Economic Systems & Globalization Unit 4-5 Notes

Unit IV & Unit V – Economics Driven Two Branches of Economics – Microeconomics – study of the behavior of individuals or specific industries within an economy – Macroeconomics – study of the behavior of the economy as a whole (at a national or international scale) Even though we may talk about these concepts initially at a micro level, our goal is to apply them to the MACRO LEVEL when discussing the how the GLOBAL ECONOMY OPERATES!

SCARCITY SIMULATION What do we do when resources are scarce?

THE BEST DECISIONS ARE PACED Faced with the fundamental economic problem…

PACED Decision Making P-What is the PROBLEM? A-What are the ALTERNATIVES C-What CRITERIA are important to the decision? E-EVALUATE each alternative with the criteria D-DECIDE among alternatives ?

Scarcity Simulation Divide into groups of 4 OR 5 (your choice!) Consider the scarce resource  Complete the PACED model in your group – Everyone must submit a copy to receive credit

PACED Decision Making P-What is the PROBLEM? A-What are the ALTERNATIVES C-What CRITERIA are important to the decision? E-EVALUATE each alternative with the criteria D-DECIDE among alternatives ?

PACED Decision Making Process 5 Minutes: Brainstorm for alternative ways of resolving the problem you group faces. Rule nothing out. 10 Minutes: Complete the balance of the chart with your group – Criteria – Evaluation – Decision Appoint one representative to report your decision

Criterion Rank Criterion Rank Criterion Rank Criterion Rank Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5

Scarcity Debriefing (5 minutes) On the reverse side of your handout briefly respond to the following: – Define scarcity in your own words – What was the scarce good in our simulation? – Why was it scarce? – How criteria help you decide among alternative allocations for the good? – Do you agree with your group’s decision for the good? Explain why or why not.

Why Can’t We Always Get What We Want?

You Can’t Always Get What You Want… “And you can’t always get what you want, Honey, you can’t always get what you want You can’t always get what you want But if you try sometime, yeah, You just might find you get what you need!” -Mick Jagger and Keith Richards =toiM1B6E2ww&feature=related

Scarcity The fundamental problem all societies and countries face… – Scarcity is the condition that results because people have limited resources but unlimited wants – Wants > Resources Task! Identify a scarce resource. EVERYTHING IS SCARCE!

Is Lebron worth $20 million a year?

Economic Decision-Making

Scarcity Forces Tradeoffs Scarcity-forces-tradeoffs principle – Limited resources force people to make choices and face tradeoffs when they when they choose – Tradeoffs: The alternate choices people have when making a decision Each choice in a trade-off implies more of one thing necessarily means less of something else

Examples… Some choices are easy to make… – Hmm… Should I have pizza or a hoagie for lunch today? Other decisions are agonizing… – Should I go to Pitt or Penn State?

Task! Reflecting on Personal Trade- offs… Think of ONE decision that you had to make in the last week…Identify your various tradeoffs for that decision Be prepared to share! In the end, what helped you decide amongst your choices?

Opportunity Cost When comparing the top 2 choices, it is the BENEFIT of the next best alternative that must be sacrificed to satisfy a want. Opportunity Cost – the value (in time, money, etc.) of the next best alternative that is given up when making a choice.

Considering the Opportunity Cost of Decisions… Revisit the choice that you made in the last week… What was the opportunity cost of that decision? Be prepared to share!

Application to the Global Level What are important decisions (not just economic) that countries must consider? – What are their tradeoffs? – What is the opportunity cost?

Finally…Why it Matters Understanding the opportunity costs/tradeoffs of different choices in life makes you a better decision-maker! Why do economists always say “There’s No Such Thing As a Free Lunch”? You always have to give something up…” ALL Individuals, Businesses, & Countries have to consider tradeoffs/opportunity costs when making decisions

Visualizing the Relationship…

Three Basic Economic Questions 3 Q’s are answered in order to make decisions about the ways limited resources will be used. 1.What to produce? 2.How to produce? 3.For whom to produce?

Economic Values Unit 4, Day 2

Where are the people in each cartoon? How would you describe each scene? Who or what decides what consumers get in each cartoon? What advantages and disadvantages do you see represented in each cartoon? Which store would you prefer to shop in, and why?

Preview Reading Read Section 3.2 (pgs 38-41) – 6 Goals – Define & Explain – Where might we see them in the US?

A society’s answers depend on its economic goals Economic Freedom – The ability to make our own economic decisions without the interference from the government Economic Efficiency – The result of using resources in a way that produces the maximum amount of goods and services. Economic Equity – The fairness with which an economy distributes its resources and wealth.

A society’s answers depend on its economic goals Economic Growth – A condition in which an economy is expanding and producing more and better goods and services. Economic Security – The idea that the less fortunate members of society should get the economic support they need to live a decent life. Economic Stability – A condition in which the goods and services people count on are available when they want them. Price stability is also important so that people can plan ahead for purchases.

Task! Rank the six economic goals from most important to least important. Write a one or two sentence justification of your ranking.

Great Goal! Choose 1 of the 6 goals discussed in class Create an advertisement for your goal Advertisement should be colorful Include the name of the goal Visual must highlight the goal’s values

COMPARATIVE ECONOMICS Unit 4, Day 3

Who Decides What in Different Economic Systems? An economic system is… – The way a society coordinates the production and consumption of goods and services Economic Systems – Traditional – Market – Command – Mixed

Preview Reading Read Section 3.3 (pgs 41-46)

Review of Economic Systems A traditional economy relies on custom and tradition to dictate production and consumption In a command economy, decisions about production and consumption are made by a powerful ruler or central authority In a market economy, individual producers and consumers coordinate economic activity.

What are the most important goals of each economic system? Traditional Command Market **Societies differ in the degree of importance they attach to each goal. Progress toward one goal can sometimes be achieved only at the expense of another (TRADEOFFS!)**

The Bracelet Market Objective: Compare command and market economies SET UP & ROUND 1: – Count off by 8 – Report to your assigned work area – Precisely follow the directions in your work area – 5 minutes to work Command Economy: 1 token to each member when 6 bracelets are produced in your group Market Economy: 1 token for each bracelet produced

Bracelet Market Round 2 & 3 – 5 minutes production time each Command: 2 more pieces of paper per round Market: access to the supply table – Tokens awarded: Command: 1 token to each member when 6 bracelets are produced in your group Market: 1 token per bracelet produced – AT END OF ROUND 3: Allocate tokens Command: Equally among all group members Market: Based on quantity or quality of production, ideas

Bracelet Market Market Day! (5 min) – Set up & price your wares Command: all bracelets=2 tokens Market: individually priced at 1, 2, or 3 tokens – 2 Shopkeepers (collect tokens for bracelets) Go Shopping! (5 min) – Go to your economy’s market – Determine what you can afford and want to buy (maximize utility) – Pay for your bracelets – Return to your desk – Put your bracelets on

Output/Income Report Round 1Round 2Round 3 Team Com mand Production 5/groups Earnings 0 Production Earnings 1/PP ProductionEarnings 1 LM Bhill WaDa AJA 7799

Command vs. Market Economies Simulation HANDS UP! WHAT DID YOU GET? Debrief - Have one person in your group record your answers to the following questions and be prepared to share: – How did it feel to be in the command economy group? The market economy group? (depending on which one you were in) – How did production vary between the command economy group and the market economy group? – How did purchasing vary between these groups? – Why do you think people would want their country to have a market economy? A command economy?

Reading Notes Remain with your economy group 20 minutes: Complete both sides— – SIDE A: Chart on economy types – SIDE B: Connections to simulation Complete for the market you took part in only 10 minutes class sharing to complete

Command Economy ActivityReading Brouda & Shuttleworth gave specific instructions The state or gov’t decides the what, how and for whom Production rewards were equal, based on predetermined quotas or goal Salaries do not vary with quality of quantity No additional supplies provided. Not enough paper. Factors of production controlled by the gov’t. Shortages common. All products sold for the same price. Gov’t set prices. No additional beans for more than 6 bracelets No incentive to produce high quality goods or innovate. Market Economy ActivityReading Limited directions—lots of latitude Workings of the market are not planned or directed Production rewards based on what is produced Salaries based on quality, quantity of production Supply table available to differentiate products Factors of production are controlled by individuals and firms. Prices vary and are set by producers Prices reflect compromise of buyers, sellers Lots of different types of bracelets, production techniques People benefit by working harder and tend to innovate, improve goods

Command Economy ActivityReading The state or gov’t decides the what, how and for whom Production rewards were equal, based on predetermined quotas or goal Factors of production controlled by the gov’t. Shortages common. All products sold for the same price. No incentive to produce high quality goods or innovate. Market Economy ActivityReading Workings of the market are not planned or directed Production rewards based on what is produced Factors of production are controlled by individuals and firms. Prices vary and are set by producers People benefit by working harder and tend to innovate, improve goods

Gains from Trade Unit 4, Day 4

Preview: Gains from Trade Imagine that you are the manager of a fast-food restaurant. You are outgoing, interact well with customers, and work the cash register proficiently. You are also efficient in the kitchen and can manage several tasks at once, such as making pizzas, preparing salads, and filling drinks. You have one employee who is slow in the kitchen and often struggles to cook while filling drink orders. Your employee works the cash register well but interacts little with the customers. Answer these questions: – What is your opportunity cost if you work the cash register? – What is your opportunity cost if you work in the kitchen? – Based on your opportunity costs, describe where you will work and where you will place your employee. Explain your rationale.

Should you grow it all? Essential Question: How does trade make people better off? Objective: Explain the concept of comparative advantage and apply it to a simulation. Task: Assume the role of a farmer producing potatoes and pineapples. Participate in several rounds of production and trade to acquire a certain amount of each product.

Directions for Farmers 1.Examine your goal. Determine what you should produce by choosing one production option from the schedule on your handout. 2.Gather your goods. Remove the corresponding numbers of potato and pineapple tokens from your envelope. Then put your handout and envelope aside. 3.To market! When the market opens, find a farmer from the other region to trade with. This will be the farmer you trade with in all rounds. You made trade only whole tokens. 4.Keep track! After the first and each successive round, complete your ledger to record production

Round 1…and 2, 3, 4 and 5 You must choose 1 of the production options on your chart BEFORE entering the market. The farmer you choose to trade with in this round MUST REMAIN THE SAME in every other round. Farmers are not required to trade. Trade only WHOLE tokens. POST ROUND: Complete your ledger. Return all tokens to your envelope (your number of initial tokens will not change between rounds).

Debriefing How did it feel to be a farmer in Region A? In region B? Regions A and B had different production schedules. In real life, why might two regions have different production schedules? How were you able to meet your goal? Did one group of farmers benefit more from specializing and trading? How does trade make people better off?

How does specialization lead to economic interdependence? Specialization – an approach to production in which individuals become highly skilled at a specific task. – Example of specialization is division of labor – the allocation of separate tasks to different people Benefits of Specialization in a Country – Improves productivity (a measure of the efficiency or output of a system) – Leads to a higher standard of living

Specialization Encourages Trade Societies that specialize are more productive than those that are self-sufficient When societies specialize, they no longer produce everything themselves…so they must TRADE with others to obtain those things they do not produce Trade is a voluntary exchange – the act of willingly trading one item or service for another – People & countries trade because it is in their mutual interests

Trade Creates Economic Interdependence Trade creates economic interdependence… – When people rely on others (within their country or from other countries) for most of the goods and services they want. We are dependent on other countries for the goods and services we consume. TASK! Look in your backpack (or on your clothes) for at least 5 different country of origin labels. Be prepared to share.

Back to the Simulation Region A: Goal=4 potatoes, 2 pineapples Who could produce the most potatoes? Pineapples? Could either meet their goals in isolation? What was the optimal production decision for each? Region B: Goal=11 potatoes, 2 pineapples Farmer A’s Production Schedule PotatoesPineapples Option 140 Option 231 Option 322 Option 413 Option 504 Farmer B’s Production Schedule PotatoesPineapples Option 1150 Option 2121 Option 392 Option 463 Option 534 Option 605

Absolute Advantage:Comparative Advantage: ability to produce more units of a good or service than some other producer using the same quantity of resources ability to produce a good or service at lower opportunity cost than another producer Absolute & Comparative Advantage

Applying the Definitions Who had absolute advantage in product? Who had the comparative advantage in potatoes? Who had the comparative advantage in pineapples? Hint…compare each person’s opportunity cost of one product to another

The Simulation Again… What is Farmer A’s opportunity cost of producing 1 potato? What is Farmer A’s opportunity cost of producing 1 pineapple? What is Farmer B’s opportunity cost of producing 1 potato? What is Farmer B’s opportunity cost of producing 1 pineapple? The Law of Comparative Advantage says you should specialize in the producing which ever good you can produce at lower opportunity cost. So, Farmer B should produce potatoes and Farmer should produce pineapples.

Which matters more? Comparative Advantage! Why? – Economic basis for specialization and trade – Specialize in producing goods with comparative advantage  both countries are better off

Putting it all together… 1.Due to different ___, farmers in Region A and B had different production schedules. 2.Farmers A & B decided to ___ in producing one good instead of producing both goods. 3.Farmer A decided to produce only pineapples because he held a ___ advantage in the production of pineapples. 4.Farmer B could produce more pineapples and potatoes than Farmer A. Thus, Farmer B had a/an ___advantage in the production of both goods. Still Farmer B specialized in producing potatoes because he had a/an ___advantage in that good. 5.At the marketplace, Farmer A & B entered into a/an ___in which they traded 1 pineapple from 2 potatoes. 6.Farmer A & B were both better off because… Word Bank Factors of production Absolute Specialize Voluntary exchange Comparative

COSTS & BENEFITS OF TRADE Unit 5, Day 1

With a partner, take 5-10 minutes to identify the countries of origin of as many items in your possession. For each item, label the country of origin on the map. You can use the world map in the back of your book to help identify their locations. Draw an arrow from the country to Warrington and label the arrow with the name of the item. Debrief – Partner Discussion (5-10 min) What surprises you about your map? Do you think the U.S. imports or exports more goods? Why might this be the case? How does global trade affect your life?

How have the forces of globalization shaped the modern world, including the United States? Who are the winners and losers in globalization? How do we measure a nation’s economic health? Has globalization helped or hindered economic development? Do the benefits of globalization outweigh the costs? What is the current state of the global economy?

Global Economy The system of economic interaction among the countries of the world Includes international trade as well as transfers of money, resources, and technology among countries

Global trade has grown dramatically since end of WWII Why? Advances in transportation and communications Shift in the types of goods being produced (less bulky commodities)

Countries trade with each other to get the goods & services they value at the lowest cost Recall: Comparative Advantage! Countries can benefit if they specialize in the production of something and trade for other stuff

Imports – products made in another country and sold domestically U.S. is the world’s leading importer $2.3 Predict: Which 3 countries do we import the most from? Data: CIA World Factbook (US Economy Tab)CIA World Factbook Exports – products made domestically and sold in another country U.S. is one of the world’s top 3 exporters $1.5 trillion Predict: Which 3 countries do we export the most to? Data: CIA World Factbook (US Economy Tab)CIA World Factbook U.S. service exports are growing

Absolute advantage – if a country can produce something more efficiently than other countries Comparative advantage – if a country can produce something at a lower opportunity cost than other countries By specializing, both countries get the goods they want at a lower cost than if they tried to produce both goods for themselves One country’s comparative advantage stems from… Differences in climate Differences in resources (also called factors of production) Differences in technology

Balance of Trade – the difference between the value of a country’s exports and the value of its imports (also known as net exports) Balance of trade = exports – imports If country has a positive answer = trade surplus Trade surplus: a country exports more than it imports If country has a negative answer = trade deficit Trade deficit: a country imports more than it exports

2011 $1.5 Trillion (exports) – $2.3 Trillion (imports) = $-0.8 Trillion OR $-800 Billion So in 2011, the U.S. ran a trade deficit!

Is a running a trade deficit common for the U.S.? Yes, according to the U.S. census bureau, we have run an annual trade deficit every year since 1975

Benefits Greater variety of goods/services Low prices which means we can buy more (raises our standard of living) Increased competition weeds out inefficient producers and rewards those who are more efficient and productive Free flow of ideas and technology promotes innovation Economic growth (ex. we are able to consume more than what our resources would allow for) Costs Short-term loss of jobs to workers from other countries that are more productive or earn lower wages (until these workers hopefully gain new skills)

Read Section 15.4 (pgs ) on “How and Why Do Countries Regulate Trade” and complete Section III of your Notes Packet

Free Trade - unrestricted movement of goods/services across countries’ borders Protectionism - Most countries, including the U.S., restrict imports to shield domestic markets from competition Regulations: Tariff Quota Embargo Voluntary Export Restraint (VER)

Protective Tariff – a tax on imported goods Import Quota – a limit on the quantity of a good that can be imported during a specified time period Analysis: Benefit - Protect domestic industries and workers from competition from cheaper foreign goods Cost – increased prices of imports (due to tariff) AND domestic producers may inflate their prices because they can (due to quota there is less competition) because hey have to (resources bought from others are more expensive)

Trade Embargo – a ban on trade with a country or group of countries Example of an economic sanction (“stick” tool of foreign policy); used to persuade another country to change its behavior U.S. embargo on Cuba Voluntary Export Restraints – limits the quantity of a good that can be exported form a country during a specific time period (it’s an export quota) Usually not “voluntary” as it is used by exporting country as way of avoiding harsher restrictions like tariffs or import quotas

ArgumentCritique Jobs Argument: Protect domestic industriesTariffs and quotas are more harmful overall Workers find new skills, industries National Security: Provide for own food, defense Maybe legitimate, as long as dictated by govt rather than industry Infant Industries: Protect new businesses, give them time to grow Hard to know for how long to establish a business, may not be worth it Unfair Competition: dumping—selling for less than cost is unfair Hard to detect dumping Protection as a Bargaining Chip: use tariffs to encourage behavior Can lead to trade wars, backfire Enviro & Labor Standards: Unfair labor laws, pollution Common in developing countries as was in the US, they will grow out of it

North American Free Trade Agreement (NAFTA) 1994 agreement between the United States, Canada, and Mexico to eliminate all trade restrictions between the countries World Trade Organization Evolved from General Agreement on Tariffs and Trade (GATT – originally 1947) Started in 1995 and currently 155 member countries “The World Trade Organization (WTO) deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.” – wto.org

Objective – Review trade regulations and arguments against trade Create a political cartoon that demonstrates a type of trade barrier or one of the arguments against free trade discussed previously. Be sure that the cartoon highlights the winners and/or losers as a result of the particular trade regulation. 10 points 2 pts visuals are colorful, clear and neat 2 pts type of trade barrier or argument is evident & correctly presented 2 pts cartoon clearly depicts winners and/or losers as a result of barrier 4 pts—accompanying written description correctly describes trade barrier, winners and losers

The cartoon depicts the long-running trade embargo (a ban on all imports and exports) imposed by the US on Cuba. The Cuban people are depicted as losers in this situation (left isolated). The US is presented in a comical light—why are we so afraid of the Cuban nationals?

This cartoon depicts both the unfair competition argument as well as the labor standards argument. It shows both US and foreign workers as losers, even as it depicts US corporations as winners with cheaper labor costs.

Global Trade Simulation Unit 5, Day 2

What are the costs and benefits of free trade?

Global Trade Objective: Evaluate the costs and benefits of free trade relative to protectionism Task: Participate in a simulation of global trade as either an exporter or importer. Achieve a trade surplus or balance for your country under various trade conditions.

BARRIERS TO FREE TRADE But first, some definitions…

Trade Barriers From least to most restrictive…

Voluntary Export Restraint Limit the quantity of a good that can be exported form a country during a specific time period (it’s an export quota) – Usually not “voluntary” as it is used by exporting country as way of avoiding harsher restrictions like tariffs or import quotas

Tariffs Tax (duty) imposed on imported goods. – Impact 60% of exports to US – Average tariff under 5% Winners: Domestic Industry, Govt Collecting Duties Losers: Domestic Consumers – Critique: Beggar Thy Neighbor Approach Example: Great Depression Tariffs lower world trade, make matters worse

Quotas Quota: limit on the quantity of a good that may be imported in a given time period. – Impact 12% of US imports – More damaging than tariffs, push prices higher

Embargo Embargo: prohibition against trading particular goods (or all goods) – Examples: Cuba, North Korea, Iran

WHICH BARRIERS WOULD YOU FAVOR MOST? WHY? As a producer? A worker? Government? Consumer?

Introduction to Global Trade Directions to begin Count off by 8 Report to your assigned country Assign roles in group 4— – 2 importers “travel” – 2 exporters “stay home” Review country cards Prepare to trade Country Assignments 1.Saudi Arabia 2.France 3.South Africa 4.India 5.China 6.Brazil 7.Venezuela 8.Ghana

Understanding Your Country Card Key Details You will set an opening price for your exports PRICES CANNOT FALL BELOW MINIMUM Sample Card: France Principle Exports 50 units steel – Min cost: $50/unit 50 units grapes – Min cost: $30/unit Principle Imports Soybeans, bananas

Using Your Ledger Sample Card: France Potential Points Per Round Equal balance of trade or surplus: 10 points Trade deficit: -5 points Import 10 units soybeans: 5 points Import 20 units bananas: 5 points Import additional goods (that you don’t export): 1 point per 10 units or more of each add’l good Trade Ledgers: France Importer: Exporter: 50 units of Grapes ImportUnitsXCost=Total Cost of total imports Balance of Trade (exports-imports) GrapesXPrice=Revenue Total Grape Revenue

Prepare to Trade! Country Team: Determine an Opening Price for Each Good & Strategize Your Approach Importers: Create a name tag for your country to wear as you travel Exporters: Create a Country Sign – Country Name – Your 2 Exports – Your Opening Price for Each Good

Go Trade! 5 minutes Importers: – Travel to other countries to secure needed goods Exporters: – Remain seated to sell your products to visiting importers – Negotiate on price as needed (above minimum)

Traders to Your Ledgers… Review your Import/Export ledgers Calculate your balance of trade – Trade deficit – Trade balance – Trade surplus Total your Points Country Reports? Sample Ledger: France Total Grape Revenue: Total Steel Revenue: Total Export Revenue: Total Soybean Cost: Total Banana Cost: Total Import Costs: Exports-Imports=Trade Bal.

Round 2: Barriers to Trade! Saudi Arabia: $10 protective tariff on ALL manufactured goods France: import quota of 5 units on ALL agricultural imports South Africa: trade embargo vs. India & China India: voluntary export restraint of 20 units on ALL manufactured goods China: $10 protective tarrif on ALL goods Brazil: Import quota of 10 on ALL imports Venezuela: trade embargo vs. South Africa and China Ghana: voluntary export restraint of 20 unit on ALL agricultural goods

Manufactured GoodsAgricultural Goods Oil Steel Cell Phones mp3 players Footwear Stereos Tomatoes Grapes Soybeans Corn

Prepare to Trade! Country Team: Revisit an Opening Price for Each Good & Strategize Your Approach Importers: Create a name tag for your country to wear as you travel Exporters: Change Country Sign as Needed – Country Name – Your 2 Exports – Your Opening Price for Each Good – Any Trade Barriers In Effect

Go Trade! 5 minutes Adhere to ALL trade barriers Importers: – Travel to other countries to secure needed goods Exporters: – Remain seated to sell your products to visiting importers – Negotiate on price as needed (above minimum)

Traders to Your Ledgers… Review your Import/Export ledgers Calculate your balance of trade – Trade deficit – Trade balance – Trade surplus Total your Points Country Reports? Sample Ledger: France Total Grape Revenue: Total Steel Revenue: Total Export Revenue: Total Soybean Cost: Total Banana Cost: Total Import Costs: Exports-Imports=Trade Bal.

Round 3: Barriers to Trade! Saudi Arabia: trade embargo on Brazil France: voluntary export restraint of 20 units on ALL goods South Africa: protective tariff of $10 on all imports India: import quota of 5 units on all manufactured goods China: trade embargo on Venezuela and France Brazil: voluntary export restraint of 20 units on all manufactured goods Venezuela: protective tariff of $10 on all imports Ghana: import quota of 10 units on all manufactured goods

Manufactured GoodsAgricultural Goods Oil Steel Cell Phones mp3 players Footwear Stereos Tomatoes Grapes Soybeans Corn

Prepare to Trade! Country Team: Revisit an Opening Price for Each Good & Strategize Your Approach Importers: Create a name tag for your country to wear as you travel Exporters: Change Country Sign as Needed – Country Name – Your 2 Exports – Your Opening Price for Each Good – Any Trade Barriers In Effect

Go Trade! 5 minutes Adhere to ALL trade barriers Importers: – Travel to other countries to secure needed goods Exporters: – Remain seated to sell your products to visiting importers – Negotiate on price as needed (above minimum)

Traders to Your Ledgers… Review your Import/Export ledgers Calculate your balance of trade – Trade deficit – Trade balance – Trade surplus Total your Points Country Reports? Sample Ledger: France Total Grape Revenue: Total Steel Revenue: Total Export Revenue: Total Soybean Cost: Total Banana Cost: Total Import Costs: Exports-Imports=Trade Bal.

Round 4: Barriers, anyone? Saudi Arabia: France: South Africa: India: China: Brazil: Venezuela: Ghana:

Manufactured GoodsAgricultural Goods Oil Steel Cell Phones mp3 players Footwear Stereos Tomatoes Grapes Soybeans Corn

Prepare to Trade! Country Team: Revisit an Opening Price for Each Good & Strategize Your Approach Importers: Create a name tag for your country to wear as you travel Exporters: Change Country Sign as Needed – Country Name – Your 2 Exports – Your Opening Price for Each Good – Any Trade Barriers In Effect

Go Trade! 5 minutes Adhere to ALL trade barriers Importers: – Travel to other countries to secure needed goods Exporters: – Remain seated to sell your products to visiting importers – Negotiate on price as needed (above minimum)

Traders to Your Ledgers… Review your Import/Export ledgers Calculate your balance of trade – Trade deficit – Trade balance – Trade surplus Total your Points Country Reports? Sample Ledger: France Total Grape Revenue: Total Steel Revenue: Total Export Revenue: Total Soybean Cost: Total Banana Cost: Total Import Costs: Exports-Imports=Trade Bal.

Debriefing What was it like to be an exporter for your country? An importer? What strategies did your country employ to earn points? In the game, did running a trade deficit impose a hardship on your country? Why or why not? In reality, are trade deficits a problem for countries? Why or why not? What types of trade barriers did you experience in round 2 & 3? What did you do differently as a result of these barriers? Did your country impose any trade barriers in round 4? Why or why not? Was your country better off under free trade or protectionism? Why? In reality, is a country better off under free trade or protectionism?

Globalization—Costs & Benefits Unit 5, Day 3

Agenda Overview of Globalization Globalization: Detractors & Defenders – Guided Reading – Poster Creation – Poster Walk Closing Conversations: Detractors & Defenders

The process by which people and economies around the world are becoming increasingly interconnected. But is it more than that? Yes – “Globalization is the closer integration of the countries and peoples of the world...brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders.“ Joseph Stiglitz, an economist and winner of the Nobel Prize

Defenders: Supports economic growth Reduces global poverty Encourages global cooperation Detractors: Persistent poverty Environmental degradation

International Organizations WTO (World Trade Organization)—Helps countries create/enforce trade agreements UN (United Nations)—Brokers int’l agreements & provides foreign aid to poor countries IMF (International Monetary Fund)—Ensure stability in int’l finance Monitoring global economy Lender of last resort Foreign Debt Service Payments Too High  IMF aid IF accept austerity Austerity—increases in taxes, reductions in government spending Assisting member nations (188) with advice & loans World Bank—financial and technical assistance to developing world

Nongovernmental Organizations Nonprofit organizations that operate outside of governments with goals of reducing poverty and protecting environment Examples: Save the Children, The Red Cross/Crescent, Greenpeace Multinational Corporations Companies that have a home base in one country and operations in other countries—some have assets > many nations Benefits: trade, investment, jobs, and new worker skills Costs: compromise the environment &workers’ rights to reap profits Sovereign Nation-States States have sovereign power to regulate trade and capital flows (movements of money & investment from one country to another) across its borders

The KOF Index of Globalization measures the three main dimensions of globalization: economic, social, and political. Produced by Swiss Economic Institute Data based on

Economic Development – the process by which countries increase their economic output and improve the lives of their people Classification of Countries’ Development: Developed – A wealthy, industrialized country in which the majority of people have more than enough income to meet their basic needs and maintain a high standard of living I.E. United States, most of Western Europe, South Korea, Australia Developing – A low-to-medium income country in which most people have less access to goods/services than the average person in a developed country I.E. China, Brazil, Saudi Arabia, Kenya Least Developed – A country that suffers from severe poverty and low standard of living I.E. Most of Sub-Saharan Africa, Cambodia, Afghanistan

Human Development Index UN measure of human development based on… Life expectancy Educational attainment Income Watch the World Change - HDI

6 groups of 5—Count off by 6 1: Economic Benefits of Globalization, p : Economic Costs of Globalization, p : Environmental Benefits of Globalization, p : Environmental Costs of Globalization, p : Cultural Benefits of Globalization, p : Cultural Costs of Globalization, p

In Groups: (30 minutes) Read your assigned section & complete notes Create poster detailing key points from notes & case study Poster will be assessed for accuracy-15pts & presentation (neat, easy to follow, includes visuals)-5 pts Individually: (30 minutes—5 per poster) Complete notes Register vote for each pairing As a class: (10 minutes) Review & discuss votes in pairings