Assignment 1: Defining Globalisation

Defining globalisation is not an easy task since the concept of globalisation contains so many aspects and any form of definition can’t be value-free. The following essay describes my personal interpretation of globalisation: Globalisation refers to the phenomenon of increasing economic interconnectedness and information exchange of people, businesses and governments around the globe. The process of globalisation is taking place at an increasingly faster rate. The process is propelled by the significant decrease in transport costs and speed for global trade, the technological advancements to communicate with someone at the other side of the globe within seconds and the possibility to easily access an unlimited amount of information through the internet. Since globalisation is taking place at an increasingly faster rate, it can be described as a revolution. Globalisation touches upon the free movement of goods, people, capital and information. In this increasingly borderless world, events in, take for example Turkey, are entering our living room within seconds. Through media channels we receive the news about Turkey within seconds and through the interconnectedness of markets, any significant change in Turkey will affect the stock prices of the Amsterdam Exchange Index within minutes. Events taking place thousands of kilometres away from our homes can cause a political debate in our home country. In this sense, the distance separating each individual country does not seem to matter anymore; our vast globe is changing in a global village where news, economic changes and even gossip spread like fire. Globalisation is not beneficial to all and is therefore often seen as a challenge or even threat. Since it has the power to penetrate all aspects of life, people are warry of how globalisation can affect their daily jobs, or how their culture is affected. The opportunities it has created are often forgotten when a global threat emerges. For businesses, globalisation offers opportunities and challenges. They need to be prepared and closely monitor their borderless business environment. For governments, globalisation means that they need to know how to cope with foreign investments and how they can protect their citizens from market failures.

Wordcount: 347

Source:

Friedman, T. (2007). The world is Flat 3.0. Retrieved August 23, 2016 from Mit Video Web site: http://video.mit.edu/watch/the-world-is-flat-30-9321/

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TRENDS IN GLOBALISATION

Date: August, 30, 2016

Name: Jeremy van Lierop

ID: 13022318

Class: ES3-3b

Assignment: Trends in Globalisation

Supervisor: Mr. Kuijpers

Assignment 2: Forces Driving Globalisation 1000

Say for example, I have seen a gap in the market and I decide to import and sell watermelon slicers. Then, by the comfort of my home, I can open the Alibaba website and for less than 1000 euro of transport costs, within 30 days, a 20 GP container filled with 160.000 watermelon slicers will arrive from the port of Shenzhen, China at the port of Rotterdam. The total costs for the watermelon slicers, including import duties and transport costs will be around 100.000 euro. For less than 1 euro a piece, 160.000 watermelon slicers arrive from China at my doorstep. And that all takes place within 30 days. This is globalization at work. Due to the revolution of the internet, I can check prices and place orders at the other side of the world. Due to the revolution in transport, the shipping price is only 0,6 eurocent per watermelon slicer and due to low trade tariffs and economies of scale, watermelon slicers can be bought at an remarkable low price. In this essay we will take a look at the forces who have made this all possible; the forces driving globalisation. A special thanks goes to the humble shipping container. In “The humble hero”, The Economist illustrates how shipping containers are one of the important forces that have driven globalisation.

It is no coincidence that the take-off of the container matches the take-off of global trade. In “The humble hero”, The Economist explains how countries that started to use containers, experienced a rise of 790% of bilateral trade over the following 20 years (The Economist, 2013, para 6). Uniform shipping containers made it possible to transport more goods in a safe way. Containers encouraged the use of bigger ships and the labour productivity at ports increased twentyfold. Ports became bigger and due to more consistent delivery times, suppliers from the other side of the world could deliver quickly and on schedule.

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Containerisation is just one of the forces that have propelled globalisation. Transport by air, the harmonisation of regulations, a better infrastructure and more lately, the Electronic Data Interchange (EDI), have all contributed to a rapid increase of efficiency in the transport of cargo. The introduction of containers to global trade has even helped to accelerate the industrialisation of developing countries. According to Richard Baldwin, the international supply chains formed by containerisation allowed developing countries like China to easily join existing supply chains instead of building their own (Baldwin, 2011).

This rapid increase in international trade would not have been possible without the new methods of communication and innovations in the information technology. New innovations in communication are one of the forces driving globalisation. Both the speed and costs of communication has been reduced to almost nothing. The introduction of the telephone made it possible to speak with someone at the other side of the globe within minutes instead of waiting weeks for a letter. In the same way the fax machine made it possible to send documents and contracts across the globe in an instant. These were costly methods of communication, but caused a revolution nevertheless. The television opened a window to the world and way to reach the masses. With the introduction of the internet, communication became almost free. More importantly, the internet offers an unlimited amount of information. Remember the old math teacher in high school who told you that it was absolutely necessary that you learn to remember basic calculations, since in the future you wouldn’t carry a calculator with you all the time? The joke is on him, since the smartphones which he probably never saw coming, offers the answer to all known calculations. With a smartphone in our hand we have access to a large share of the world’s information. If it’s true that knowledge equals power, the most powerful nowadays are the ones that have the knowledge off where to find all other knowledge.

Population growth and economies of scale have contributed to globalisation in various ways. First, strong population growth has caused overpopulation which has forced people to emigrate to other continents. These migration flows, have brought an exchange of new products and ideas and have been at the basis of the United States and Australia. Secondly, population growth has created an abundance of labour, which made it possible to achieve a high level of industrialization. Thirdly, population growth has been responsible for creating a huge demand for products and services. In a way, these huge consumer markets are one of the drivers of globalisation. They have created the steady demand which made it possible to grow economies of scale. Economies of scale have contributed the interconnectedness of the world economies; a crisis in a major economy can be felt in all major economies. In this sense, borders don’t matter anymore. Through mergers and acquisitions, the world has seen the growth of companies with a turnover higher than the GDP of some European countries. These global enterprises are responsible for a large share of foreign direct investments; in this way they are propelling globalisation. Among all these forces that have propelled globalisation, the removal of trade barriers may not be forgotten. Without the removal of high import and export tariffs, companies would still be serving their home market only and the build-up of global supply chains would not have been possible.

All these forces driving globalization caused a revolution on their own, but working all together they are propelling globalization at an increasingly faster rate. Without the humble container, it would be much harder to buy 160.000 watermelon slicers from China. Without technological advancements in communication and information technology, it would not have been possible to communicate in an

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instant with everyone across the globe at virtually no costs. Without the development of the internet, we wouldn’t have access to large share of the world’s information. This has all been possible because there has been a steady consumer demand for these innovations and because economies of scale have motivated countries to specialize and trade the products in which they have a comparative advantage. And this international trade would not have been possible without the abolishment of most trade barriers. In a way, all these globalisation forces have set each other in motion and continue to propel this revolution.

Word count: 1045

Source:

Baldwin, R. (2011). Trade And Industrialisation After Globalisation's 2nd Unbundling: How Building And Joining A Supply Chain Are Different And Why It Matters. Retrieved August, 2016 from NBER Web site: http://www.nber.org/papers/w17716

The Economist. (2013). Free exchange. The humble hero. Containers have been more important for globalisation than freer trade. Retrieved August 28, 2016 from The Economist Web site: http://www.economist.com/news/finance-and-economics/21578041-containers-have-been-more-important-globalisation-freer-trade-humble

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Assignment 3: The promises of globalisation

When the world woke up on the Friday after the Brexit referendum, it was shocked to be informed that the Brexit camp had won. The result came as a surprise and the Brexiteers might have been the most surprised. Although every individual voter had their own reason to cast a vote to leave the EU, it could be stated that a large share of the voters in favour of a Brexit felt that the promises of globalisation and the promises of the EU had not benefited them. Brexiteers are not the only ones who feel that globalisation has not kept its promise. In the EU, populist parties, who have protectionist measures in their programmes are on the rise and in the United states, Donald Trump suggests that the United States should impose a 45% import tariff on Chinese goods; it seems that anti-globalist sentiments are on the rise. Therefore I would like to take a closer look at the promises of globalization. My guideline will be the article “Trade in the balance” written by the Economist which takes a closer look at how free trade with China has affected the working class of the USA and how it will affect them in the future.

At this time, as the UK has not left the EU yet, it is still too early to predict the true implications for the UK’s and World’s economy. It is certain, however, that a little bit more than half of the voters felt that the country would be better off on its own. Besides being tired of EU regulations, and the high membership costs, they felt that free movement of goods, persons and capital had not benefited them personally, and that only the rich elite was getting richer while their situation remained stagnant. Therefore, to some extent, one can conclude that the middle finger towards the EU was also meant as an anti-establishment middle finger towards globalization. The middle finger was aimed at the privileged elites that told them that free movement of goods and persons would benefit them, while clearly it had not benefit them over the past decades. It were the “normal” people, the working class, who were tired of these false promises and wanted to take back control over their country and take back control over the money that they sent to the EU. The various institutions like the IMF, the OECD, the Bank of England and Price Waterhouse Coopers, who told them that a leave would have a negative effect on GDP were mistrusted and attempts by Obama or the European Union to let the Brits stay were ignored or seen as part of the problem. Clearly, globalisation has left a large share of Brits unhappy.

Just like their counterparts across the Atlantic, a share of the working class in the USA feels betrayed by the promised benefits of free trade. In “Trade in the balance”, The Economist takes a closer look at how trade can make everyone better off in the long-run, but often does not in the short-run. In comparison with the jobs the American economy could have had, the competition with labour abundant China has led to an estimated job-loss of 2.4 million jobs. The assumption that workers would easily find Jobs in other fields turned out to be untrue; the regions affected turned out to be unable to move workers to other industries or to more prosperous regions. The following chart from The Economist shows how free trade with China has led to a significant reduction in manufacturing jobs in the USA and how America’s current-account balance has deteriorated due to the unbalanced trade with China:

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Competition with China has had a large impact on manufacturers across the country. According to the authors referred to in the economist, Chinese imports accounted for a 44% decline in employment in manufacturing between 1990 and 2007. As a consequence, America’s electorate is increasingly susceptible for protectionist measures such as the 45% import tariff on Chinese goods which is campaigned by Donald Trump.

The protectionism advocated by Trump can never be the right answer since it can cause protectionist retaliations which will result in a lower global output. Globalization, on the other hand increases global output and has the power to make everyone better off. Globalization has lifted hundreds of millions of Chinese out of poverty, but why has it not worked for the working class in the United Kingdom and the United States? One answer is timing; in the short run free trade results in increased competition and a loss of jobs as production is moved to places with lower wages. In the long run, however it enhances the variety of products available on the market and causes markets to specialize in producing what they can produce the best. The industries with such a comparative advantage have, due to free trade, a whole global market at their disposal resulting in lower costs and higher incomes for consumers. Another answer on why globalization has not worked for everyone lies in the fact that even though globalization and free-trade result in a larger pie to share, this pie is not shared equally. Some get a large share of the pie and others only receive a tiny piece. It is up to the countries themselves to compensate the workers and invest in job retraining in order to let free trade work for everyone.

To summarize: “globalisation can make everyone better off. That does not mean it will.” (The economist, 2016) On both sides of the Atlantic there are large shares of people who lost their jobs due to globalization and want to take back control. Their responses to globalization are understandable and supported by facts. Their responses however do not mean that free trade should be abolished. The increased competition caused by free trade will result in larger markets and products being produces where they can be produced the most efficiently. This will result in a higher global output and a larger pie to share. How this pie is shared is up to countries themselves to decide.

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Wordcount: 1019

Source:

The Economist. (2016). Free exchange. Trade in the balance. Globalisation can make everyone better off. That does not mean it will. Retrieved August 26, 2016 from The Economist Web site: http://www.economist.com/news/finance-and-economics/21690073-globalisation-can-make-everyone-better-does-not-mean-it-will-trade

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Assignment 4: Identifying Current Trends in Globalisation

For Henk, the new manager of our R&D facility in vegetable seeds, the key word is automation. His aim is to speed up processes and to reduce costs. Not long after our former manager retired, he placed a digital weather station in one of our fields where we try to develop cabbage that has a resistance to bacterial diseases like Xanthomonas and Pseudomonas. For the type of research that our company does, it is very important that in the first place plants don’t die, since some can cost up to 5000 euro. Secondly it is very important that with every test, we are able to create similar conditions. The weather station was a good investment; it sends up-to-date information to our system about the temperature, wind, soil humidity and nutrients. At the same time, it’s a good example of some current trends in globalisation. Touching upon “the internet of things” this remotely monitored station, equipped with sensors, allows us to increase efficiency and to create data files which will form a bench mark for the upcoming years. Touching upon “Lean and Green”, the weather station allows us to save-up on recourses like fuel, fertilizer and pesticides. Lastly, the station will reduce the labour which was needed to check upon the crops. The weather station is not loved by all; one of my colleagues is warry about machines taking over his job.

One of the new trends in globalisation is “the internet of things”. This term is used for describing the trend that in the future most everyday items like clothes and washing machines will be equipped with sensors and connected to the internet. This will increase operating efficiency, send feedback to manufactures and provide more comfort of usage. My brother, who is studying electrical engineering, has already embraced this new trend; he has attached a temperature and humidity sensor to his coffee machine, to let his friends know when the coffee is ready. It shows how sensors can be easily incorporated in products to increase consumer comfort. How will the internet of things influence globalisation? For most, the world is changing from a connected place to a digital hyperconnected place. As a result, the trade of physical goods is expected to be replaced by digital “goods”. E-books, movies and games are already traded digitally. In the near future, 3D designs will be sent instead of replacement parts and the error in your car’s operating system can be fixed from a distance. Supply chains are expected to be linked from consumer to raw-material supplier and maybe even vice versa. This trend has the potential to make the world a little bit more efficient.

“Lean and Green” Is another trend which continues to influence globalization. As recourses like oil, gas, phosphates and rare earths are becoming scarce, the global economy is preparing itself for a transition. Climate change is the ultimate example of how meaningless borders are. As a global problem, it requires a global solution. In this way it is propelling political globalisation. Not only does a country like China uses its foreign policy to secure “rare earths” from Africa in order to supply

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Chinese companies, it is also trying to find a balance between economic growth and the environment. For businesses, the environment will continue to play a key role in the way products are designed, produced, distributed and marketed. Lufthansa, for example, has acquired an airplane that can fly on biodiesel. It has also bought shares in a company that uses algae to produce biodiesel. In this way it is securing its future fuel demand and at the same time letting its customers know that they care about the environment.

The internet of things, big data and artificial intelligence are all expected to replace routine cognitive tasks done by humans. The question is: “Will these future techs cause mass unemployment, or just require a transition from jobs that can be automated to job’s that can not be automated?” In “Automation and anxiety”, The Economist describes which jobs are at risk of being replaced and how this will affect society. At risk are jobs like accountants and real-estate sales agents. Relatively risk-free jobs are jobs that require creativity or social interaction (The economist, 2016). If a job is likely to be replaced, depends on whether the job consists of tasks that are routine or not. As an example they write that even a radiologist, a medical specialist, can see the task of interpreting x-rays being replaced by smart software. In the United States, 47% of workers had jobs that are at high risk of being automated (The Economist, 2016). This all seems like a dooms-day prophecy, however, automation is nothing new; history teaches us that where repetitive tasks are being automated, it enabled the workers to do other tasks better. Until now, automation has created more jobs than it destroyed (The Economist, 2016). This current trend in globalisation means that workers need to be prepared for a life-long learning in order to be flexible enough to fulfil the future jobs that this future technology will generate.

To conclude, “The internet of things” and “Artificial Intelligence” will create, yet unknown opportunities and changes. The world is changing into a hyperconnected place, where linking products to the internet will increase efficiency and consumer comfort. The “Lean and green” movement is changing the way products are designed, manufactured, distributed and marketed. It also propels political globalisation as countries are forced to work together to alleviate this global problem. These global trends will replace jobs and create new ones. Therefore, a life-long learning is advised to be prepared for this difficult transition.

Word count: 938

Source:

The Economist. (2016). Automation and anxiety. Will smarter machines cause mass unemployment? Retrieved August 30, from The Economist Web site: http://www.economist.com/news/special-report/21700758-will-smarter-machines-cause-mass-unemployment-automation-and-anxiety

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Assignment 5: How does Globalisation affect my Daily Life?

Last year I decided to buy stocks from the money that I earned with working during the summer holiday. The first stocks I bought were from a company listed as CREE INC. It’s an American company that designs and produces LED lighting and semiconductors. Other companies I invested in were Gazprom, Southern Copper, Mosaic company (Phosphate mining) and Fidelity fund India. It was not until the first weeks of 2016 that I noticed how truly interconnected the world’s economy is; as the growth forecasts for the Chinese economy started to fall, suddenly I saw all my stocks going down. My decision to stay away from Chinese stocks, got backfired. Even the companies of which I thought, had nothing to do with the Chinese economy were showing a sharp decline in stock price.

This personal example shows how fragile the world economy has become. A crisis or negative result in one country or industry can be felt instantly. Personally I fear that this high level of interconnectedness possesses the risk of a crisis spreading so quickly that there is no time to brace for impact. Think of a pandemic disease wiping out a large share of the world population, before we can react. Another crisis I see coming has to do with China being a hybrid democracy. China has become a success story as it has achieved an impressive economic growth and uplifted hundreds of Chinese from poverty. At the same time, I fear that since this political system is lacking the democratic institutions that can allow unhappy voters to vote for a new leader, the Chinese economy is at risk of an implosion. To visualise it; their society can not release pressure like the safety valve of a water cooker does.

Besides having some fear of a crisis being able to spread quickly, as my life is right now, I feel that globalisation offers me more opportunities, than threaths. Being born in a rich country with an open economy, globalisation allows me to aim for a profession in the international field. Having chosen for a broad study, I feel that I’m flexible enough to cope with the changes that will be caused by globalisation. Globalisation allows me to choose between an incredible large variety of products, all offered at a competitive price. Yesterday, I celebrated my birthday; the number of congratulations coming from people in other countries, outnumber the one coming from the Netherlands. To conclude, being in this situation, I feel that globalisation offers more opportunities than threats to me.

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