ECONOMICS – 4TH ESO UNIT 12: GLOBALIZATION AND IMBALANCES IN GLOBAL ECONOMY 1. 2. 3. 4. THE GLOBALIZATION ENVIRONMENTAL PROBLEMS INEQUALITY AND UNDERDEVELOPMENT SUSTAINABLE DEVELOPMENT 1. THE GLOBALIZATION Globalization is the word used to describe the growing interdependence of the world’s economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information. Since ancient times, humans have sought distant places to settle, produce, and exchange goods enabled by improvements in technology and transportation. But not until the 19th century did global integration take off. Following centuries of European colonization and trade activity, that first “wave” of globalization was propelled by steamships, railroads, the telegraph, and other breakthroughs, and also by increasing economic cooperation among countries. The globalization trend eventually crashed in the catastrophe of World War I, followed by post-war protectionism, the Great Depression, and World War II. But the term gained popularity after the Cold War in the early 1990s, as cooperative arrangements shaped modern everyday life. A variety of factors have contributed to the process of globalisation. Some of the most important are: ✓ ✓ ✓ ✓ Transport costs. The costs of ocean shipping have come down, due to containerisation, bulk shipping, and other efficiencies. The lower unit cost of shipping products around the global economy helps to bring prices in the country of manufacture closer to those in export markets. Technological change. Rapid and sustained technological change has reduced the cost of transmitting and communicating, a key factor behind trade in knowledge products using web technology. The growth of the internet has increased e-commerce, enabling firms of all sizes to compete more easily in global markets. Essentially, the internet acts as a 24-hour shop front allowing consumers all over the world to buy products online and around the clock, from whoever happens to be offering the best deal. For the firm, it therefore provides cheap marketing with global reach, such that even small local businesses can afford to serve customers abroad. Less protectionism. Borders have opened and average import tariff levels have fallen. More trade agreements have been signed. Growth Strategies of Transnational and Multinational Companies. In their pursuit of revenue and profit growth, increasingly global businesses and brands have invested significantly in expanding internationally. Besides, cultural globalization has made easier the growth of multinational companies. Globalization is a complicated issue and it is necessary to evaluate the pros and cons before drawing any conclusions. Pros: 1. Globalization represents free trade which promotes global economic growth, creates jobs, makes companies more competitive, and lowers prices for consumers as competition between countries is supposed to drive prices down. 2. It also provides poor countries, through foreign capital and technology, with the chance to develop economically and by spreading prosperity, creates the conditions in which democracy and respect for human rights may flourish. According to supporters, globalization and democracy should go hand in hand. 3. There is now a worldwide market for companies and consumers who have access to products of different countries. 4. There is cultural intermingling and each country is learning more about other cultures. 5. Transnational companies investing in installing plants in other countries provide employment for the people in those countries often getting them out of poverty. 1 ECONOMICS – 4TH ESO Cons: 1. The general complaint about globalization is that it has made the rich richer while making the non-rich poorer. 2. The biggest problem for developed countries is that jobs are lost and transferred to lower cost countries. 3. Large multi-national corporations have the ability to exploit tax havens in other countries to avoid paying taxes and are accused of social injustice, unfair working conditions (including slave labour wages, living and working conditions), as well as lack of concern for environment, mismanagement of natural resources, and ecological damage. Many people think there is a threat of corporations ruling the world because they are gaining power, due to globalization. 4. As countries are more connected, economic crisis spread easier. 2. ENVIRONMENTAL PROBLEMS Over the last decades, environmental problems have worsened. Currently, the main problems related to environment are: a) Biodiversity Loss. The past 50 years have seen a rapid growth of human consumption, population, global trade and urbanisation, resulting in humanity using more of the Earth’s resources than it can replenish naturally. A recent WWF report found that the population sizes of mammals, fish, birds, reptiles and amphibians have experienced a decline of an average of 68% between 1970 and 2016. The report attributes this biodiversity loss to a variety of factors, but mainly land-use change, particularly the conversion of habitats, like forests, grasslands and mangroves, into agricultural systems. b) Plastic Pollution. A report by science journal, Nature, determined that currently, roughly 11 million tons of plastic make its way into the oceans every year, harming wildlife habitats and the animals that live in them. Shockingly, National Geographic found that 91% of all plastic that has ever been made is not recycled, representing not only one of the biggest environmental problems of our lifetime, but another massive market failure. Considering that plastic takes 400 years to decompose, it will be many generations until it ceases to exist. c) Deforestation. Every minute, forests the size of 20 football fields are cut down. By the year 2030, the planet might have only 10% of its forests; if deforestation isn’t stopped, they could all be gone in less than 100 years. Agriculture is the leading cause of deforestation, another one of the biggest environmental problems appearing on this list. Land is cleared to raise livestock or to plant other crops that are sold, such as sugar cane and palm oil. Besides for carbon sequestration, forests help to prevent soil erosion, because the tree roots bind the soil and prevent it from washing away, which also prevents landslides. The three countries experiencing the highest levels of deforestation are Brazil, the Democratic Republic of Congo and Indonesia, however Indonesia is tackling deforestation, now seeing the lowest rates since the beginning of the century. d) Air Pollution. Research from the World Health Organization (WHO) shows that an estimated 4.2 to 7 million people die from air pollution worldwide every year and that nine out of 10 people breathe air that contains high levels of pollutants. This comes mostly from industrial sources and motor vehicles, as well as emissions from burning biomass and poor air quality due to dust storms. e) Climate change. The climate change involves global warming. This is the slow increase in the average temperature of the earth’s atmosphere because an increased amount of the energy (heat) striking the earth from the sun is being trapped in the atmosphere and not radiated out into space. 2 ECONOMICS – 4TH ESO Scientists attribute current atmospheric warming to human activities. Specifically, gases released primarily by the burning of fossil fuels and the tiny particles produced by incomplete burning trap the sun’s energy in the atmosphere. Scientists call these gases “greenhouse gases” (GHGs). The global effort to manage climate change has been organized through what is called the United Nations Framework Convention on Climate Change (UNFCCC). The UNFCCC was launched at the 1992 Rio Earth Summit to achieve GHG concentrations at a level that would prevent dangerous anthropogenic interference with the climate system. To solve all these problems, environmental policies are needed but there are two main drawbacks: a) Environmental effects are economic externalities. Polluters do not usually bear the consequences of their actions; the negative effects most often occur elsewhere or in the future. b) Natural resources are almost always underpriced because they are often assumed to have infinite availability. Anyway, it is necessary governments keep on regulating harmful activities towards environment with penalties and subsidies, promoting renewable energies and the environmental education. 3. INEQUALITY AND UNDERDEVELOPMENT With globalization, inequality has increased in general but particularly in some underdeveloped countries. Some of the common characteristics displayed by most of the underdeveloped countries in the world are as follows: - Low Per Capita Income. - High inequality of income and wealth is another common feature of underdeveloped countries. In these countries, large percentage of national income is shared by a small segment of the society while a large segment of the society gets barely enough to survive. - High Growth Rate of Population and high unemployment rate. - Low rate of saving and investment. - Underdeveloped economies use outdated technology for production and have low labour productivity due to low level of skills. - Insufficient infrastructures. 3 ECONOMICS – 4TH ESO - - Low Volume of Foreign Trade. Underdeveloped countries export primary products like, agricultural goods, minerals, petroleum oil, etc., and import finished products, especially consumer goods. Terms of trade are grossly unfavourable to underdeveloped countries. High external debt. 4. SUSTAINABLE DEVELOPMENT Sustainable development can be defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, sets the 17 Sustainable Development Goals (SDGs), a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. These 17 SDGs are: https://www.youtube.com/watch?v=0XTBYMfZyrM&feature=emb_logo GLOSSARY AIR POLLUTION: Contaminación del aire. BIODIVERSITY LOSS: Pérdida de biodiversidad. BRAND: Marca. CLIMATE CHANGE: Cambio climático. GLOBAL WARMING: Calentamiento global. GLOBALIZATION = GLOLISATION: Globalización. GREENHOUSE GASES: Gases de efecto invernadero. INEQUALITY: Desigualdad. OCEAN SHIPPING: Transporte marítimo. PER CAPITA INCOME: Renta per cápita. PROS AND CONS: Pros y contras. SUSTAINABLE DEVELOPMENT: Desarrollo sostenible. SUSTAINABLE DEVELOPMENT GOALS (SDGS): Objetivos de Desarrollo Sostenible (ODS). UNDERDEVELOPMENT: Subdesarrollo. UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE: Convención marco de las Naciones Unidas sobre el cambio climático. 4
