Chapter 1 Flashcards
Define Globalization
Growing integration and interdependence among nations, especially in economic activities:
- Trade, investment, technology, and finance
Define Economic Globalization
Allows goods, services, capital, and labor to move more freely across borders, promoting efficiency, innovation, and access to broader markets
Define Economic Interdependence
Domestic economics rely increasingly on international trade, investment, and partnerships, making no country self-sufficient, and influencing:
-political relations
-culture
-environment
What is Trade Liberalization, and what has it done?
Has lowered barriers, increasing trade volumes, and economic ties among nations, particularly through institutions like GATT and the WTO
Has Financial Globalization increased or decreased? What is the evidence?
It has intensified, with trillions of dollars flowing daily through foreign exchange and global capital markets.
What are the three historical waves of globalization?
- First wave (19th century): Driven by industrialization and steam transport
- Second wave (post-WW2 to 1970s): Led by Bretton Woods institutions and U.S. economic leadership
- Third wave (1980s onward): Fueled by deregulation, information technology, and emerging markets
Why is globalization slowing down?
Rising nationalism, protectionism, trade disputes, and supply chain disruptions
What does the Red Wing Shoe Case highlight?
How international competition can threaten domestic producers when global labor and production costs are lower (consumers will choose cheaper products)/
Is the U.S. economy considered relatively open or closed?
Relatively open, with significant portions of its GDP tied to imports and exports (e.g. nearly 12% of GDP in trade flows)
Why do capital movements (foreign investment in US assets) play a much larger role in US international linkages than labor movements?
Money crosses U.S. borders far more easily and in much larger amounts than people do
What does Kodak’s decline show?
How firms that do not adapt to changing global technologies and competition risk losing global market share
What does Schwinn Bicycles’ Demise Reflect?
Reflects how domestic manufacturers can be undercut by cheaper imported products, especially from countries like China
Stanley Black & Decker’s experience with reshoring production from China to Texas illustrates what?
How tariffs and labor costs influence manufacturing decisions
What did the COVID-19 pandemic do?
Disrupted global supply chains, raising awareness about dependence on foreign inputs, and prompting interest in restoring or diversifying suppliers
What are three misconceptions about trade?
- The belief that imports only destroy jobs
- View that all benefits from trade go to foreign countries
- Perception that trade deficits indicate economic failure
Where does trade lead to job displacement?
Hurts mainly low-skill and import-competing industries, but also creates higher-paying jobs in others, particularly in export-oriented and advanced industries
What do workers in export industries benefit from?
Higher wages, better working conditions, and receive more training than those in import-competiting sectors
Why is export-driven employment significant in the U.S.?
It supports millions of jobs across states and industries, particularly in manufacturing and services
What are the advantages of globalization for the U.S. economy?
Lower consumer prices, greater product variety, innovation, higher productivity, and economic growth
What due critics argue globaliztion causes?
- Wage stagnation for low & middle-income workers
- Job offshoring in both manufacturing and services
- Rising inequality and regional job losses
Why are even white collar and high-skilled service jobs increasingly outsourced?
Due to digital connectivity (accounting, software development, customer service)
What typically happens when displaced workers eventually find reemployment? (What is different about their new jobs?)
Their new jobs often pay less or offer lower job security, highlighting the need for retraining and adjustment support
