R&D Chap 7: Global economic flows

R&D Chap 7: Global economic flows

1. Global trade

   • operates through various economic networks such as supply chains, international production networks, global commodity chains....
     • But most importantly, the global value chain
       • follows the creation of value through different stages, from creation of a product to its disposal after use
         • 1) Consumption side - Commodities: 1st link in this chain
           • What is happening: Demand for supplies skyrocketed
             • Why?: Due to increasing affluence and emerging middle class in developing nations especially China and India
               • Consequence + Problem: Oil crisis. Oil is required to produce commodities. Depletion of limited oil resources due to increased demand for commodities. Price of oil increases. Countries which are oil exporters today may become importers themselves to satisfy their domestic consumption demand.
         • 2) Production side - Manufacturing
           • What's happening: some developing countries stimulate trade and investment through low prices and low wages
             • Consequence: leads to "race to the bottom" among countries vying for investment and export businesses
               • Why this may not be a problem: race to the bottom is just a temporary stage; eventually countries strife to move up the value-add chain, shifting from manufacturing to knowledge/innovation driven economies. As some countries upgrade, some other countries enter the bottom to take their place, guranteeing a supply of low-priced, low-wage products to the North
             • Outsourcing: contracting work to companies located in other countries. Apart from economic domain, also prevalent in health care and military domains. Not only does the process operate at macro level but also increasingly observed at micro and meso levels
   • What is flowing across geographical and virtual boundaries?
     • commodities
       • including financial goods and services
         • What's happening: national economies across the globe are highly interconnected through financial markets
           • Problem: cyclical flluctuations in one country affect many other countries. the more powerful the economy, the greater likelihood that the crisis will spread around the world
       • consumer goods and services
         • What's happening?
           • Economic: hyper-consumption (buying more than one can afford) and hyper-debt (owing more than one will be able to pay).
           • Cultural: emergence of consumerism, definition of personal identity through consumption practices, "you are what you buy"
     • Corporations, peopel and ideas