Reading Assignment 4:Economic globalization - Dicken(YANGPEIFU)

 1.Summary

Multinational corporations (TNCs) are key drivers of the global economy. While often labeled as "borderless giants," most TNCs retain significant operational concentration in their home countries. These corporations utilize globalization to manage complex cross-border production networks, connecting resources and markets. Emerging from historical models like colonial trading companies, modern TNCs have grown exponentially, with over 61,000 firms operating through 900,000 branches, contributing about 10% of global GDP. TNCs pursue market-oriented investments to access new markets and asset-oriented investments to acquire localized resources such as natural resources or skilled labor. They expand internationally through greenfield investments, mergers and acquisitions, or strategic alliances to share risks, technology, and development costs. Despite their global reach, TNCs remain influenced by their home countries’ cultural and organizational characteristics, such as Japan’s Keiretsu or South Korea’s Chaebol. To optimize operations, TNCs adopt various production models, including centralized, localized, regional, or globally segmented supply chains. In their relationship with nation-states, TNCs exploit policy differences through regulatory arbitrage, but governments maintain control over critical areas like market access. Labor dynamics are often uneven due to the geographical fixedness of workers compared to the flexibility of TNCs, though international civil society organizations (CSOs) help address these imbalances. While TNCs significantly shape economic globalization, they are not omnipotent, operating within the constraints of national regulations, cultural contexts, and global economic systems, creating a dynamic interplay of integration and conflict.Economic globalization is one of the three dimensions of globalization (the other two are political and cultural globalization), referring to the transnational flow of goods, capital, services, technology, and information, as well as the increasing integration and interdependence of national, regional, and local economies through cross-border trade, investment, and cooperation. Its core includes the globalization of production, finance, markets, technology, institutions, and personnel. Modern economic globalization has benefited from the advancement of long-distance transportation and communication technology, the rise of the knowledge economy, and the development of science and technology. In addition, the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), have promoted the reduction of trade barriers and economic openness, accelerating the process of globalization.

The history of economic globalization can be traced back to the formation of early commodity, labor, and capital markets. In the mid-twentieth century, containerized transportation technology and market policy changes led to a significant increase in global trade. Since then, global supply chains have.expanded further as multinational corporations have moved to regions with lower labor costs through outsourcing and reorganization of production. International governmental organizations (such as the United Nations and the World Bank) and non-governmental organizations (such as international charities) also play an important role in promoting global cooperation and assistance. At the same time, multinational corporations increasingly rely on transnational R&D and cultural adaptation capabilities to expand their markets. Migrants also play an important role in the global economy, supporting their home economies through remittances, spreading technology and business culture, and facilitating cross-border asset flows. Although globalization has brought greater 

wealth mobility and productivity, it has also raised challenges including labor transfer, national sovereignty conflicts, and social equity issues. Globalization has accelerated economic growth and the reduction of global poverty. Since the 1980s, the annual growth rate of per capita GDP in globalized countries has accelerated from 1.4% in the 1960s and 2.9% in the 1970s to 3.5% in the 1980s and 5.0% in the 1990s. In contrast, the growth rate of developed countries has fallen from 4.7% in the 1960s to 2.2% in the 1990s, while that of non-globalized developing countries has fallen from 3.3% in the 1970s to 1.4% in the 1990s. This growth is not only due to the performance of China and India, 18 of the globalized countries achieved significant growth in the 1980s and 1990s. Although some globalized countries (such as China) have seen an increase in domestic inequality, this inequality is more due to domestic policies (such as internal immigration restrictions and agricultural policies) rather than international trade. Globalization has significantly reduced poverty rates, such as the 5.4% annual income growth rate for the poorest 20% of the population in Malaysia and the 3.8% annual income growth rate for the poorest 20% of the population in China. In several countries, the proportion of the population living on less than $1 a day has fallen significantly: from 20% to 15% in China and from 43% to 36% in Bangladesh. Overall, globalized countries are narrowing the per capita income gap with developed countries. Through economic expansion, newly industrialized countries such as China, India and Bangladesh have made significant progress in reducing inequality. Global supply chains are complex, interconnected networks that enable companies to produce, manage and distribute goods and services around the world. These supply chains transform natural resources, raw materials and components into final products delivered to customers by linking together value chains. Companies often optimize supply chains by producing in lower-cost regions, but this strategy can lead to a "race to the bottom," where companies move to countries with lax labor and environmental regulations to reduce costs, resulting in poor working conditions, low wages, increased pollution, and government deregulation to attract investment. Nonetheless, when labor demand in low-cost countries is too high, as in China, wages can rise and the public will demand more government protection. In developing countries with less regulated industries, long-term labor can lead to health problems, especially for women workers who are exposed to hazardous chemicals or harsh environments in agriculture and textiles. Efforts to improve working conditions, including safety policies implemented after the Rana Plaza factory collapse in Bangladesh, show the potential to address these issues. Gender inequality is also a problem in global supply chains, with women often facing a higher risk of unemployment and discrimination in the workplace. Several global movements, such as fair trade and the anti-sweatshop movement, aim to improve labor conditions in developing countries. Fair trade improves the quality of life of disadvantaged producers through direct sales, higher prices, and support for community development, while the anti-sweatshop movement protests unfair labor treatment. Capital flight is another globalization-related issue, when financial conditions in a country deteriorate (such as rising taxes or currency devaluation), assets flow out quickly, which can lead to liquidity crises and economic instability. In addition, while income inequality within countries has increased during the period of globalization, overall global inequality is shrinking due to rapid economic growth in developing countries.Economic inequality encompasses fairness, equality of outcomes, and equality of opportunity. Although early research suggested that inequality contributes to economic growth, subsequent research has shown that the level of income inequality is an important factor in long-term economic growth. International inequality, the income gap between countries, while still huge, is shrinking rapidly. For example, China and India have doubled their per capita income in the past two decades, while the United States took 150 years to achieve the same growth. Economic globalization and liberalization have promoted improvements in welfare and reduced inequality in developing countries. Since 1970, living standards in these countries have improved significantly, as reflected by increased life expectancy, decreased infant mortality, increased adult literacy rates, and decreased fertility rates. This shift not only improves the quality of the population but also reduces child labor as families are more inclined to educate their children for a better future.

However, economic development resulting from international investment and trade may exacerbate local income inequality. High-skilled workers tend to earn higher wages, while low-skilled workers have limited income growth. The expansion of the global market may also allow multinational companies to reap huge profits, weaken the competitiveness of local enterprises, and further exacerbate inequality. But globalized stock markets have partially alleviated this problem by providing ordinary investors with opportunities to invest in international companies. In addition, companies in developed countries often have competitive advantages due to automation technology, advanced processes and good infrastructure, especially in areas such as agriculture, which increase productivity through mechanization and chemical inputs. Developing countries rely on cheap labor and have an advantage in labor-intensive industries. According to the theory of comparative advantage, national economies tend to focus on producing products for which they are more competitive, although this difference may even out in the long run, leading to more balanced economic development.

2.Project

 Economic growth and poverty reduction

 - Globalization has accelerated economic growth. In particular, the per capita GDP growth rate of globalized countries is significantly higher than that of non-globalized countries.

 - Although income inequality has increased in some areas, overall living standards in developing countries have improved and poverty rates have fallen.

 Global supply chains and labor conditions

 - Multinational companies reduce production costs through global supply chains, but this may trigger a "race to the bottom", leading to worsening working conditions and environmental pollution.

 - Labor in laxly regulated countries faces health risks, sexism and unfair treatment, but global movements such as Fairtrade are driving improvements.

 Tax havens and capital flight

 - Tax havens attract capital through low tax rates, encourage tax avoidance and evasion, create global tax competition and exacerbate the gap between rich and poor.

 - The huge scale of hidden assets poses challenges to economic transparency and fairness.

 Cultural globalization

 - Cultural exchanges and integration are enhanced, and Western culture (such as fast food culture, English and media) spreads globally, while triggering calls for the protection of local culture.

 - Globalization of media has resulted in information flows being dominated by a Western perspective, although media influence is also rising in other regions.

 Population migration

 - Technological progress and globalization have made human migration more convenient, and the number of international immigrants has increased significantly, profoundly affecting the social structure of both the sending and receiving countries.

Economic inequality and development

 - Income gaps between countries have narrowed, but income inequality within countries has increased.

 - Investment in education and the expansion of global markets have opened up more opportunities for some, but also exacerbated skills and income gaps.

3. Question

How has globalization promoted economic growth and poverty reduction while also causing greater income inequality and worsening labor rights?