1. International Economy and Globalization
Chapter 1
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2. Globalization greater interdependence among nations
increased integration of product and resource markets through trade, immigration, and foreign investment
includes noneconomic elements such as cultural and environmental factors
occurs on political, technological, cultural and economic levels

3. First Wave of Globalization
triggered by technological developments in transportation – steam engine and railroads
dominated by European and American businesses
brought to an end by World War One
Great Depression prompted further limitations on trade and protectionism

4. Second Wave of Globalization
result of reaction against nationalism following WWII as well as lower transportation costs
dominated by developed nations with developing nations largely excluded
lead to greater increase in per capita income for developed countries than for less developed countries

5. Latest Wave of Globalization
1980-present
included some but not all developing countries
featured increased capital movement
decline in mobility of labor
outsourcing became more prevalent with both blue collar and white collar jobs moving from the U.S. into lower cost areas

6. Openness - rough measure of the importance of international trade
(Exports + Imports)
GDP
Openness =

7. Labor and Capital
Greater interdependence typically leads to more movement of the factors of production between nations.
mobility of labor into the U.S. declined from the 1920s to the 1960s due to more stringent immigration policies
capital flows have increased substantially as other nations invested in U.S. assets

8. Importance of Globalization
law of comparative advantage – countries can benefit by producing goods for which they have lower opportunity costs
increased competition leads to lower prices for consumers
open economies lead to increased technological development and innovation

9. Fallacies of International Trade
zero sum game – untrue – both countries can gain by specializing
reduced domestic employment – untrue – specific industries may suffer but overall employment increases
trade restrictions as beneficial – untrue – restrictions reduce purchasing power of other nations and lead to retaliatory actions

10. Threat to Workers significant threat to unskilled workers in the U.S.
companies may move production to other countries which exploit labor or environmental resources
similar to threat created by technological improvements which increase efficiency

11. Criticisms of Globalization
free trade benefits U.S. corporations rather than citizens
environmental exploitation
human rights issues
reduction in domestic wages
lower domestic competitiveness as a result of developing facilities elsewhere