1. What Is Globalization?
Globalization means many different things to students depending on their experiences. International students are usually well aware of the power of multinational corporations, the size of the U.S. market, and the opportunities and constraints on access to global markets. Students from the United States have an image of globalization that will depend on whether they have seen jobs lost to international competitors, been part of firms that have increased exports or imports, or read carefully the country of origin information on products they purchase.

Teaching strategy: Ask students how they have experienced the effects of globalization. Most students will be able to name imported products they purchase. Some will not know that well-known foreign companies like Toyota and BMW produce products in the United States. Often students are unaware of the fact that many U.S. brand names are owned by companies with headquarters outside the country. Many students will be unaware of U.S. leadership in international trade of services, financial assets, and technology.

1. Globalization is neither new nor widespread.
   
   Ask students if they ever read National Geographic articles about the treasures found on ancient sunken ships. These articles often describe ships containing products from many different areas of the region, as traders sought out and brought new products to new customers. Though globalization is not new, not all countries participate in global markets. Ask students to name the countries banned for U.S. travelers (Cuba and North Korea, and until June 2004, Libya.)
   
   
2. The role of technological change
   
   Three technological factors are contributing to the spread of globalization: falling transportation costs, improved communications, and computers.
   
   Teaching strategy: Ask students if they have used voice over Internet protocol (VOIP) for international telephone calls. Have they corresponded with friends while either they or the friend was in another country? Have they called a companys customer assistance and spoken with someone in another country? This last question may create controversy among students fearing the loss of jobs to overseas competitors.
   
   
3. Measuring globalization
   
   Foreign Policy magazine uses a four-category system to rank countries on degree of globalization. These categories are political engagement, technology, personal contact (travel and tourism, international communications, and cross-border income transfers), and economic integration.
   
   

2. Globalization controversy

1. Arguments against globalization
   
   Opponents of globalization argue it does more harm than good. Critics view globalization as primarily enriching corporate elite. Their view is multinational corporations enrich themselves at the expense of poor people and the environment, using international organizations to promote their interests.
   
   Developing countries are pitted against each other, with the lowest-cost producer, often ignoring social and environmental costs, racing to the bottom to get the jobs and income offered. Workers rights and child labor rules are often ignored.
   
   The WTO, IMF, and World Bank are seen as agents supporting the interests of multinational corporations and industrialized countries.
   
   
2. Arguments in favor of globalization
   
   Supporters of globalization argue trade raises the standard of people living of both industrialized and developing countries. Supporters point out that the major international organizations are sponsored and led by governments not corporations. Advocates also contend that the race to the bottom is not documented, and multinational corporations are motivated by market opportunities, not lax environmental enforcement.
   
   Supporters of globalization contend it expands opportunities, improves working standards, and raises wages of workers.
   
   Teaching strategy: Use local examples to demonstrate the impact of globalization. Have students read the country of origin labels on their clothes before class. Bring a world map to show students where their clothing comes from. Ask students if they would be willing to pay more for clothing made in the United States.
   
   

3. Globalization, Economic Growth, and Incomes
The Asian tigersHong Kong, Korea, Singapore, and Taiwanare often used as the example of globalization leading to economic growth. Todays students do not remember when Japan, the model for the Asian tigers, was considered a low-cost, low-quality producer.

Teaching strategy: Have students consider the following questions:

• Have those countries that pursued globalization grown faster than those that did not?
  
  

• Has income inequality increased or decreased in countries pursuing globalization?
  
  
• Has the gap between rich and poor countries decreased with globalization?
  
  
• Has poverty been reduced in countries pursuing globalization?
  
  

4. Financial Crises and Globalization

1. Crises of the 1990s
   
   During the 1990s, financial crises occurred in Mexico and Southeast Asia in countries pursuing economic growth through globalization. Data provided in the text show all of the countries except Malaysia had short-term debt greater than the international currency reserves in the country. Except for Mexico, each country had a high percentage of bank loans relative to the countrys GDP. In each country, the stock market had dropped dramatically, and during the financial crises, each countrys currency dropped significantly against the U.S. dollar.
   
   
2. Exchange rates and financial crises
   
   Each of the countries had a fixed exchange rate policy prior to the crisis period. If a financial crisis does not occur, fixed exchange rates reduce currency risk facilitating trade. To maintain a fixed exchange rate the government must intervene, buying or selling its currency to maintain equilibrium. In the case of Mexico, given the long history of financial crises coinciding with presidential elections (every six years), Mexican and other investors sold peso assets and bought dollar assets, betting the peso would need to be devalued. The central bank, not having sufficient reserves to absorb the increased supply of pesos, eventually had to devalue the peso. Similar scenarios occurred in the Southeast Asian countries and in the process many businesses failed, having borrowed in dollars or other world currencies and now being unable to repay loans with lower-valued domestic currencies.
   
   
3. What caused the crises?
   
   Four factors contributed to the crises:
   
   

• Fixed exchange rates
  
  

• Falling international reserves
  
  
• Lack of transparency
  
  
• Short-term international investment
  
  

If the countries had not pursued globalization, they could have avoided the financial crises, but protectionism limits choices for consumers, reduces competition, and reduces market opportunities for entrepreneurs.