
influences types of crops
that can be grown in an
area;
– Example: sugar cane grew
well in Caribbean islands –
warm, lots of rain. Since
Sugarcane is bulky & heavy,
shipment was expensive;
refineries were built on
islands because it was
cheaper.

10. CHALLENGES OF
GLOBALIZATION
• Human Resources –where
humans & entrepreneurs
are located affects location
of economic activities.
– i.e. Japan – has few natural
resources, but a large
educated workforce is found
there. It is a center of
manufacturing – Sony,
Toyota, Honda – all located
in Japan.

11. CHALLENGES OF
GLOBALIZATION
• Infrastructure – important to
location of economic
activities; the investment a
society makes to roads,
railroad tracks, electric
power, telephone/Internet
lines, are important!
• Finished goods need to be
transported via
roads/railways; where there
is no electric power,
telephone, etc. won’t attract
manufacturing.

12. CHALLENGES OF
GLOBALIZATION
• Access to Consumers:
location of consumers
influences economic
activity; more activities are
found in populated areas;
– Physical barriers (mountains,
forests, deserts) make it
difficult to reach consumers.
– Flatlands & valleys bring
resources & people together.
– Note: changes in technology
or infrastructure can
eliminate barriers.

13. CHALLENGES OF
GLOBALIZATION
• Changes in Geography
affect location of
economic activities:
– 1. Changes in Climate –
– Sahel – was used for herding but
less water & grass over time
results in people migrating south.
– Warming of Earth – causing
farming activities in N.
Hemisphere to move farther
north (by about 200 miles or so).

14. CHALLENGES OF
GLOBALIZATION
– 2. Changes in Resources –
Discovery of new resources
causes increase in activity;
when it runs out, towns can
be deserted.
California Ghost Town (After Gold Rush)

15. CHALLENGES OF
GLOBALIZATION
– 3. Changes in Infrastructure
- construction of canals,
railroads, paved roads,
makes it easier to access
resources, attracting new
activities.
– i.e. Erie Canal – made it possible
to ship farm products from
Midwest to NYC.
– i.e. Completion of Railroad –
linked E. & W. U.S. Texas
Cattlemen could drive cattle to
Kansas where they would be
shipped by railroad to consumers
in the East.

16. CHALLENGES OF
GLOBALIZATION
• TRADE – different areas
specialize in different
economic activities – this
leads to trade (exchange
of goods/services).
– Uneven Distribution of
Resources: different
climates, soils, landforms,
minerals create diverse
ecosystems with different
plants/animals.

17. CHALLENGES OF
GLOBALIZATION
– Petroleum – one of our most
important resources – key
source of energy & necessary
for products from fertilizers to
plastics.
Petroleum is made by
decaying microscopic
animals & plants in the
sea. Many countries
have almost no oil,
while others have an
abundance. See map.

18. CHALLENGES OF
GLOBALIZATION
– Human Resources – also
unevenly distributed! (i.e.
China has a lot of workers
willing to work for low wages
compared to more developed
countries. In developed
countries, strong educations
give much
experience/training for
entrepreneurs, high
technology, etc.)

19. CHALLENGES OF
GLOBALIZATION
• Specialization – uneven
distribution of resources,
natural & human, leads to
specialization – each region
making goods based on what
resources are available.
– Comparative Advantage –
producing goods & services
that can be made at the
lowest cost.

20. CHALLENGES OF
GLOBALIZATION
• Specialization encourages
trade: regions rarely
produce everything they
need; they exchange
through trade – exporting
& importing.
– Exports – goods/services
sold from one country to
others;
– Imports – goods from
foreign countries brought to
a country for use or sale.

21. CHALLENGES OF
GLOBALIZATION
• History of Global Trade
Patterns:
• 1. Ancient World – trade
was advanced even then.
– i.e. Ancient Egypt –
grain/mineral surplus – traded
these with Greece for wine &
olives;
– i.e. Roman Empire – exported
olive oil & wine to N. Africa for
wheat, China for silk &
porcelain, Egypt for cotton,
India for spices.

22. CHALLENGES OF
GLOBALIZATION
– 2. Middle Ages – After fall of
Roman Empire, trade was
disrupted; Europe
communities became mostly
self-sufficient; in other parts
of the world, trade thrived:
– Islamic World – Many ports in
Middle East were used for trade;
– West Africa – Timbuktu was a
center for gold/salt. Arab
merchants crossed Sahara.
– Americas – Maya traded salt,
cacao, pottery with Guatemala in
exchange for turquoise, jade.

23. CHALLENGES OF
GLOBALIZATION
– 3. Rise of Atlantic Trade –
As colonies were set up in
America & new trade routes
were established to China &
India around Africa,
Mediterranean trade grew
less important.
– Great Britain became leading
naval power in 1700s with
colonies all over the world,
dominating world trade.
–

24. CHALLENGES OF
GLOBALIZATION
– 4. Industry, Protectionism &
Empire: Development of
steamships, railroad &
factories all increased speed
& scale of trade.
– European powers – established
plantations & mines in their
colonies to obtain raw materials
to use in Europe’s factories. They
also established trading posts in
China while U.S. opened up trade
with Japan.
Some countries reacted to
influx of British goods by
enacting protective tariffs –
adding duties (taxes) to
imports, making British goods
more expensive.

25. CHALLENGES OF
GLOBALIZATION 5. Collapse of Trade
Barriers:
WTO (World Trade Organization)-
oversees trade agreements
around world (97% world
represented).
Free Trade Zones – i.e. NAFTA
(North American Free Trade
Association); EU (European
Union). Eliminates restrictions on
goods moving from one country
to another.

26. CHALLENGES OF
GLOBALIZATION
– 6. Offshoring & Outsourcing –
– Companies now move production to
countries where costs of labor, etc.
are lower. (Offshoring).
– Companies hire other companies
overseas to produce parts or provided
services to free up others to focus on
other issues. (Outsourcing)
• i.e. a computer assembled in U.S. might
have parts manufactured in China or
Mexico.
• i.e. when American customers call
customer service, they may speak to an
English-speaking representative from
another country.

27. CHALLENGES OF G
GLOBALIZATION
• Information technology like
Internet open up trade to
more customers.
• Containerized Cargo makes
shipping easier as well…
goods are packed onto large
truck-like containers &
loaded onto a ship, then
serve as backs of trucks
after being delivered, or as
railroad cars, without
repacking.

28. CHALLENGES OF
GLOBALIZATION
• COSTS/BENEFITS TO
GLOBALIZATION:
– Benefits:
– People enjoy goods/services from
all over the world
– Benefits of connectivity – ease of
communication via phone,
facebook, email, skype, etc.
– Advances in technology, medicine,
engineering, spread quickly.
– Advances in speed of economic
development – average standards
of living are higher than ever
before.

29. CHALLENGES OF
GLOBALIZATION
– Costs –
– Manufacturing has shifted away
from countries where labor is
more costly – cause workers in
developed countries lose their
jobs;
– Workers in newly industrialized
countries are forced to work long
hours under harsh conditions;
– Pollution & climate change have
increased;
– Pandemics (diseases spread
across globe) are spread more
quickly.

30. CHALLENGES OF
GLOBALIZATION
– Costs (Cont.)
– Some feel they have no
control over their local
economy – a financial crisis in
one country leads to others.
– Local communities & cultures
are losing their uniqueness –
Fast food & Pop music replace
local customs/traditions.
– Can cause violent reactions;
i.e. Islamic fundamentalists
express anger over
contemporary global culture
using terrorism.