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Economic interdependence
Elements of interdependence
Trade: goods, services, raw materials, energy Finance: foreign debt, foreign investment, exchange rates Business: multinational corporations, global production
Carbaugh, Chap. 1
Economic interdependence
Globalization
The process of greater interdependence between countries and their citizens Involves increased integration of product and resource markets
Trade Labor (immigration) Investment
Economic interdependence
Economic interdependence
Waves of Globalization
1st wave: 1870-1914
Falling tariff barriers Improved transportation
Economic interdependence
700 in Philippines 20,000 in India 3,000 in India 500 in China, India 700 in China 800 in Philippines, China
Architectural blueprints Finance, information technology Chip design, tech support Software design Consumer electronics, R&D Accounting, tech support
Source: Drawn from Is Your Job Next? Business Week, February 3, 2003, pp. 5060.
Carbaugh, Chap. 1
Economic interdependence
Exports (% of GDP)
53% 37 31 27 31 22 18 9 10
Imports (% of GDP)
46% 33 25 26 18 21 21 13 8
7
Economic interdependence
Source: U.S. Census Bureau, Foreign Trade Division, U.S. Trade in Goods and Services, 19602002 at http://www.census.gov/foreign-trade/statistics, and Economic Report of the President, 2002.
Carbaugh, Chap. 1
Economic interdependence
Economic interdependence
Interdependence: Impact
Overall standard of living is higher
Access to raw materials & energy not available at home Access to goods & components made less expensively elsewhere Access to financing and investment not available at home International competition encourages efficiency
Carbaugh, Chap. 1 10
Economic interdependence
Carbaugh, Chap. 1
11
Comparative advantage
Carbaugh, Chap. 1
Economic interdependence
Comparative advantage