Text 9. The Globalization of Markets

The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace. It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market. The global acceptance of consumer products such as Citicorp credit cards, Coca-Cola, Levi's jeans, Sony Walkmans, Nintendo game players, and McDonald's hamburgers are all frequently held up as prototypical examples of this trend. Firms such as Citicorp, Coca-Cola, McDonald's, and Levi Strauss are more than just benefactors of this trend; they are also instrumental in facilitating it. By offering a standardized product worldwide, they are helping to create a global market. A company does not have to be the size of these multinational giants to facilitate, and benefit from, the globalization of markets.

The most global markets currently are not markets for consumer products - where national differences in tastes and preferences are still often important enough to act as a brake on globalization--but markets for industrial goods and materials that serve a universal need the world over. These include the markets for commodities such as aluminum, oil, and wheat, the markets for industrial products such as microprocessors, DRAMs (computer memory chips), and commercial jet aircraft; and the markets for financial assets from US Treasury Bills to eurobonds and futures on the Nikkei index or the Mexican peso.

In many global markets, the same firms frequently confront each other as competitors in nation after nation. Coca-Cola's rivalry with Pepsi is a global one, as are the rivalries between Ford and Toyota, Boeing and Airbus, Caterpillar and Komatsu, and Nintendo and Sega. If one firm moves into a nation that is currently unserved by its rivals, those rivals are sure to follow lest their competitor gain an advantage. These firms bring with them many of the assets that have served them well in other national markets - including their products, operating strategies, marketing strategies, and brand names - creating a certain degree of homogeneity across markets. Thus, diversity is replaced by greater uniformity. As rivals follow rivals around the world, these multinational enterprises emerge as an important driver of the convergence of different national markets into a single, and increasingly homogenous, global marketplace. Due to such developments, in an increasing number of industries it is no longer meaningful to talk about "the German market," "the American market," "the Brazilian market," or "the Japanese market"; for many firms there is only the global market.

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1. What is globalization according to the text?

2. In what way can you explain the global acceptance of consumer products?

3. Should companies offering their products worldwide be a multinational giant?

4. Do national differences in tastes and preferences remain? In what way do they influence the trend towards globalization?

5. Describe the global market trends in relation to competition?

6. Why is it often meaningless to speak about the German market or the American market today?

Text 10. The Globalization Debate:

Prosperity or Impoverishment?

Is the shift toward a more integrated and interdependent global economy a good thing? Many influential economists, politicians, and business leaders seem to think so. They argue that falling barriers to international trade and investment are the twin engines that are driving the global economy toward greater prosperity. They argue that increased international trade and cross-border investment will result in lower prices for goods and services. They believe that globalization stimulates economic growth, raises the incomes of consumers, and helps to create jobs in all countries that choose to participate in the global trading system.

One frequently voiced concern is that far from creating jobs, falling barriers to international trade actually destroy manufacturing jobs in wealthy advanced economies such as the United States and United Kingdom. The critics argue that falling trade barriers allow firms to move their manufacturing activities offshore to countries where wage rates are much lower.

Supporters of globalization reply that critics miss the essential point about free trade - the benefits outweigh the costs. They argue that free trade results in countries specializing in the production of those goods and services that they can produce most efficiently, while importing goods that they cannot produce as efficiently. When a country embraces free trade, there is always some dislocation but the whole economy is better off as a result.

Supporters of globalization do concede that the wage rate enjoyed by unskilled workers in many advanced economies has declined in recent years. However, while globalization critics argue that the decline in unskilled wage rates is due to the migration of low-wage manufacturing jobs offshore and a corresponding reduction in demand for unskilled workers, supporters of globalization see a more complex picture. They maintain that the declining real wage rates of unskilled workers owes far more to a technology-induced shift within advanced economies away from jobs where the only qualification was a willingness to turn up for work every day and toward jobs that require significant education and skills. They point out that many advanced economies report a shortage of highly skilled workers and an excess supply of unskilled workers. Thus, growing income inequality is a result of the wages for skilled workers being bid up by the labor market, and the wages for unskilled workers being discounted. If one agrees with this logic, a solution to the problem of declining incomes is to be found not in limiting free trade and globalization, but in increasing society's investment in education to reduce the supply of unskilled workers.

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1. Do you think that the trend towards a more integrated economy is positive? Why?

2. Is there any relationship between international trade, investments and globalization?

3. What are negative consequences of globalization?

4. What arguments do supporters of globalization use to prove that globalization is a positive trend?

5. In what way does globalization influence the labour market?

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