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Age of Globalization Week 2 & 3

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by: Kate Notetaker

Age of Globalization Week 2 & 3 BADM 1004

Kate Notetaker
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These notes cover class for weeks 2 and 3 due to having no class for Labor Day.
The Age of Globalization
Maurer, N; Rehman, S
Class Notes




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This 5 page Class Notes was uploaded by Kate Notetaker on Wednesday August 31, 2016. The Class Notes belongs to BADM 1004 at George Washington University taught by Maurer, N; Rehman, S in Fall 2016. Since its upload, it has received 300 views. For similar materials see The Age of Globalization in Business Administration at George Washington University.


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Date Created: 08/31/16
September 7, 2016 Recitation  Global Risk and Global Megatrends  Macro trend  new normal  Recent Global Tectonic Shifts o Scratch the surface of the data  Something changed o 10 years ago o Will still be feeling the effects from it  GDP  Gross domestic product o Dollar value of all final good and services produced in a country’s borders in a given year o Major economic data to compare countries and their performance o ONLY 4 groups that can buy stuff in our economy o GDP = C + I + G + X N  C = consumers  I = investment  G = governments  X n countries that buy stuff o Not included in GDP  Intermediary goods  goods that are involved in the final production of that product  Non-production transactions  Stock, bonds, transfer of houses  Only new houses sold are counted  Non-market activities  plumber called to fix toilet  GNP  Gross national product o American owned but brought back o Number tends to be much larger than GDP  US dollar is the only safe haven currency right now  Growth rates of GDP  how fast we are going  GDP per capita  take GDP and divide by population  Shadow economy  activities that aren’t counted o Unreported activity o Really hard to measure  guess  Four underground economies o Illegal economy o Unreported economy o Unrecorded economy o Informal economy  Index of state weakness in the developing world (The Brookings Institute) o Economic o Political o Security o Social welfare  GDP not the only measurement but it’s the most widely used  Watch 2 videos  links at the end of powerpoint September 12, 2016  5 stages of development of a nation o Countries are poor and people think/know that they are poor  living day to day, bare minimum  No health care, no kind of safety net  Some countries live like this for a while  Something happens  could be luck, find something, develop o Countries are getting rich quickly  Such as India  fasted growing emerging market in the world  Change their laws, allow foreign investment to come in  Same time globalization began  China  policy choice to re-engage the world  People still think that they are poor  very small percentage of people gets rich really quickly  Takes a lot of time for the bulk of the people to catch up  Not big spenders o Countries are rich  Everyone knows that they are wealthy  People think of themselves as rich  Economic decadence  sense of shifting your priorities  From working to avoiding these and savoring fruits of labor  Slowing down o Countries become poorer and people still think of themselves as rich  Debt  live off of credit  Start to leverage your assets  Just to sustain their lifestyle o Last stage of the cycle  typically go through deleveraging and relative decline  People are slow to accept  No more credit  cant spend as much  Not a lot of savings, no cushion  Have to cut personal budget, have to get rid of assets  Relative decline  US has a very high GDP to debt ratio  Why do some countries succeed and why do some fail?  Mercantilism o Measure of national wealth precious metals o Export  a way of earning more gold  Adam Smith  moves the word away from the mercantilism mindset o Winner and winner instead of win-lose  Classical notion to a dynamic one o Competitive advantage  Drivers of Economic Growth o Traditional theories  Increasing capital intensity  Raw materials and land  Higher labor productivity  Growth comes from the use of more inputs  limits to growth o New theories  Know-how and investments in R&D are key drivers  Entrepreneurship  Learning society  No limits to growth  Classical Economic Model Assumptions o P = L P o 2 countries, 2 goods o One factor of production employed in producing  labor o Labor productivity  how many things can they make in one day? o Value of each product determined by its labor content o Goods move freely o Labor is nor internationally mobile  Adam Smith o Explanation of Productivity Advantage (absolute advantage)  David Ricardo o Comparative Advantage  more important  Factors proportions theory  endowment theory o Heckscher and Ohlin o Refined after WWII o P = L +PK P  Dynamic notion of comparative advantage o Take a disadvantage  turn it into an advantage  Globalization o Process of interaction and integration among people, companies and governments of different nations  Driven by international trade and investment  Aided by information technology  Effects on environment, culture, political systems, economic development and prosperity, human well being o Not new  doing this for thousands of years  Buying from and selling to each other in lands at great distances  Silk Road  China and Europe o People and corporations have invested in enterprising in other countries o Similar to those prevailing before the outbreak of the First World War o Policy and tech developments  spurred increases in cross-border trade, investment and migration  So large that we think it’s a new phase in its economic development  Globalization is now farther, faster, cheaper and deeper o New wave has been driven by policies that have opened economies domestically and internationally o Many governments adopted a free market system  Increasing productive potential o Negotiated dramatic reductions in barriers to commerce  International agreements to promote trade in goods, services and investment o Defining feature is an international industrial and financial business structure o Proponents of globalization claim it allows poor countries and citizens to develop economically o Opponents claim that the creation of an unfettered international free market has benefited multinational corporations in the Western world at the expense of local businesses o Resistance to globalization  try to manage the flow of capital, etc.  Technology has been a principal driver of globalization o Communication and physical transportation  Globalization of Competition o Types of Competition  International  Multi-domestic  Global o Value Chain  Adding value, creating manufactured goods  Idea  R&D  Sourcing ( you need money, labor and raw materials)  Manufacturing  marketing  sell it  Every step of the process  looking at their competition  Strategic Alliances o Join with a major competitor in that same field o Might be easier if they shared in one step


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