Globalization involves increasing political, economic, cultural, and technological interconnections between countries and peoples around the world. It is driven by advances in communication, travel, and technology that have accelerated the flow of ideas, capital, and goods across borders. Key institutions that shape globalization include the IMF, World Bank, and WTO, which work to promote free trade, economic development, and monetary cooperation between nations. While globalization has increased prosperity in many places, it has also contributed to cultural homogenization and been criticized for exacerbating inequality and environmental damage.

1. Lecture 11
Trade, Interdependence, and
Globalization

2. Globalisation
Globalisation could
involve all these
things!

3. Globalization

4. What is
Globalization?
Global industrialism or
globalization is a process of
forging international political,
economic, religious, and socio-
cultural interconnections
KFC Kuwait
7-11 Beijing

5. Globalization Definition
•Variety of definitions, centering around the
world becoming “smaller” and more
interconnected in the areas of commerce,
culture, and politics
•Causes: technological advances in
communication, travel, and computational
power, expansion of trade

6. Thomas Friedman, “The Lexus and the Olive Tree”
• A globalist system has replaced the Cold War system
• The new system has unique rules, logic, pressures and incentives driven by
international capitalism
• Features integration: free flow of capital, goods, ideas more broadly, faster,
deeper than anytime in the past.
• The “Golden Straightjacket”: must abide by goals of free market principles,
efficiency. Rewarded if you do.
• New key players: The “Electronic Herd.”
• Globalization promotes cultural homogenization, the “Big Mac.”

7. Thomas Friedman’s
Definition of Globalization

8. Friedman: Globalization’s New Structure and
Balance of Power
• Traditional balance between states (countries), U.S. is
the paramount player
• Balance between states and global markets: states
can’t ignore the market any longer without costs
• Balance between individuals and states: people
influence governments through the market at home
and abroad (for good and evil).
• Globalization produces “super-empowered
individuals

9. Important Conclusions from Friedman’s Argument
1. Rewards. Those who participate in
globalization are rewarded, though there are
winners and losers.
2. Peace Dividend. Those engaged in
globalization have too much to lose with war.
3. Democratic Dividend. Free movement of
information with markets produces drive for
freedom and liberty—seeds of democracy.

10. History of Globalization
According to Thomas Friedman

11. The Stages of Globalization
(From Thomas Friedman in The World is Flat)
• Globalization 1.0 (from 1492 to 1800)
• Globalization 2.0 (from 1800 to 2000)
• Globalization 3.0 (from 2000 to the present)

12. Globalization 1.0
Christopher Columbus

13. Globalization 2.0 (first half)
Steam engine
Railroads

14. Globalization 2.0 (second half)
OpenMoko open source smart phone
Satellites
Apple Mac Pro
Fiber optics

15. Globalization 3.0
1.0
2.0
3.0

16. Globalization 3.0 (continued)
Schematic Map of the Internet

17. Aspects of Globalization

18. 5 ASPECTS OF GLOBALIZATION
1. ECONOMIC
2. TECHNOLOGICAL
3. CULTURAL
4. POLITICAL
5. MILITARY
THESE ASPECTS ARE ALL INTERCONNECTED!
*********************
After this lecture, can you give 1 example of each of the
above?

19. 1. Economic Globalization

20. 1. Economic Globalization
TODAY:
Economies Are Increasingly Linked Together
EXS: NAFTA (MX, CA, US), The EU, WTO (World Trade
Organization)
WTO
• Only global international organization dealing with the
rules of trade between nations
• Goal: help producers of goods and services, exporters,
and importers conduct their business

21. 1. ECONOMIC GLOBALIZATION
MULTI-NATIONAL
CORPORATIONS
• OLD: Dutch East India
Company?
• 1602 company of Dutch
merchants & independent
trading companies
• Spice trade monopoly in East
Asia
• Power to colonize territories &
enslave indigenous people
• Indonesia & South Africa

22. 1. ECONOMIC GLOBALIZATION
• NEW: Nike, Wal-Mart, Royal/Dutch Shell
• Top 100 multinationals are all US-owned companies!
• Royal/Dutch Shell: global group of energy and
petrochemical companies, operating in more than 140
countries and territories, employing more than
112,000 people

23. 2. Technological
Globalization

24. 2. TECHNOLOGICAL
GLOBALIZATION
• “World Wide Web” has exploded in last 10 years
• Computers can move money around world = “finance capital”
• Silicon Valley is 9th largest economy in world!
Africa
• Number of telephones is decreasing
• More computers in Manhattan than all of Africa!
• Post-colonial infrastructures don’t support technology

25. 3. Cultural Globalization

26. 3. CULTURAL GLOBALIZATION
• Cultural Imperialism = Dominance of one culture over others
• Hollywood movies, MacDonald’s, Disneyland, Starbucks
• Dominance of the English language and invasion of other languages
• Do people all over the world have the same taste?
Africa
• “Culture Industry” = opportunities for Africans to sell their culture in the
“global market” that values traditional culture

27. 3. CULTURAL GLOBALIZATION
McArabia Kofta

28. 4. Political Globalization

29. 4. POLITICAL GLOBALIZATION
The United Nations: Global assoc. of govts. facilitating
cooperation in international law, security, economic
development, and social equity
• Whose interests does the UN represent?
• The US and the UK were the only nations in support of
going to war in Iraq
• Can a global politics with social values exist?
• Alternative political gatherings: Annual World Social
Forums since 2001, The Piece Process @ Gav!

30. 4. POLITICAL GLOBALIZATION
South Africa
• In 2001, US pharmaceutical corporations sued South African
companies for infringing on AIDS medication patent laws
• In 2003, President George W. Bush announced the Emergency
Plan in 2003 - the largest international health initiative in history
by one nation to address a single disease
•HIV/AIDS Situation in 2004
HIV Infected: 5.3 million
AIDS Deaths: 370,000
AIDS Orphans: 1.1 million

31. 5. Military Globalization

32. 5. MILITARY GLOBALIZATION
Nuclear Bombs F/A-22 Raptor

33. 5. MILITARY GLOBALIZATION
• Global alliances become clear during war time
• Ex: Today’s US alliance with Britain in wars against
Afghanistan and Iraq
• What will happen with North Korea and nuclear weapons?
Africa
• “Trade in Arms” = US sold $227 million in arms to AF in
1990s
• US train and provide weapons for African armies on both
sides of their civil wars (ex. Mobutu civil war in Congo)
• US is the #1 exporter of weapons globally
• US is the last on the list of exporters of non-military aid to
the developing world

34. 5. MILITARY GLOBALIZATION
Smart Bombs Sidewinder Missiles

35. Consequences/Effects of
Globalization

37. Globalization Consequences/Effects
•Consequences cited by various scholars and
activists:
•Cheaper goods and services
•Growing wealth for certain actors
•Environmental damage
•Exploitation of labor

38. Globalization Consequences/Effects
•Consequences cited by various scholars and
activists (cont.):
•Mixing of cultures:
•Dominant Western culture eroding traditional
cultures
•Backlash from those who want to maintain
traditional cultures
• “Lexus and the Olive Tree” (Friedman)
• “McWorld vs. Jihad” (Barber)

39. Globalization Consequences/Effects
•Consequences cited by various scholars and
activists (cont.):
•Diseases spread more rapidly
•Economic crises spread more rapidly
•Increased trafficking of humans and drugs
•Terrorism/asymmetric warfare made easier

40. Globalization Consequences/Effects
Global Culture: Homogenization
 Technology (Internet, TV, cell phones etc.) is sweeping away cultural
boundaries creating the possibility and even the likelihood of a global
culture.
 Global entertainment companies shape the perceptions, values, and
dreams of people, everywhere.
 This spread of values, norms, and
culture tends to promote Western ideals
of capitalism and consumerism.
 Resulting in the disappearance of local
cultures, traditions, and identities
replaced by a single commodity/ single
identity world – the Westernization of
culture
Ladies only line Saudi Arabia

41.  Coca-colonization: Coke, McDonald’s, Levi’s, MTV, Disney, computer games,
American (or American style) TV shows, look-alike shopping malls with look-
alike goods
 the meaning of good, appropriate, success changes
Globalization Consequences/Effects
Asymmetry in Power Relations and Flows
 Banana Republicanization
 Move from the dominant to the weaker
like to teach the world to sing
Big Bird does China

42. Summary of
Consequences/Effects
Pros and Cons to Globalization

43.  increases economic
prosperity and opportunity
 higher degrees of political
and economic freedom in the
form of democracy
 Improved standard of living
– reduction in poverty
 Improved gender relations
 Increased life-span
Pros

44. Cons  Increased environmental damage
 increased poverty, inequality, injustice
 erosion of traditional culture
 Corporations are motivated by profit
and have little concern for people
 economic globalization developments
feed into ethnic, religious, and factional
tensions that lead to wars and help
breed terrorism
 Terrorists now globally interconnected
and empowered with knowledge, create
a whole new category of warfare based,
in part, on the disruption of the
interconnections which are both created
by and necessary for globalization
Corporations shape political policy of
countries e.g. over fishing

45. Trade

46. Role of Trade with Globalization
•A key element of economic globalization
•Dramatic increases in trade over the past 200 years
•Technological advances (most notably the steam engine)
powered expansion of trade in 19th and early 20th centuries
•After setback of Great Depression and World War II, trade
grew again, accelerating with collapse of communist bloc
and advances in information technologies
•Institutions such as GATT (later WTO) have facilitated trade
globally
•Growth of regional free trade blocs

47. Economic Approaches to Trade
•Approaches to trade
•Mercantilist/autarkic practices
•Liberal, “free trade” policies
•A mix of the two extremes (protecting certain
domestic industries, etc.)

48. Effects of Trade
•Differences in countries’ exports (primary
products vs. high-tech manufactured goods) can
lead to dependency relationships and inhibit
development of poorer countries
•“Free trade” vs. “fair trade”
•Comparative and absolute advantage (see
lecture #10)

49. Free Trade Controversy
•Free trade and barriers to trade
•WTO (previously GATT)
•Most favored nation and reciprocity principles
•Efforts to reduce tariffs, subsidies, quotas, and
other barriers to free trade (and ongoing disputes,
such as agricultural subsidies by wealthy countries)
•Regional free trade agreements (e.g., NAFTA)
•Conflict with WTO goals

50. Summary of GATT Rounds
Round N of
Countries
Subjects and
Modalities
Main Outcomes Value of Trade
Covered
Average
Tariff Cut
Average Post
Round Tariffs
Geneva
1947
23 Tariffs;
Item-by-Item
Negotiation
Concessions on
45,000 tariff lines
$ 10 billion 35%
Annecy
1949
33 Tariffs;
Item-by-Item
Negotiation
Modest tariff
reductions
37%
Torquay
1950
34 Tariffs;
Item-by-Item
Negotiation
8,700 tariff
concessions
26%
Geneva
1956
26 Tariffs;
Item-by-Item
Negotiation
Modest tariff
reductions
$2.5 billion 15%
Dillon
1960-1961
26 Tariffs;
Item-by-Item
Negotiation
Tariff adjustments
following creation of
EEC
$4.9 billion 20% 17%
Kennedy
1962-1967
62 Tariffs;
Linear cuts
30,000 tariff lines
bound
$40 billion 35% 8.7%
Tokyo
1973-1979
102 Tariffs; NTBs;
Linear cuts;
Codes
$155 billion 34% 6.3%
Uruguay
1986-1994
103 start,
128 end
Tariffs; NTBs;
Item-by-Item and
Linear;
WTO
WTO
Dispute Resolution
$3.7 trillion 39% 4.0%

51. See Supplemental Readings

52. Regional Trade Agreements
• Besides economic organizations, regional trade agreements
form a key part of the institutional structure of the world
economy
• Regional trade agreements have proliferated around the
world since the beginning of the 1990s

53. Five Types of Regional Trade Agreements
•1. Partial trade agreement – two or more
countries liberalize trade in a selected group of
product categories
•2. Free trade area (FTA) – trade in goods and
services fully liberalized between two or more
countries
•North American Free Trade Agreement
(NAFTA)

54. Slide 2-54
Five Types of Regional Trade Agreements
(cont.)
•3. Customs union (CU) – an FTA plus a common
external tariff (CET)
•European Union in the 1970s and 1980s
•MERCOSUR in South America
•4. Common market – a CU plus free mobility of
factors of production
•European Union in the 1990s

55. Five Types of Regional Trade Agreements
(cont.)
•5. Economic Union – common market with
coordination of macroeconomic policies
(including common currency, harmonization
of standards and regulations)
•United States
•Canada
•European Union

56. Global Institutions that
Affect IPE

58. International Institutions
• The three global organizations playing a major role in
international economic relations are:
• The International Monetary Fund (IMF)
• The World Bank
• The World Trade Organization (WTO)
Let’s take a closer look at the functions
of these organizations…

59. IMF

60. The IMF
• Founded by the Bretton Woods meetings between the Allies in July
1944
• Each of the 184 members charged a quota
• 25% in SDRs or convertible currencies
• US quota is SDR 37,149.3 million (largest)
• Palau quota is SDR 3.1 million (smallest)
• The size of the quota determines the member’s voting power
• 250 basic votes + 1 voter/SDR 100,000 quota
• US has 371,743 votes (17.11%) Palau 281 votes.

61. The IMF
• The IMF was established to:
•Promote international monetary cooperation;
•Promote exchange stability and orderly exchange
arrangements
•To foster growth and high levels of employment,
and
•to provide temporary financial assistance to
countries to help ease balance of payments
adjustment

62. The IMF
•Fundamental disequilibrium and exchange crisis
•Crisis occurs when a country runs out of
foreign exchange reserves – a major currency
or gold that can be used to pay for imports
and international borrowings
•IMF conditionality – requirement for the
borrowing member to carry out economic
reforms in exchange for a loan

63. The World Bank

64. The World Bank
•Also founded at the Bretton Woods
Conference
•Founded as the International Bank for
Reconstruction and Development (IBRD)
•World Bank has 184 members

65. The World Bank
•Main functions: development lending
•Today, IBRD is one of the five subgroups making up the World
Bank Group
•IDA (International Development Assn.),
•IFC (International Finance Corp.),
•MIGA (Multilateral Investment Guarantee Agency),
•ICSID (Int’l Cent. For Settlement of Investment Disp.)

66. WTO

67. From GATT to WTO
•Uruguay Round Agreement signed in 1994
•The round established the WTO:
•144 members as of 1 January 2002
•reaches beyond GATT to new trade issues;
•has a more effective dispute settlement
mechanism; and
•monitors national trade practices more
consistently

68. The WTO
•Main Tasks of the WTO
•Administering WTO trade agreements
•Forum for trade negotiations
•Handling trade disputes
•Monitoring national trade policies
•Technical assistance and training for LDCs
•Cooperation with other international agencies

69. The WTO
 Interdependence Norms
 Liberalization – negotiations to reduce protection.
 Nondiscrimination – enshrined in the concept of most
favored national status (MFN): every WTO member must
treat each of its trading partners as it treats its most
favored partner
 National treatment – imports must be given a similar
treatment on the domestic market as domestically
produced goods

70. The WTO
•Sovereignty Norms
•Reciprocity – negotiations proceed in
terms of exchange of “concessions” of
substantially equivalent value.
•Safeguards – right of government to
preserve economic stability through
(nondiscriminatory) protection
recognized.