1. THE ECONOMIC DIMENSION OF GLOBALIZATION
Jojo Chih Jin Ru (I40026)
Ngo Thi Hong Ngoc (I41014)
Xiaoyu Yang (I39032)
Younkyoung Lee (I40001)

2. Prior epoch vs. today
Transportation – railroad and steam ship vs. airplane
Telegraph vs. internet
Both depends on large-scale flows of capital
Both entailed large-scale immigration
Global economic specialization then and now

3. Key subjects in Economic Dimension of Globalization
International Economic Institutions / Organizations
Multinational Corporations (MNCs)
Trade and global economic flows
Financial globalization

4. Bretton Woods System
An international monetary system that would ensure exchange rate stability, prevent competitive devaluations, and promote economic growth.
Delegates from 44 nations signed the agreement in July 1944.
1) Each participating state would establish a “par value” for its currency expressed in terms of gold or in terms of the gold value of the US dollar.
2) Obligation for each country to adopt a monetary policy that maintained the exchange rate (± 1 percent).
3) International Monetary Fund (IMF) & International Bank for Reconstruction and Development (IBRD) were created.
4) The entire system was based on the US dollar (global currency).

5. International Economic Organizations
International and multilateral regulatory agencies
World Trade Organization (WTO)
International Monetary Fund (IMF)
The World Bank

6. International Trade Organization (ITO)
To regulate international trade
Failed to get approval from US congress as perceived as threats to its national sovereignty.
International Trade Organization (ITO)
General Agreement on Tariffs and Trade (GATT)
World Trade Organization (WTO)
More acceptable than ITO
Came into existence in 1947 and operated until 1995
Multilateral trade has been negotiated under GATT
Superseded by the WTO
substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis

7. World Trade Organization (WTO)
Signed by 123 nations on 15 April 1994.
Intergovernmental organization which regulates international trade.
Oversees the implementation, administration and operation of the covered agreements.
Provides forum for governments to negotiate trade agreements, to settle trade disputes, to sort out the trade problems they face with each other.
The WTO encompasses much of what GATT’s mandate, but moved onto other issues and areas such as services. (GATS & TRIPS)
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

8. International Monetary Fund (IMF)
Principal forum for discussing not only national economic policies in a global context but also issues important to the stability of the international monetary and financial system.
In the beginning, the IMF managed the exchange rate system created at Bretton Woods.
After collapsed of Bretton Woods, the IMF
Promote international monetary cooperation
Promote exchange stability and orderly exchange arrangements
To foster growth and high levels of employment
To provide temporary financial assistance to countries to help ease balance of payments adjustment
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

9. The IMF: Successes or Failures (Case study)
Turkey
After 2001 financial crisis, It was estimated that about 500,000 jobs were lost in Turkey just within first 45 days after the crisis.
The Turkish government strictly followed an IMF sponsored program for its economic recovery. Turkey gradually privatized the entire state sector and worked to resolve problems of corruption within the newly privatized enterprises.
The IMF loans and the reforms calmed down the Turkish markets and the economy entered into a recovery period within a year.
Turkey paid off the IMF’s debt on April 2013.

10. The IMF: Successes or Failures (Case study)
Bolivia
In the early 1980s, Bolivia experienced unprecedented hyperinflation.
Bolivia was adopted the Structural Adjustment Programs (SAPs) that were funded and supported by the IMF. 
IMF loans aimed to reduce the fiscal deficit through budget cuts which primarily resulted in the reduction of social spending.
This combined with the privatization of state enterprises and natural resources such as water and gas during the 1990s and early 2000s led to massive popular uprisings. Many indigenous Bolivians joined forces to oppose government policy. 
The peak was during the Water War in Cochabamba, as well as the Gas War. The Bolivian people protested against neoliberalism reform in Cochabamba.
The IMF stopped funding the Bolivian economy when Evo Morales took office, and the economy shifted toward twenty-first century socialism.
first, the Greek programs “only served to raise debt and demanded excessive fiscal adjustment;” second, the financing was “used to repay foreign banks;” and third, “growth-killing structural reforms, together with fiscal austerity, have led to an economic depression.

11. World Bank
Founded as the International Bank for Reconstruction and Development (IBRD) at 1944.
Component of World Bank Group and a part of the United Nations system.
Make loans to developing countries to help them reduce poverty, increase economic growth and improve quality of life.
The Bank has expanded far beyond its original focus on projects involving physical infrastructure to social and environmental issues.

12. Significant transformations
1) Governments have privatized, liberalized and marketized a range of sectors and activities that were previously state- owned. 2) Reduction in tariffs on most manufactured goods, further integration of trade. 3) Issues have arisen that are of collective concern to many states but which cannot be managed adequately by each state acting independently. There is incentive for states to cooperate with other nations.

13. Critiques The World Bank
Is criticized for lending money to middle-income countries instead of poor countries.
Is seen as losing focus and of encroaching on the other activities.
Infrastructure projects financed by the World Bank Group have social and environmental implications. For example, World Bank-funded construction of hydroelectric dams in various countries has resulted in the displacement of indigenous peoples of the area.
 IMF often attach loan conditionalities based on what is termed the ‘Washington Consensus’, focusing on liberalisation—of trade, investment and the financial sector—, deregulation and privatisation of nationalised industries. Often the conditionalities are attached without due regard for the borrower countries’ individual circumstances and the prescriptive recommendations by the World Bank and IMF fail to resolve the economic problems within the countries. IMF conditionalities may additionally result in the loss of a state’s authority to govern its own economy as national economic policies are predetermined under IMF packages. Issues of representation are raised as a consequence of the shift in the regulation of national economies from state governments to a Washington-based financial institution in which most developing countries hold little voting power. 

14. Critiques
The IMF
Is criticized for lacking transparency in its decision-making and its operations.
Increasingly seemed marginal and irrelevant.
“One–size-fits-all” approach - general models are imposed on developing countries without regard for differences among and between their economies.
Failure of structural adjustment that did not bring sustained growth.
The World Bank and the IMF are accused for being missionary institutions pushing neo-liberal, Washington Consensus ideas on developing countries.
The World Bank and the IMF are receiving protests over the continuing dominance of developed countries.
 IMF often attach loan conditionalities based on what is termed the ‘Washington Consensus’, focusing on liberalisation—of trade, investment and the financial sector—, deregulation and privatisation of nationalised industries. Often the conditionalities are attached without due regard for the borrower countries’ individual circumstances and the prescriptive recommendations by the World Bank and IMF fail to resolve the economic problems within the countries. IMF conditionalities may additionally result in the loss of a state’s authority to govern its own economy as national economic policies are predetermined under IMF packages. Issues of representation are raised as a consequence of the shift in the regulation of national economies from state governments to a Washington-based financial institution in which most developing countries hold little voting power. 

15. Multinational Corporations (MNCs)
Many believe that the MNCs has grown more powerful, perhaps much more powerful, than the nation-state and any of other organizations, especially in the globalization process.
Advocates of multinationals say they create high-paying jobs and technologically advanced goods in countries that otherwise would not have access to such opportunities or goods.
On the other hand, critics say multinationals have undue political influence over governments, exploit developing nations and create job losses in their own home countries.

16. Definition of MNCs
A MNC is a multinational corporation which has facilities and other assets in at least one country other than its home country.
Such companies have offices and/or factories in different countries and usually have a centralized head office where they coordinate global management.
Very large multinationals have budgets that exceed those of many small countries.

17. MNCs in the globalization process
MNCs set up production worldwide where cheap labour is available, where markets are near, and where government policies look after their interests.
Globalization has enabled improvement in trade and communication with different countries. There has been a tremendous increase in globalization with the increase in the number of MNCs.
Since the MNCs are producing as well as selling in many countries, they are interlinking the economies of these countries and thus speeding up globalization.

18. What is EMNCs ?
An emerging multinational corporation (EMNC) is a firm that is based in an emerging economy and controls outward foreign direct investment abroad, thus multinational corporations and outward foreign direct investment may be used interchangeably.
According to the World Bank classification, emerging countries often belong to the lower or upper-middle income categories, experience a higher growth rate than that achieved by industrial economies, and are more oriented towards applying a wide spectrum of economic policies favoring free-market mechanisms.
Furthermore, according to Constanza (2012), emerging markets are characterized by institutional instability and lower levels of economic development compared to industrialized economies.

19. First-worlds - Developed MNCs
Developed MNCs may have certain concerns when investing in emergent economies.
These may include corrupt or non-meritocratic politicians in the government, protectionist sentiments against foreign MNCs and suspicion amongst employees of different backgrounds and ethnicities.
The lack of diversification within the board of directors, and thus shortage of insight into developing economies, may be a challenge for first-world MNCs.
First-world MNCs relocate their businesses, acquire local firms and hire local talents to stay relevant. Combining competitive local resources with global operations, MNCs engage in risk-sharing and engage in mutually beneficial alliances with smaller firms to effectively tap into developing markets.

20. First-worlds - Developed MNCs
Developed MNCs may have certain concerns when investing in emergent economies.
Large MNCs might also approach government officials directly with an analysis of the country's issues and offer solutions though their products and services. This alleviates problems and improves the country's appeal to potential investors, and concurrently generates revenue for the firm.
Due to globalization, skills of the old become obsolete; they no longer deal with the developed world, but developing economies instead. Large MNCs recognize this and to better manage overseas operations, they deploy more competent staff abroad and even look for talented natives to fill top positions, though eligible candidates are scarce and retaining them is difficult.

21. Emerging economies - EMNCs
Emergent countries bring forward products and strategies that push prices to a new low- specializing in low-end markets and increasingly compete with large firms in the middle- income bracket as well.
Though growth may be rapid, studies have found developing MNCs' business models and tactics short of their first-world counterparts', placing doubt on the sustainability of their economic growth.
Although these companies may still be inexperienced and face various problems, they adopt sensible measures and aspire to raise the company, and meet global standards.
Individuals and companies in developing nations are also beginning to strive towards better governance and demanding higher ethical standards from politicians and businesses alike.
This spurs positive sentiments to the potential of these firms, though they are not based in first-world nations.

22. BRICS and The Next 11 Economies
BRICS countries - Brazil, Russia, India and China, and South Africa.
The Next 11 Economies - Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam
Jim O'Neill - the man responsible for coining the BRIC acronym to represent emerging markets - also coined the 'Next 11' to represent the world economies with the potential to become among the world's largest during this century. The countries include Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam. These are frontier markets that investors may want to consider investing in as the next big emerging markets.

23. Emerging economies - EMNCs

24. Effects on the World Economy
Some might consider that MNCs only have good effects on the world economy; however, there is a reverse side of it as well.

25. Advantages from the Viewpoint of the Home Country
MNCs usually get raw-materials and labour supplies from host countries at lower prices; specially when host countries are backward or developing economies.
MNCs can widen their market for goods by selling in host countries; and increase their profits. They usually have good earnings by way of dividends earned from operations in host countries.
Through operating in many countries and providing quality services, MNCs add to their international goodwill on which they can capitalize, in the long-run.

26. Limitations from the Viewpoint of the Home Country
There may be loss of employment in the home country, due to spreading manufacturing and marketing operations in other countries.
MNCs face severe problems of managing cultural diversity. This might distract managements’ attention from main business issues, causing loss to the home country.
MNCs may face severe competition from bigger MNCs in international markets. Their attention and finances might be more devoted to wasteful counter and competitive advertising; resulting in higher marketing costs and lesser profits for the home country.

27. Advantages of MNCs from the Viewpoint of Host Country
Employment Generation
Automatic Inflow of Foreign Capital
Proper Use of Idle Resources
Improvement in Balance of Payment Position
Technical Development
Managerial Development
End of Local Monopolies
Improvement in Standard of Living
Promotion of international brotherhood and culture
(i) Employment Generation:
MNCs create large scale employment opportunities in host countries. This is a big advantage of MNCs for countries; where there is a lot of unemployment.
(ii) Automatic Inflow of Foreign Capital:
MNCs bring in much needed capital for the rapid development of developing countries. In fact, with the entry of MNCs, inflow of foreign capital is automatic. As a result of the entry of MNCs, India e.g. has attracted foreign investment with several million dollars.
(iii) Proper Use of Idle Resources:
Because of their advanced technical knowledge, MNCs are in a position to properly utilise idle physical and human resources of the host country. This results in an increase in the National Income of the host country.
(iv) Improvement in Balance of Payment Position:
MNCs help the host countries to increase their exports. As such, they help the host country to improve upon its Balance of Payment position.
(vi) Technical Development:
MNCs carry the advantages of technical development 10 host countries. In fact, MNCs are a vehicle for transference of technical development from one country to another. Because of MNCs poor host countries also begin to develop technically.
(vii) Managerial Development:
MNCs employ latest management techniques. People employed by MNCs do a lot of research in management. In a way, they help to professionalize management along latest lines of management theory and practice. This leads to managerial development in host countries.
(viii) End of Local Monopolies:
The entry of MNCs leads to competition in the host countries. Local monopolies of host countries either start improving their products or reduce their prices. Thus MNCs put an end to exploitative practices of local monopolists. As a matter of fact, MNCs compel domestic companies to improve their efficiency and quality.
In India, many Indian companies acquired ISO-9000 quality certificates, due to fear of competition posed by MNCs.
(ix) Improvement in Standard of Living:
By providing super quality products and services, MNCs help to improve the standard of living of people of host countries.
(x) Promotion of international brotherhood and culture:
MNCs integrate economies of various nations with the world economy. Through their international dealings, MNCs promote international brotherhood and culture; and pave way for world peace and prosperity.

28. Limitations of MNCs from the Viewpoint of Host Country
Danger for Domestic Industries
Repatriation of Profits
No Benefit to Poor People
Danger to Independence
Disregard of the National Interests of the Host Country
Misuse of Mighty Status
Careless Exploitation of Natural Resources
Selfish Promotion of Alien Culture
Exploitation of People, in a Systematic Manner
(i) Danger for Domestic Industries:
MNCs, because of their vast economic power, pose a danger to domestic industries; which are still in the process of development. Domestic industries cannot face challenges posed by MNCs. Many domestic industries have to wind up, as a result of threat from MNCs. Thus MNCs give a setback to the economic growth of host countries.
(ii) Repatriation of Profits:
(Repatriation of profits means sending profits to their country).
MNCs earn huge profits. Repatriation of profits by MNCs adversely affects the foreign exchange reserves of the host country; which means that a large amount of foreign exchange goes out of the host country.
(iii) No Benefit to Poor People:
MNCs produce only those things, which are used by the rich. Therefore, poor people of host countries do not get, generally, any benefit, out of MNCs.
(iv) Danger to Independence:
Initially MNCs help the Government of the host country, in a number of ways; and then gradually start interfering in the political affairs of the host country. There is, then, an implicit danger to the independence of the host country, in the long-run.
(v) Disregard of the National Interests of the Host Country:
MNCs invest in most profitable sectors; and disregard the national goals and priorities of the host country. They do not care for the development of backward regions; and never care to solve chronic problems of the host country like unemployment and poverty.
(vi) Misuse of Mighty Status:
MNCs are powerful economic entities. They can afford to bear losses for a long while, in the hope of earning huge profits-once they have ended local competition and achieved monopoly. This may be the dirties strategy of MNCs to wipe off local competitors from the host country.
(vii) Careless Exploitation of Natural Resources:
MNCs tend to use the natural resources of the host country carelessly. They cause rapid depletion of some of the non-renewable natural resources of the host country. In this way, MNCs cause a permanent damage to the economic development of the host country.
(viii) Selfish Promotion of Alien Culture:
MNCs tend to promote alien culture in host country to sell their products. They make people forget about their own cultural heritage. In India, e.g. MNCs have created a taste for synthetic food, soft drinks etc. This promotion of foreign culture by MNCs is injurious to the health of people also.
(ix) Exploitation of People, in a Systematic Manner:
MNCs join hands with big business houses of host country and emerge as powerful monopolies. This leads to concentration of economic power only in a few hands. Gradually these monopolies make it their birth right to exploit poor people and enrich themselves at the cost of the poor working class.
In summary, MNC activity is sometimes beneficial for host country economic development, and at other times is detrimental to such development.

29. Criticism of MNCs in Developing Countries
"Multinational corporations do control. They control the politicians. They control the media. They control the pattern of consumption, entertainment, thinking. They're destroying the planet and laying the foundation for violent outbursts and racial division.“

30. Criticism of MNCs in Developing Countries
MNCs may also bring with them relaxed codes of ethical conduct that serve to exploit the neediness of developing nations, rather than to provide the critical support necessary for countrywide economic and social development.
When a MNC invests in a host country, the scale of the investment (given the size of the firms) is likely to be significant. Indeed governments will often offer incentives to firms in the form of grants, subsidies and tax breaks to attract investment into their countries. This foreign direct investment (FDI) will have advantages and disadvantages for the host country.
MNCs have also been blamed for supporting corrupt and repressive political regimes that would help them with continuing their operations.

31. Criticism of MNCs in Developing Countries
The shifting landscape of national political regimes and MNC’s economic power has brought about a new kind of instability in the political arena that has also created greater uncertainty and enhanced risk in the economic arena.
MNCs are facing increasing pressure to respond to societal needs and expectations that were hitherto considered the responsibility of local political authorities and also home-grown economic organizations.
One dimension of the resultant instability can be found in numerous and recurrent campaigns – sometime violent and invariably destabilizing – against the operations of MNCs whether they are dealing with resource extraction, e.g., mining for minerals and oil; working conditions and wages for workers in low wage countries; and, pollution and environmental degradation dealing with MNC operations.

32. “It depends” Are MNCs good or bad for the global economy?
Regardless of the answers to these questions, one thing is certain: MNCs are a permanent and growing feature of international political economy in the twenty-first century. MNCs with their political and economic power will be effective in all areas of our lives. They will continue to grow and influence international relations with different outcomes in the future.
From their emergence, through their developments, multinational corporations have always been important actors in world economy.
Willingly or not, nation states start to share their rights with multinationals and an interdependent and sometimes a mutually beneficial relationship has formed among these actors.
Nation states, especially the most developed ones, still hold the leading act in international relations
Multinational Companies are a reality and they are here to stay for the forseeable future. It is time for countries which have been exploited to start making changes and amend their ways for the better and the sooner the better.
MNCs think global Act Local

33. Global economic flows (Trade)
Production flows: Trade
Trade surplus and deficit
A good place to get a quick snapshot of global trade, as well as net economic flows in and out of a nation-state.
Two global economic giants are China and the US.
US trade deficit and China trade surplus
The China’s surplus with the US was almost equal to its surplus with all other countries in the world. And the US has a large deficit with China than with any other country in the world.
The trade deficit with China has certainly hurt America industry, but it has greatly aided the American consumer who has access to a wide range of low-priced imports from China.

34. Global economic flows (Trade)
Trade in goods and services is clearly central to the global economy. Mainly through interconnected circuits. These interconnections are clear in the various chains and networks that exist in the global economy specifically in global trade.
International trade of goods is a major revenue of globalization. More than half of world trade occurs between high-income areas such as as Japan and United State. However, trade is increasing between these high-income counties and developing countries, such as in Asia and South America
Economic chains and network:
Supply chains
International production networks
Global Commodity Chains
Global Value Chain

35. Global economic flows (International Trade)
Supply Chain: begins with raw materials and follows the value- adding process through a variety of inputs and outputs and ultimately to a finished product
International production networks: networks of producers involved in producing a finished product. MNCs are the central role.

36. Global economic flows (International Trade)
Global commodity chains: used by firms to their resources, transform them into goods or commodities and finally distribute them to consumers. This includes buyer-driven chains such as Wal-Mart which play an important role in determining what industries produce and how much they produce. And also includes producer-driven chains, which focus on governance structure of global commodity chain.
Global value chain: various phrases of production, delivery to final consumers, final disposal.
“Emphasis on the relative value of those economic activities that are required to bring a good or service from conception to, through the different phrases of production, delivery to final consumers, and final disposal after use. “(Gereffi 2005: 168)

37. Global economic flows (Increasing competition of commodities)
One of the most striking developments in recent years has been the increasing global competition for various commodities.
Demand for commodities has increased.
fueled by: not only highly developed countries, but now by massive development in developing countries such as China and India
This is absolutely a fundamental change in the global economic structure (Krauss 2008).
The result of this was massive increases in the price of all sorts of commodities, which reached record highs in 2008, before the Great Recession.

38. Global economic flows (International Trade)
Pros: Exports create jobs and boost economic growth. They give domestic companies more experience in producing for foreign markets. Over time, companies gain a competitive advantage in global trade. Imports allow foreign competition reduce prices for consumers. It also gives shoppers a wider variety of goods and services.
Cons: The only way to boost exports is to make trade easier. Governments do this by reducing tariffs and other blocks to imports. That reduces jobs in domestic industries that can not compete on a global scale. It also leads to job outsourcing. That is when companies relocate call centers, technology offices and manufacturing. They choose countries with a lower cost of living.

39. Global economic flows (Race to the bottom and upgrading)
Race to bottom: less developed countries want to compete and succeed in the global economy, they must undercut the competition in various ways such as offering lower wages, poorer working conditions, even sacrifice the environment and so on.
The current global economic system is based on a race to bottom by less developed countries and exploitation of them.
But there is one fact that we must not ignore: a process of upgrading in less developed countreis and their industries, which means at least some of them enter the global economic market at or near the bottom, but over time begin to move up.

40. Global economic flows (Race to the bottom and upgrading)
This point can be made more generally, which called industrial upgrading: economic actors—nations, firms and even workers move from low-value to relatively high-value production.
Rivoli’s argument:
She gives a example of the global market of T-shirt, that if we take the long historical view, the nations that won the race to the bottom are now among the most successful global economies in the world.
She generalizes that nations and areas within them must win the race to the bottom in order ultimately to succeed.
However she recognizes that activists have altered the nature of the race by raising the bottom. “ bottom is rising”.

41. Global economic flows (Race to the bottom and upgrading)
However, this view is debated by globaphobics. They think the countries interested in development by race to the bottom, this not only leads them into poverty for at least a time, but it greatly advantages the wealthy North which is guaranteed a continuing source of low-priced goods and services as one country replaces another at the bottom. Winning the race to the bottom is no guarantee of adaptive upgrading, but it is a guarantee of low wages and poverty for an unknown amount of time.
Do you agree with it?

42. Global economic flows (Consumptions)
Consumption is highly complex, involving mainly consumer objects, consumers, the consumption process consumption sites.
Consumer objects and services: while many objects and services remain highly local, an increasing number have globalized. On the one hand, the global objects such as automobiles from the US and Germany, on the other hand, there are global services such as those offered by accounting and package delivery services.
Consumers: consumers are on the move throughout the world, often as tourists.

43. Global economic flows (Consumptions)
Consumption process: not -too-distant future. There is a remarkable similarity throughout the world in the process of consuming in a supermarket, a shopping mall, or a fast-food restaurant.
consumption sites: American and Western-style consumption sites—shopping mall, fast-food restaurant, clothing chains, supermarket, theme park, Internet sites such as amazon.com and eBay have spread throughout much of the world.

44. Financial globalization
Given the expansion of trade, migration, and capital flows, along with increasingly complex global organization of production, it is not surprising that last 30 years has seen a boom in research on globalization.
The current Age of Globalization in the last 50 years is actually the second great wave of globalization of international trade and capital flows.
The first occurred from 1870 to 1914, when international trade grew at a 4% rate annually, rising from 10% of GDP in 1870 to over 20% in 1914, while international flows of capital grew annually at 4.8% and increased from 7% of GDP in 1870 to close to 20% in

45. Financial globalization
With the coming of World War I, the first Age of Globalization came to an end, leading to what Rajan and Zingales (2003a) have referred to as the “Great Reversal.”
A new international system was created, to promote world trade and prosperity – the establishment of two new international financial institutions, IMF and the World Bank, and also the General Agreement on Tariffs and Trade (GATT) – extremely successful.
Financial globalization is primarily confined to rich countries. Obstfeld and Taylor (2004)

46. Financial globalization
Despite the huge increase in international capital flows in recent years, they primarily flow from North to North that is from rich to other rich countries (northern hemisphere).
Two complementary reasons why capital flows occur:
They can move funds from countries where the marginal productivity of capital is relatively low to countries where it is high
They can facilitate diversification
This feature of international capital flows is a paradox. Lucas (1990)
We might think: extremely high returns in poor countries and massive flows of capita l from rich to poor countries. However, this happens to only one-fifth of total international capital flows.

48. Should financial globalization be encouraged
Should financial globalization be encouraged? Will further financial globalization be beneficial to these poorer countries?
One of few things polls of economists do agree on is that globalization of international trade is desirable…
The evidence that financial development and economic growth are linked:
larger financial sector (financial deepening) showed larger the economic growth King and Levine (1993)
doubling of the size of private credit in an average less-developed country - two percentage point annual increase in economic growth (e.g., Levine, Loayza, and Beck 2000).
firms dependent more on external sources of funds, would benefit more from financial deepening, are found to grow faster in countries that are more financially developed (Rajan and Zingales 1998, Demirguc-Kunt and Maksimovic 1998).
financial development raises growth is more through improvements in the allocation of capital that produces higher total factor productivity rather than through higher investment (Beck, Loayza, and Levine 2000, Levine 2004).

49. Although financial deepening improves an economy's rate of economic growth, it is possible that poverty will remain the same or increase because the resulting growth could lead to greater income inequality. (Hmmm ironic…)
Countries with better financial development, the income of the poorest fifth of the population actually grows faster than average GDP per capita indicating that financial development is associated with reductions in poverty and even with reductions in the use of child labor.
Despite its benefits, financial development often does not happen in poor countries because their financial systems face severe impediments to solving asymmetric information problems. Such as The Tyranny of Collateral, Inability of the Legal System to Enforce Restrictive Covenants, Government-Directed Credit, Underdeveloped Regulatory System to Promote Transparency.

50. Skeptical of financial globalization, stating:
Although financial deepening improves an economy's rate of economic growth, it is possible that poverty will remain the same or increase because the resulting growth could lead to greater income inequality.(Hmmm ironic…)
Opening up of financial markets in emerging market economies to foreign capital – leads to economic collapse (Stiglitz 2002)
Skeptical of financial globalization, stating:
“But the claims of enormous benefits from free capital mobility are not persuasive” (Bhagwati 1998, 2002)
“The Deficiencies of Global Capitalism.” On Globalization (George Soros 2002)

51. Relationship Between Globalization and Growth in Per Capita GDP (in the ten years thru 2002)

52. Can globalization encourage financial development?
One solution: opening up of domestic markets to foreign goods and direct investment, as well as to foreign capital and foreign financial institutions Rajan and Zingales (2003b) and World Bank (2001).
Globalization, particularly financial globalization, can encourage financial development indirectly by decreasing the incentives for financial repression.
incumbent firms will now be more likely to support the necessary institutional reforms to make the financial system work better, and increase in financial sector will foster economic growth.

53. Why financial globalization doesn't always work
Opening up an economy to international capital flows, particularly if it is not managed properly, can lead to financial crises that are disastrous to the economy.
There are two basic routes through which emerging market countries can find themselves in a crisis:
a financial liberalization/globalization process gone wrong
a severe fiscal imbalance

54. Why financial globalization doesn't always work
Bad policies are the reason that financial development does not occur and why financial globalization often leads to harmful financial crises.
Instead of rejecting financial globalization, we can greatly improve the environment for economic growth if we develop policies that promote successful financial development and financial globalization.

55. Questions
What can be the future of international economic institutions?
Fighting corruption or prioritize economic development, what should developing countries choose?
Should developing countries adopt “race to the bottom” to lower their environmental standards to attract international business?
Is financial globalization beneficial?
Is economic globalization a source of prosperity or a main cause of inequality?