Tutorial 6 1. Hyperglobalists believe that globalisation is both new and inevitable. In your answer refer to global economy.

Question 1  Operationalise/rephrase the question in own words. Identify the core issue, outline the syntheses and indicate level of agreement with the question. 1. Hyperglobalist View of Global Economy (Castells, Ohmae)  The Hyperglobalists believe that there is growth of global products, services, and markets. They also argue that there is global integration of production, marketing and distribution of products (the world is seen globalised/borderless).  Firms are seen as involved in increasing flow of goods, services, capital and ideas which results in economic growth. The firms are seen to no longer represent nationstates (dominance of oligopolies). a. Global Capitalism  Goods and services are traded throughout the world. These arrangements are supported by organisations such as The World Bank, World Trade Organisation, International Monetary Fund etc. These organisations promote ideology of marketisation (capitalism) in which political intervention is reduced and economic liberalisation is enhanced.  Share of world trade taken by Less Developed Countries (LDCs) and Newly Industrialising Countries (NICs) has improved and remained stable at 25%-30% which is indicative of an increment in the level of global economic interdependence. b. Culturalising Economy  Japanese organisational model such as Toyotaism that specifies flexible specialisation is increasingly been carried out throughout the world. Japanese organisations are more focused on asset building and market share.  Some of the implementations in that direction has been simultaneously imitated by many other organisations. The global flows of business ideas are increasingly rapid. It is a reflexive process in which employers strategically think about the firm in terms of a specific culture (corporate symbols, rituals, training, communication etc). Means Strategic Management Just-In-Time Total Quality Management Explanations  Firms stress on relationship between organisations, suppliers and customer markets.  Minimising inventory and therefore eliminating waste (Muda) which goes against the JIT mind set of Quality.  Refers to quality control in which workers are involved in the maintenance of production standards.  Workers meet in quality control circles to systematically identify limitations (flaws) within the quality of their products.  JIT and TQM encourage Japanese organisations to develop autonomous work groups (collectivising and sharing of task).

Teamwork

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c. Financial Markets  Global financial markets has evolved in various ways: Elimination of Space  Implies conquest of time whereby there is 24 hours trading by electronic access.  It deals with currency, stocks, securities, (futures and commodities). Homogeneity of Financial Markets  Banks have become stock dealers, building societies and credit unions have become banks.  The financial system have become more complicated and states are placed at the mercy of financial markets. Banks as Main Credit Providers  Banks have become the main credit providers at the international level and these are far less territorially linked than the state credit providers that they replaced.

 Prove on the existence of a globalised economy can be explained in terms of the spiral effects of the financial crisis that was experienced worldwide (interconnectedness). Asian Economy Crisis  In Thailand, sales shrank, businesses failed, loans went bad, short-term capital fled the country, stock market fell etc. Thailand baht collapsed due to floating. IMF lent US$5 billion to bail out Indonesian government and another US$57 billion to South Korean government.  Asian industries were closed and demand for commodities dropped and commodities prices fell with them.  DME commodity producers such as Australia and Canada switched export markets. Russia rouble also came under pressure and subsequently devalued in 1998. Stock market around the world plunged. Brazil also devalued its currency by 35% setting up further panics and more IMF bailouts.  States are also under the pressure to accommodate global market forces by attracting investments through international fiscal competition. Because of this states implement less policies that are welfare oriented (weakening social democracy). 2. Transformationalist View of Global Economy (Sklair, Held et.al)  They argue that the present era is another step in a long evolutionary process in which closed local and national economies disintegrate into more mixed, interdependent and integrated cosmopolitan societies (Enmeshment).  At the same time, there is also unevenness in economic development. Some economic actors are pushed into subsidiary/subordinate positions (Marginalization).

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a. Enmeshment Japan  The 1990s have been a serious setback for economic growth in Japan. The problems in the banking system triggered and prolonged the recession. The problem was ignited by an emphasis on exports which was supported by easy credits in the 1980s by the banking system (bubble economy).  When the Yen was devalued in 1985 (Plaza Accord), the MOF compensated for the decline in exports by injecting spending into the economy thus inflating the bubble.  Funds were ploughed into real estate (used as collateral) & industrial fixed assets. There was also off-shoring of production to offset costs. The result for large firms was overcapacity and the declining exports led to NPLS.  Banks were saddled with bad debt as firms stopped borrowing & banks also began slowing lending & this in turn, hurt the small businesses.  In relation to globalisation, it seems that the bubble economy and its burst seem to be a domestic issue. The way in which the crisis of a banking sector spread to other sectors of production is essentially domestic because of the bank-industrial relationship.  The once favourably viewed Japanese corporate management methods was now viewed as rigid and seen as harming liberal market competition.  Hence, there was economic, industrial and bureaucratic reforms. In most cases, Japanese reforms too American ways of management (adopt a globally acknowledged way of business). So, in Japan, globalisation has been identical to the acceptance of American ways of business in most business context.

China  China was considerably late joining global trade networks.  The gradual opening of the eastern coast attracts massive amounts of foreign investment. It is also interesting to note that the Chinese government has rejected radical opening of the domestic market and have chosen to control financial flows (however, this is a difficult task).  But the future task for China is to consider how to incorporate the global trade rules into the domestic law, and how to enforce the law when almost all people stick to traditional business customs. The cases of intellectual property and of food safety standards are the best examples.

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b. Marginalization  TNCs in the NICs, women workers were the majority (>90%) in EPZs. They were employed because considered nimble fingers, slow wit. Process Positive social consequences Negative social consequence

a. TNCs Expanding.

Providing consumer goods, Exercising power skills and new technology anonymously and without social responsibility. States and corporations act jointly to develop research and technology at little cost to taxpayers. Provide jobs, raise standards of health, safety and pay taxes. Diminution of the states sovereignty and responsibility to its citizenry. Worker exploitation and too much power placed in the hands of local elites.

b. Forging Alliances between powerful nation states.

c. Spread of TNCs to the NICs esp in export processing zones.

 The effects of these developments can be seen in terms of class polarization at a global level. Based on the data from UNDP (United Nations Development Programme) and UNRISD (United Nations Research Institute for Social Development), it is suggested that there is a rise in the income differences between the richest and poorest countries.  The data was collected from resource, trade, income and quality of life indexes. The data was analysed regionally.  UNRISD estimates that the number of people living on less than $1 per day have increased from 1.1 billion to 1.2 billion. Some estimates suggest that there 2 billion people worldwide who live on less that $2 per day.  There is growing global social inequality. Poverty defined according to the Copenhagen Summit refers to lack of income, lack of productive resources to sustain livelihoods, hunger, malnutrition, ill health, lack of access to education etc.  With 12% of worlds population, Africa has 1% of world trade and investment. In industrializing countries there is serious cases of job losses and emergence of parttime/contractual employment and downsizing. In present knowledge economy 2/3 of workers were classified as services workers.

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3. Sceptics View of Global Economy (Hirst and Thompson, Hay)  The view suggests that organisation of the economy is still predominantly national. What we experience is internationalisation (growing links between separated national economies). a. International Business  Internationalisation process involves the extension of economic activities across national boundaries. It is essentially a quantitative process which leads to more extensive geographical pattern of economic activity. b. Trading Blocs  The current world economy is not sufficiently integrated to constitute a truly globalised economy. For example, the formation of trading blocs has led many to claim that international economic activity is dominated by Europe, North America and Pacific Asia. The trading blocs exclude other countries from internal markets and compete aggressively for third markets. Therefore, this overthrows the view of a single global economy. c. Trade Activities  There is a massive North-South divide in trade and investment. Major economic activity (trade, investment and financial flows) take place in and between the triad of Japan, North America and Europe. They influence the financial markets.  IDOL is a permanent fixture. Since production functions have been shifted away from the old industrial zones, this has allowed themselves to be upgraded (enabling emergence of more professional skill workers) in the Northern Hemisphere and more unskilled workers (labour force) in the Southern Hemisphere. Hence, there is cross-licensing technology, joint ventures and off-shore production of components.  Simultaneously, development of EPZs also saw foreign companies operating with minimum regulation, taxation and creation of greater income gaps.

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