Globalization

Globalization refers to the shift toward a more integrated & interdependent world
economy. Globalization has several facets, including the globalization of markets
& the globalization of production.

Globalization of Markets

The globalization of markets refers to the merging of historically distinct &

separate national markets into one huge global marketplace. The global market
is created because of following main reasons:

 Falling barriers to cross-border trade & investment

 Convergence of the tastes & preferences of consumers

Globalization of Productions

The globalization of production refers to the sourcing of goods & services from
different locations around the globe to take advantage of national variations in
the cost & quality of factors of production (such as labor, energy, land, & capital).
By doing this, companies hope to lower their overall cost structure or improve the
quality or functionality of their product offering, thereby allowing them to compete
more effectively.
There are five distinct phases in the evolution of globalization since the
1800s (see figure)
Fourth Industrial Revolution (4IR)

What is it?

The Fourth Industrial Revolution represents a fundamental change in the way we

live, work & relate to one another. It happened because of extraordinary
technology advances commensurate with those of the first, second & third
industrial revolutions. These advances are merging the physical, digital and
biological worlds in ways that create both huge promise & potential peril. There
are three reasons why today’s transformations represent not merely a
prolongation of the Third Industrial Revolution but rather the arrival of a Fourth
and distinct one: velocity, scope, and systems impact. The speed of current
breakthroughs has no historical precedent. When compared with previous
industrial revolutions, the Fourth is evolving at an exponential rather than a linear
pace. Moreover, it is disrupting almost every industry in every country. And the
breadth and depth of these changes herald the transformation of entire systems
of production, management, and governance.

What will happen In the future?

Good Things-

 Technological innovation will also lead to a supply-side miracle

 Long-term gains in efficiency and productivity
 Transportation and communication costs will drop
 Logistics and global supply chains will become more effective
 Cost of trade will diminish
 All of this will open new markets and drive economic growth.

Bad Things-

 The revolution could yield greater inequality, particularly in its potential to

disrupt labor markets.
 Due to automation, the net displacement of workers by machines might
aggravate the gap between returns to capital and returns to labor
 On the other hand, the displacement of workers by technology may
collectively result in a net increase in safe and rewarding jobs

We cannot foresee at this point which scenario is likely to emerge, and history
suggests that the outcome is likely to be some combination of the two.
Drivers of Globalization

Two macro factors underlie the trend toward greater globalization

 Decline in trade barriers to the free flow of goods, services, and capital
 Technological change, particularly the dramatic developments in
communication, information processing, and transportation technologies

Decline in Trade Barriers

 During the 1920s & 1930s, many of the world’s nation-states erected
formidable barriers to international trade & foreign direct investment.
o Retaliatory trade policies were implemented by different countries
against each other
o Ultimately, this depressed world demand & contributed to the Great
Depression of the 1930s

 Having learned from this experience, the advanced industrial nations of the
West committed themselves after World War II to progressively reducing
barriers to the free flow of goods, services, and capital among nations

 Under the umbrella of GATT, eight rounds of negotiations among member

states took place to lower barriers to the free flow of goods and services

 Uruguay Round was the most recent one which were finalized in
December 1993 and which established the World Trade Organization
(WTO) to police the international trading system

 From historical data, it can be said that the larger the difference between
the growth rates of world trade & world production, the greater the extent
of globalization

Technological Change

 Technological change has made the globalization a tangible reality.

 Every year there are major advances in communication, information
processing and transportation technology, including the explosive
emergence of the “Internet of Things (IoT).”
 Communication- Development of the microprocessor since World War II
enabled the explosive growth of high-power, low-cost computing, vastly
 increasing the amount of information that can be processed by individuals
& firms.
o Over the past 30 years, global communications have been
revolutionized by developments in satellite, optical fiber, wireless
technologies, and the Internet
o Internet has developed into the information backbone of the global
economy
 Transportation Technology- Several major innovations in transportation
technology have occurred since the 1950s.
 The development of commercial jet aircraft & superfreighters & the
introduction of containerization have simplified transshipment from one
mode of transport to another with a low cost.

What are the debates of Globalization?

Globalization, Jobs, and Income

 Falling trade barriers allow firms to move manufacturing activities to

countries where wage rates are much lower which will destroy
manufacturing jobs in wealthy advanced economies such as the United
States and Western Europe

 Due to the entry of countries like China, India, & states from Eastern
Europe into the global trading system, along with global population
growth, the pool of global labor has increased more than fivefold between
1990 & today.

 Other things being equal, can conclude that this enormous expansion in
the global labor force, when coupled with expanding international trade,
would have depressed wages in developed nations.

Globalization, Labor Policies, and the Environment

 Adhering to labor & environmental regulations significantly increases the

costs of manufacturing & puts them at a competitive disadvantage in the
global marketplace vis-a-vis firms based in developing nations that do not
have to comply with such regulations.

 Because of this reason, free trade encourages firms from advanced

nations to move manufacturing facilities to less developed countries that
 lack adequate regulations to protect labor & the environment from abuse
by the corrupt people.

Globalization and National Sovereignty

 Today’s increasingly interdependent global economy shifts economic

power away from national governments & toward supranational
organizations such as the WTO, the EU, and the UN.

 Unelected bureaucrats now impose policies on the democratically elected

governments of nation-states, thereby undermining the sovereignty of
those states & limiting the nation’s ability to control its own destiny.

Globalization and the World’s Poor

 Despite the supposed benefits associated with free trade & investment,
over the past 100 years or so the gap between the rich & poor nations of
the world has gotten wider

 In 1870, the average income per capita in the world’s 17 richest nations
was 2.4 times that of all other countries. In 1990, the same group was 4.5
times as rich as the rest

 In 2017, the 34 member states of the Organization for Economic Co-

operation and Development (OECD), had an average gross national
income (GNI) per person of more than $40,000, whereas the world’s 40
least developed countries (LDCs) had a GNI of under $1,000 per capita—
implying that income per capita in the world’s 34 richest nations was 40
times that in the world’s 40 poorest

Why is FDI important for any consideration of going global?

Ans- https://blogs.iadb.org/integration-trade/en/why-do-companies-invest-abroad-
and-how-does-it-impact-development/#:~:text=FDI%20is%20about%20much
%20more,newly%20arrived%20firms%20from%20abroad.

Sociocultural Approach: Globalization

Remember that the extension questions are created by combining the HL
extension topics with the three topics in each of the approaches. 

Sociocultural extension topics: “The influence of globalization on

individual behaviour.”

 How globalization may influence behaviour

 The effect of the interaction of local and global influences on behaviour
 Methods used to study the influence of globalization on behaviour

Sociocultural approach topics:

 The individual and the group

 Cultural origins of behaviour and cognition
 Cultural influences on individual attitudes, identity and behaviours

READ MORE  IB Psychology Exam Question Banks

 Paper 1: Biological approach (Link)

 Paper 1: Cognitive approach (Link)
 Paper 1: Sociocultural approach (Link)
 Paper 1: HL Ext Bio Animal Studies (Link)
 Paper 1: HL Ext Cog Technology & Cognition (Link)
 Paper 2: Human Relationships (Link)
 Paper 2: Abnormal Psychology (Link)

Soc-cult HL Extension Exam Questions

Sociocultural essay questions*: “The influence of globalization on individual

behaviour.”

 Discuss how globalization may influence behaviour.

 Discuss how globalization may influence behaviour and cognition.
 Discuss one or more effects of globalization on cultural origins of behaviour.
 Discuss one or more effects of globalization on cultural origins of behaviour
and/or cognition.
 Discuss the effect of the interaction of local and global influences on cultural
origins of behaviour.
 Discuss the effect of the interaction of local and global influences on the
individual and the group.
 Evaluate one or more methods used to study the influence of globalization on
behaviour.
 Evaluate one or more methods used to study the influence of globalization on
cultural origins of behaviour.
 Evaluate one or more methods used to study the influence of globalization on
the individual and the group.

*The HL extensions are only assessed in Section B of Paper 1, the essay

section. No SAQs will reference the extension materials