Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697632066230.pdf (Australia)
.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

D I S C U S S I O N P A P E R .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Globalisation What is this thing called Globalisation?

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


By Tim Harcourt* Chief Economist Australian Trade Commission Level 25, 201 Kent Street Sydney NSW 2000 Australia For comments: tim.harcourt@austrade.gov.au *This discussion paper is based on a presentation given to the Economics and Business Educators Association of New South Wales in March, 2001.

An updated version was also presented to the Australian Graduate School of Management (AGSM) at the invitation of Professor Tim Devinney.
Comments were provided by Peter Gahan, Peter Kriesler, Charles O’Hanlon, Jacqui Dwyer, Cleve Killiby and Terry O’Connor.

Assistance was also provided by Preety Duggal, Bernice Shen, Yat To Lee, Heidi-Melissa Reid, Penny Styles, Caitlin McColl and Nicole Paull.

The views contained in this paper and any errors are the responsibility of the author alone.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Contents What is this thing called Globalisation?

1.

Introduction 2.
1.

Introduction 2.

Globalisation – what does it mean?

2.1 The Battle for Seattle page 2 page 4 page 4 2.2 Global sceptics and global advocates page 5 2.3 Is it new?

3.

The dimensions of globalisation 3.1 Trade 3.2 Investment 3.3 Organisational change 3.4 ‘New Economy’ technologies 4.

Austrade and globalisation 5.

Conclusion REFERENCES page 6 page 8 page 8 page 9 page 11 page 12 page 13 page 14 page 15 USEFUL WEBSITES FOR ECONOMICS AND BUSINESS STUDENTS page 17 1.

Introduction .

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


First of all we have to start with education.

I am a big some exceptions, can’t move in the same way believer in education.
I can see the difference it can because of the social nature of labour market make to individuals and to society.

I remember institutions.

So if labour is a ‘quasi-fixed’ factor of visiting South Africa in 1994.

I saw what had production then human capital investment is a good happened to workers who had been denied even the bet.

Therefore education matters especially in an era most basic education when they were kids in the of globalisation.

townships.
townships.

They couldn’t advance because they didn’t have the necessary skills.

After all, education is a passport to a better life.

Not just economically, but also in terms of personal development.

I also remember visiting an Australian aid project in Johannesburg at the Institute of Advanced Journalism (IAJ).

Australian teachers and journalists had volunteered to work with young people from the townships about the basics of writing and broadcasting.
The project gave them not only a career but also the personal confidence to learn and to grow.

Also, education is intrinsic to the topic of this paper – globalisation.

Believe me, if there is one thing you can be sure of after wading through all the globalisation literature is that education matters.
Investing in human capital by advancing people’s skills and developing their know-how is the best thing a country can do in a rapidly globalising world So for these reasons, I say we should go forth and educate, especially in relation to economics and business studies.

The role that is played by economics and business educators is an important part of this process of investing in human capital for the greater good.
What educators teach young people about the ways and means of the economy will not only help them personally but will ultimately benefit the entire Australian community.

There are positive externalities in what educators do and I believe Australia will gain from this now and well into the future.

In this paper I was asked to tackle ‘globalisation’.

It is certainly topical and has been for some time in international circles and here in Australia.

It is a term widely used but not always understood.
It has several dimensions and therefore can be quite difficult to explain.

Because of its complexity, I have structured my paper into discrete parts.

economy.

Whatever your tariff level, exchange rate Firstly, I will attempt to get beyond the placards, the regime or foreign investment guidelines, you must headlines and the throwaway lines and see what we invest in the skills of your people.
A well educated, mean by this elusive but emotive term globalisation highly skilled workforce is the most valuable asset an in all its different guises.

economy can have.

After all, capital is relatively mobile.

It can move and move quickly.

Labour, with 2 Introduction • Australian Trade Commission • WHAT IS THIS THING CALLED GLOBALISATION?

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


Secondly, I will look at the different dimensions of globalisation with particular reference to trade, investment, organisational change and the ‘new economy’.

In doing so I will make cursory reference to how the ‘modern’ form of globalisation compares to similar phenomena in the past.
Thirdly, I will briefly outline the role that Austrade plays on behalf of the Australian community to help Australian businesses (especially small and medium sized enterprises – SMEs) as they cope with the forces of globalisation.

Hopefully, by breaking down the topic in this fashion I will have provided some useful information on the topic of globalisation that you can take to the classroom yourselves.

WHAT IS THIS THING CALLED GLOBALISATION?

• Australian Trade Commission • Introduction 3 2.


Globalisation .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


–what does it mean?

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

2 .


1 T h e B a t t l e f o r S e a t t l e Whilst the city of Seattle (and the State of When introducing the ‘globalisation debate’ I often think of the ‘Battle for Seattle’.

That event certainly captured the public imagination of what had been talked about loosely as ‘globalisation’ throughout the mid to late 1990s.

Washington) lobbied hard to host the event, the local dignitaries may not have anticipated what was in store.
Despite its credentials as a global city, which has influenced international trends and tastes, Seattle became the site of a mass demonstration not seen in the USA since the 1960s.

The streets were blockaded, You may recall the event.

In 1999, the leaders of the there were riots and some acts of violence occurred.

World Trade Organisation were looking for a venue Real drama occurred as a state of emergency was to launch the ‘millennium round’ of multilateral trade declared.
The city of Seattle looked like a war zone.

negotiations.

This was billed as the final major scale international event of the twentieth century.

Seattle seemed the perfect setting for such an event.

After all Seattle, is one of the most prosperous cities in the United States and has enjoyed much of its success due to its strategic position in the global economy.
It is an important transport hub for ports and railways, the corporate base of international aircraft giant Boeing, and the home of new economy giants Microsoft and Amazon.com.

It is also a prominent exporter of entertainment and a setter of cultural trends.

It is the self-proclaimed capital of grunge But only a small minority were involved in such incidents.

The protestors were, in fact, a varied group.


There were representatives of the environmental lobby, human rights organisations, developing country activists, religious organisations, indigenous groups and representatives of both the international and US labour movement.

Many of the demonstrators belonged to Non-Government Organisations (NGOs).

Most held peaceful demonstrations and were shocked by some of the violent clashes that occurred in some parts of the city.
music producing rock bands such as Nirvana and The protestors came to Seattle to demonstrate against Pearl Jam.

It has also been the venue for the popular ‘globalisation’ in general and the WTO in particular.

TV series Frasier and movies such as Disclosure and To them, the WTO had come to symbolise all that is Sleepless in Seattle.
It’s the capital of coffee chains wrong with globalisation and (what they claimed with Starbucks spreading its influence throughout the were) its associated impacts on the economy and world.

Seattle, it has been claimed, is the city that the community.

best symbolised the 1990s so why not end the decade there with a major international event?

4 Globalisation – what does it mean?

• Australian Trade Commission • WHAT IS THIS THING CALLED GLOBALISATION?

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Since Seattle we have seen similar protests in Prague, environmental standards and indigenous issues.

here in Australia in Melbourne and also in In fact if you asked each demonstrator at Seattle Washington DC and more recently in Quebec City.
(or any of the other protests) about their definition The World Bank, the International Monetary Fund of globalisation I am sure you would get different (IMF) and the World Economic Forum (WEF) have, answers.

After all they are a diverse group of a like the WTO, become targets for anti-globalisation variety of interests and causes (and I would groups.

According to the demonstrators, the Seattle imagine, philosophies).
protests were possibly represented the high point of a ‘campaign against globalisation’.

Many of the same groups were involved in the campaign against the Multilateral Agreement on Investment (MAI), which was being negotiated in the OECD in the late 1990s (see Graham, 2000).

2 .

 The Seattle protestors form just one part of a diverse group of citizens who are sceptical about the merits of globalisation.

They are the ‘global sceptics’.


But what were ‘global sceptics’ who protested against the WTO at Seattle really objecting to?

What is the intellectual basis of their objections and what are the alternative policy solutions on offer behind the placards?

Are their objections to the international economic order new and unique to the new millennium or are they just a re-hash of old debates In fact, the global sceptics come from all points of the political compass.
Some on the ‘left’ oppose globalisation because they say that international capital has too much influence compared to national sovereign governments.

Others on the ‘right’ oppose all things that are deemed to be ‘foreign’ (that is, foreign capital, foreign governments and especially foreign people such as immigrants).

Many global-sceptics place blame on a range of outcomes that may in fact have domestic causes rather than international ones.
However, there are many other global sceptics who do not oppose globalisation, as such but argue about what form it should take.

They also have policy views that are not anti-trade.

A good example is Dani Rodrik of Harvard University who has written about globalisation and social protection (see Rodrik, 1997).

that have occurred long ago?

In some respects, it is Of course, there are also the global advocates.

They hard to know because the demonstrators were such a are a diverse group too.
If you passed around the diverse group.

Some clearly objected to free trade, microphone at the World Economic Forum at Davos others were concerned about corporate influence on and asked the delegates for their definition of governments whilst others were concerned about globalisation you would get many different views.

WHAT IS THIS THING CALLED GLOBALISATION?

• Australian Trade Commission • Globalisation – what does it mean?

5 .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

For instance, some global-advocates like Ohmae 2 .

3 I s i t n e w ?

(1990;1995) write enthusiastically about the “borderless world” and “the end of the nation state.” Others focus mainly on trade and comparative advantage.

Most economists understand the economic case for free trade and see the modern form of globalisation as part of this process.
For instance, ANZ Chief Economist Saul Eslake has put this view eloquently: So is this debate between the global sceptics and global advocates new?

Certainly the principles are not, even if the circumstances have changed.

In fact if you look at the economic history, the topics of trade, internationalisation, capital flows and the like have always played an important role.

The issue of how national economies integrate has always been contestable amongst economists.
For instance, if we “...globalisation, is ...simply the logical extension use trade as a proxy for globalisation, the debate has of the tendency towards specialisation and trade involved various scholars and philosophers since has been going on almost since mankind first Moses was in short pants (Munckton, 2001) walked on the surface of the earth“ Eslake References were made to foreign trade in the (2000:2) Other global-advocates, like Friedman (Thomas not Milton) in his bestseller ‘The Lexus and the Olive Tree’ see globalisation as not just about trade but about the triumph of market forces, technology and open and democratic forces throughout the world (Friedman, 1998).
discussions of the classical scholars in Ancient Greece.

Foreign trade and the ‘doctrine of the universal economy’ was also adopted by philosophers and theologians in the first and second century (Irwin, 1996).

One of major contributions of Adam Smith (the father of political economy) was to put the first economic case for free trade (Smith,1776).
This was partially in response to mercantilism but was also In fact, as the diversity of views amongst both global done in keeping with Smith’s principles as a moral sceptics and global advocates shows how the philosopher.

Smith’s analysis of free trade later globalisation debate cuts across many traditional influenced David Ricardo in the eighteenth century political alliances.

whose principles of ‘comparative advantage’ still survive to this day in the economic textbooks.
6 Globalisation – what does it mean?

• Australian Trade Commission • WHAT IS THIS THING CALLED GLOBALISATION?

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


One hundred years after Adam Smith enunciated the History shows that whilst the principles are not new the economic case for free trade, the world, in fact, circumstances are.

To look at this more closely I have experienced a major expansion of the international come up with a framework to look at the economic economy as the nineteenth century version of evidence on globalisation.

I have decided to break ‘globalisation’ took hold.


As Kozul-Wright (1995) has globalisation down into four dimensions: trade, pointed out, the globalisation of the nineteenth century investment, organisational change, and the ‘new was sometimes referred to as the ‘Golden Age’ of economy’ technologies.

economic integration.

At the time of this Golden Age, Australia became a nation and grappled with our own free trade versus protection debate at the beginning of the twentieth century.
The economic integration of the nineteenth century, flowed into the twentieth but came to halt due to the effect of two world wars and the Great Depression.

The effects of these events took their toll on the world economy, only to recover after the establishment of international economic institutions (under the leadership of John Maynard Keynes) at Bretton Woods.
This allowed a second ‘Golden Age’ under the post-war consensus to continue until the breakdown of those institutions in the 1970s following the OPEC oil shock and the Vietnam War.

Since that time, we have seen a twentieth century version of globalisation emerge.

This has comprised multilateral tariff reductions, floating exchange rates and an expansion of international capital flows.
These trends, quickened by the technology of the ‘new economy’, set the scene for the globalisation debates we are having today.

WHAT IS THIS THING CALLED GLOBALISATION?

• Australian Trade Commission • Globalisation – what does it mean?

7 3.

The dimensions of .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

globalisation .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


3 .

1 Tr a d e Trade is the dimension of globalisation that receives the most attention.

Trade liberalisation refers to the removal or minimisation of formal trade barriers Cheaper inputs to make businesses more competitive.
And last but not least, new technologies and greater competition, both of which boost economic growth.” through the processes of the WTO and other regional According to economic historians, Trade was and bilateral trade agreements.

Trade liberalisation receives much public scrutiny because it involves direct policy decisions by national government to reduce trade barriers.

It involves legislation and important in nineteenth century globalisation too.
“Large scale international trade was ‘born’ in the nineteenth century.

Between the defeat of Napoleon and WWI European trade multiplied nearly forty-fold, negotiation with other governments in highly visible having only doubled in the previous 100 years” public fora.

This is perhaps why trade liberalisation has received so much public attention compared to other dimensions of globalisation.
It is more “visible” and “discrete” than other more evolutionary processes that companies implement in escape of the public eye.

(see Bairoch, 1989 in Baldwin and Martin, 2000).

Trade was important to the Australian colonies at this time too.

Exports as a percentage of Australian GDP was, in fact, higher in the nineteenth century than it was for most of the twentieth (See Pinkstone, 1992).
I recall having a look at this historical data during the The case for trade was put succinctly by WTO Sydney Olympics last year.
I found that our ‘gold Director General Mike Moore on a recent visit to rush’ did as much for our trade balance in the Australia (see Moore, 2001) Moore has publicly nineteenth century as Ian Thorpe’s efforts did for our commended Australia’s support for open trade and swimming team at Sydney 2000 (Harcourt, 2000b) has seen it as a major contributor to Australia’s economic success in recent years.
He regards trade as an important ingredient to improved living standards: Trade liberalisation has been important to Australia’s economic performance in modern times.

Successive Australian governments have delivered on “Trade works its wonders in many ways.

Higher commitments to reduce trade barriers (with bipartisan exports pay for goods and services that are more support).

Australia has opened up its trade and cheaply priced abroad.

The need to compete in diversified its export base.
This has helped us cope world markets forces companies to become more with external shocks like the Asian financial crisis of efficient.

And exporting firms provide good, high 1997-99.

According to Jacqui Dwyer of the Reserve paying jobs...Imports too bring many benefits.

Bank of Australia, we did so whilst being a price-taker Cheaper food and clothing for working families.

not price-setter in most world markets (see Dwyer Cheaper and better cars and electronic goods.

and Fabo, 2001).
and Fabo, 2001).

8 The dimensions of globalisation • Australian Trade Commission • WHAT IS THIS THING CALLED GLOBALISATION?

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


But despite this people still worry about trade.

They say it 3 .

2 I n v e s t m e n t costs jobs and hurts people.

They don’t like imports and think they displace home-grown products.
They blame governments and bodies like the WTO.

This occurs despite considerable economic evidence that trade and openess supports growth and distribution objectives in rich and poor countries alike (Moore, 2001).

Despite the capacity of capital flows to outstrip trade flows there is less public debate about the role of investment in this aspect of globalisation relative to trade.
Part of the reason is that there are few formal regulations of investment made by governments on an international scale to the same extent as there are trade In Australia, the anti-trade criticism is also concentrated regulations in the WTO.

Yet the opening up of the mainly on imports and tariffs.

Little is ever said about domestic economies to foreign direct investment (FDI) exports and the important role that the exporter is an important part of modern globalisation.
community plays in the Australian economy.

In order to focus public attention on the exporting side of the trade equation, Austrade produced a discussion paper called ‘Why Australia Needs Exports: The Economic Whilst investment was important in nineteenth century globalisation, it was very different to today’s.

As Eslake writes: Case for Exporting”.


The paper discusses the “Foreign investment then was overwhelmingly macroeconomic and microeconomic arguments for portfolio investment – that is purchases of stocks exporting as well as some of the social benefits of and bonds – rather than, as is increasingly the case trade.
For instance, the paper looks at the links today, direct investment in the establishment, between trade and immigration, and the cultural and expansion or acquisition of branches, subsidiaries diplomatic benefits of trading with other nations.

The and affiliates in other countries.


…Moreover most paper also looks at the characteristics of exporters in of the capital flowed to labour-scarce and resource- comparison to non-exporters in terms of the labour rich countries (as the US, Australia and Argentina market, business practices, innovation and the ‘new then were) rather than to relatively poor and labour economy’ (Harcourt, 2000a).
abundant countries as is the case today.” This evidence shows that trade does bring net benefits In Australia’s case in 1901, Britain accounted for just to the community.

Choosing not to trade could in fact over half of our capital needs (Pinkstone, 1992).

Most lead to worse economic circumstances for the of it was in infrastructure.

Australian community.

Since the fall of the Berlin Wall, more countries do now engage in trade and are reaping rewards albeit at different rates and magnitudes.
WHAT IS THIS THING CALLED GLOBALISATION?

• Australian Trade Commission • The dimensions of globalisation 9 .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


However, FDI is an important part of modern partially foreign owned companies in Australia, are globalisation.

On the microeconomic side, FDI flows likely to pay higher wages and be more productive have changed sharply in the last twenty years.
than wholly owned Australian firms.

As demonstrated by the United Nations Conference on Trade and Development (UNCTAD), FDI flows rocketed in the mid-1980s.

The agency estimates that the global sales of MNC’s foreign affiliates now exceed the world trade volume by 30% (See Baldwin and Martin, 2000).

Foreign investment, like exporting is said to contribute to improved productivity, higher skills and higher wages (DFAT, 1999).
This is supported by international evidence that foreign-owned employers pay better than domestic ones.

For instance, Graham (2000; 93-4) has calculated that in manufacturing, across a range of countries, foreign affiliates pay one There are of course, certain benefits to be had from and half times the wage paid by their domestic FDI.

In the Australian context, FDI has been shown to counterparts.

benefit both Australia and the source countries.


It has also been demonstrated that FDI ultimately assists all sectors of the Australian economy (Department of Foreign Affairs and Trade (DFAT), 1999).

However, it should be noted that the size and pace of these FDI flows have caused concern in the globalisation debate.

In some respects, this is the key to the globalisation debate.
Capital moves faster Open investment regimes are said to assist exports because of information technology and without and exporters.

There is a close link between FDI and appropriate prudential supervision, there is a high exporting (DFAT, 1999).

FDI is helpful to the domestic chance of instability and ‘contagion’ across world economy too as it assists in technology and financial markets.

This was highlighted during the knowledge transfer and raises productivity and Asian financial crisis of 1997-99.
Fortunately, growth.

For instance, the presence of foreign firms Australia has a well-developed financial infrastructure encourages more domestic firms to export (see Sousa, with transparency, stability and high standards of Greenaway and Wakelin, 2000).

This occurs for two corporate governance.

This has enabled Australia to reasons.

One is competition.
One is competition.

The second is the effect play a constructive important role in rebuilding of spillovers in knowledge and technology, which the financial infrastructure in the region foreign firms bring to local industry.

(see Grenville 1999).

Whilst FDI is shown to be a major source of employment opportunities, most of the debate about foreign investment in the labour market is over wages and conditions.
Evidence shows that wholly and 10 The dimensions of globalisation • Australian Trade Commission • WHAT IS THIS THING CALLED GLOBALISATION?

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

3 .


3 O r g a n i s a t i o n a l c h a n g e However, exporters and the affiliates of international The third dimension of globalisation relates to organisational change in the corporate sector.

Examining trade and investment flows between firms are often the first to implement organisational change in Australia.
One characteristic of exporters relative to domestic firms, is that they tend to adapt international business practices much earlier than countries may provide some indication of intentional firms in the domestic market do.

Hence, practices like economic integration but it may miss major developments in corporate restructure and firm behaviour that may have major affects.
There has benchmarking, business networking, contracting out, out-sourcing are more likely to be pronounced in the exporting sector of the economy at least in its initial been a whole change in the nature of the firm due to stages.

These pressures are later translated to the rest the globalisation of the production and distribution process.

Firms are now part of global supply chains with widespread global networking.

This has led to of the economy.


But these also coupled with the improvements in wages, productivity, safety standards and education and training which are characteristic new management strategies such as outsourcing.

of the exporting sector.

Eslake (2000) has also noticed this trend.

He writes: “For both corporations and governments, the This dimension of globalisation is new.
There were corporate changes in the nineteenth century as there drive to lower costs has in turn spawned a variety were multinational companies (such as the East India of management strategies such as ‘outsourcing’ Company).

But control was often done on a colonial non- core activities to outside specialists, striving and geo-political basis.

It also occurred at a much for economies of scale by acquiring and slower pace.
Corporate strategic options that took consolidating the operations of other businesses place within nation borders can now take place producing similar or compatible products, and shifting activities to locations where the most beyond national borders in quick time due to the technological advances of the ‘new economy’.

important inputs (such as labour or energy) may This is the final dimension of globalisation to which be obtained on the most favourable terms.

For we now turn.
For we now turn.

each of these strategies, reaching across national borders is a distinctly possible outcome.” Of course, this corporate strategy might take place within a nation too.

In some instances, it may not have anything to do with trade or investment but the latter may be an easier target (see Quiggin , 1999).

The strategy may be purely a domestic one.

WHAT IS THIS THING CALLED GLOBALISATION?

• Australian Trade Commission • The dimensions of globalisation 11 .

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

3 .

4 ’ N e w E c o n o m y ’ t e c h n o l o g i e s In fact, the recent growth of measured productivity in the new economy has come to notice in both; the In terms of real economic impact, the rise of the ‘new USA (see US Department of Commerce, 1998) and economy’ (or ‘the information age’) is perhaps the in Australia (see Parham, 1999).
The increase in most important part of the globalisation phenomena.

measurable productivity has seemingly resolved the The new economy is a shorthand reference to how a puzzle several years ago by Robert M. Solow who whole range of technological phenomena including had commented: information exchange, business systems, and commercial transactions and simple communications drives economic behaviour.
The phenomenon of globalisation is in fact driven by the technologies associated with the new economy and the business practices that are available due to the adoption of these technologies.

These changes are not only affecting business, but also are also creating anxiety between the information rich and the information poor and affecting the macroeconomic statistics that central banks rely upon when formulating public policy.
The new economy has captured the imagination of many prominent decision-makers in the global economy from Bill Gates to Alan Greenspan.

It has greatly impacted on business processes and through the rise of the Internet and e-commerce.

Both Gates (1999) and Friedman (1998) refer to the importance of speed in the global economy and the increased competitive pressures that information technology has induced.
Greenspan (1999) has linked the “…synergies in laser, fiber and optic satellites and computer technologies” to the increase in the return on capital and the accelerated rate of growth in productivity.

“You can see the computer age everywhere these days except in the productivity statistics...” (The Economist July 24-31, 1999) The Information Age or “New Economy” is already affecting the behaviour of exporters.
As mentioned, Austrade research already shows the tendency of exporters to use the Internet and e-commerce to a greater extent than domestic firms do (see Harcourt, 2000a) But is it new?

There certainly were equivalent considerations in the nineteenth century.

For instance, there was the impact of the telegraph wire, electricity and rapid improvements in transportation.
In modern globalisation it has been mainly communications and information that have permitted a faster flow of ideas across the world economy.

The lower cost in telecommunications has especially promoted the rapid increase in investment, especially in the services sector where knowledge-based skills matter (See Baldwin and Martin, 2000).
There are also greater expectations on governments to respond to quickly to these flows of information and capital (which was not the case in the nineteenth century) 12 The dimensions of globalisation • Australian Trade Commission • WHAT IS THIS THING CALLED GLOBALISATION?

4.

Austrade and .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

globalisation .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


So how is Austrade faring with globalisation?

We • Helping explain the benefits of trade and have traditionally been a trade promotion agency investment to the Australian community through focussing on helping Australian firms export.

In recent the ‘Exporting for the Future’ campaign.


years, we have also turned our attention to increasing inward and outward investment.

But the different dimensions of globalisation are changing the role that we play in helping Australian companies.

As Charles O’Hanlon, Austrade’s Executive General Manager for Europe puts it: “ Under globalisation, the paradigm is changing.
International business is no longer about putting boxes on ships, or selling your technology and getting royalties or a license fee.

It is now about enmeshing yourself in the markets of industrialised countries it is all about finding global opportunities for Australian businesses and helping them benefit from internationalisation by helping them source capital, skills and new technologies as well as export opportunities” (O’Hanlon, quoted in Harcourt, 2001).
Some of our key strategies to deal with globalisation include: • Growing the number of Australian firms that are exporting through the ‘Knowing and Growing’ project.

• Assisting Australian businesses to get on-line and deal with the new business practices associated with the new economy through the ‘Information Age’ project.
• Helping build Australia’s ‘knowledge capital’ in international trade and investment through networking, knowledge transfer and building educational capacity with strategic partnerships (through the establishment of the Austrade Institute) The economics of networking and the new literature on knowledge capital provides a rationale for government to assist in trade promotion.

Many Australian SMEs are not in exporting despite there being good economic reasons why they should be.
Therefore Austrade can and should play a role in overcoming obstacles to exporting and making sure that potential exporters that should be exporting are able to enter international markets.

This is the focus of our Export Market Development Grants Scheme.

In short, with the prominence that globalisation is playing, and given our mandate to help Australian businesses advance on the world stage there is no better time than the present to be working for Austrade.

WHAT IS THIS THING CALLED GLOBALISATION?


• Australian Trade Commission • Austrade and globalisation 13 5.

Conclusion .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


In conclusion, this paper has provided a synthesis of My final message goes back to the importance of various aspects of the debate about globalisation that education.
In the heat of the debate there has been drew the world media’s attention to the streets of lots of emphasis on rhetoric and not enough analysis Seattle in November 1999. or understanding (especially of the economic The first section placed the ‘Battle for Seattle’ and the debate between global sceptics and global advocates in its historical context.

It seems that the principles of international trade have always been similar throughout the ages even if the circumstances have changed.
evidence that is available).

Both the global sceptics and the global advocates have played a part in this.

I think economists have a key role to play in communicating the analysis and the evidence to non- economists throughout the community.

After all, the main social responsibility of the economist is to explain and to persuade but not to ridicule.

I have The second section dealt with ‘modern’ globalisation just read Robert Skidelsky’s spell binding third and as we understand it.
It analysed the four ‘dimensions’ final volume of the life of John Maynard Keynes of globalisation: trade, investment, organisation (Skidelsky, 2000).

What struck me about the account change, and the ‘new economy’ technologies.

is how good a communicator and persuader Keynes The third section briefly outlined how Austrade helps Australian companies in dealing with globalisation.

was of economic ideas.


No doubt this was why he was not only a brilliant economist but also such an influential public figure of international standing in times of both war and peace and boom and depression.

This is an important lesson for all economists who are trying to understand and explain ‘modern’ globalisation to students and to the community.

I hope that this paper will serve as useful background and provide some clarity and simplicity to the debate.
I hope it will help you when you explain to your students the processes at work and the eventual effects of what has been termed globalisation.

14 Conclusion • Australian Trade Commission • WHAT IS THIS THING CALLED GLOBALISATION?

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


References and further reading: Australian Bureau of Statistics and Austrade (2000) A Portrait of Australian Exporters, ABS Cat.8154.0, Canberra.

Baldwin, R and Martin (1999) Two Waves of Globalisation: Superficial Similarities, Fundamental Differences, NBER Working Paper 6904, Cambridge, MA.

Department of Foreign Affairs and Trade (1999) Foreign Direct Investment: The Benefits for Australia, Commonwealth of Australia, Canberra.
Dwyer, J and Fabo, J (2001) The Manufacturing Sector: Adapting to Structural Change Reserve Bank of Australia Bulletin, March, Sydney The Economist (1999) The New Economy July 24th-30th, London.

Eslake, S (2000) The Drivers of Globalisation ANZ Banking Group, Melbourne.
Friedman, T (1998) The Lexus and the Olive Tree, Farrar, Straus and Giroux, New York Gates, W (1999) Business @ the speed of thought, Collins-Hemingway, New York Graham, E (2000) Fighting the Wrong Enemy: Anti-global Activists and Multinational Enterprises, Institute for International Economics, September, Washington DC 15 .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


Greenspan, A (1999) Humphrey-Hawkins Testimony Ohmae, K. (1990) The Borderless World: Power and to Congress, February 1999, Washington DC Strategy in the Interlinked Economy New York: Grenville, S (1999) Financial Crisis and Globalisation, Harper business.

Reserve Bank of Australia Bulletin August, Sydney.

Ohmae, K .
Ohmae, K .

(1995) The End of the Nation State: Harcourt, T (2000a) Why Australia Needs Exports: The Economic Case for Exporting, Australian Trade The Rise of Regional Economies.

New York: The Free Press.

Commission and the Centre for Applied Economic Parham, D (1999) The New Economy?

A New Look Research (CAER), UNSW, Sydney.

at Australia’s Productivity Performance Productivity Harcourt, T (2000b) Winning Medals and Markets: Commission, May, Melbourne.
An Economist’s Guide to the Sydney 2000 Olympic Pinkstone, B (1992) Global Connections: A History of Games, Australian Trade Commission, Sydney.

Exports and the Australian Economy, AGPS, Canberra.

Harcourt, T (2001) British ties can build a bridge to Quiggin, J (1999) Globalisation, Neoliberalism and Europe Australian Financial Review, 28 February Inequality in Australia, Economic and Labour 2001, Sydney.

Relations Review, Vol 10 No 2, December, Sydney.


Irwin, D (1996) Against the Tide: An Intellectual Rodrik, D. (1997).

Has Globalisation Gone Too Far?

History of Free Trade, Princeton University Press, Washington D.C. :Institute for International Economics.

Princeton, NJ, USA Smith, A (1776) The Wealth of Nations, London: Kozul-Wright, R. (1995) “Transnational Corporations Penguin .
and the Nation State” in J. Michie and J.Grieve Smith (1995) (eds) Managing the Global Economy Oxford: Oxford University Press, pp.135-71.

Meredith, D and Dyster, B (1999) Australia in the Global Economy, Cambridge University Press, Cambridge, UK.

Moore, M (2001) The WTO: The Challenges Ahead, Speech to the National Press Club, Sousa, N Greenaway, D and Wakelin, K (2000) Multinationals and Export Spillovers, GLM WP 2000/14, Nottingham.
Skidelsky, (2000) John Maynard Keynes : Fighting for Britain 1937-1946, MacMillan, London.

US Department of Commerce (1999) The Emerging Digital Economy II, Washington, D.C. 5th February, Canberra, Wood, A (1995) “How Trade Hurt Unskilled Workers’ Munckton, P (2001) Some Thoughts on Globalisation, unpublished mimeo, Commonwealth Bank, Sydney.

Journal of Economic Perspectives Vol 9, No 3, Summer pp.57-80.

16 .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.
Useful Websites for Economics and Business Students “ E c o n o m i s t s c o r n e r ” o n t h e A u s t r a d e w e b s i t e a t : http://www.austrade.gov.au : Australian http://www.abs.gov.au http://www.efic.gov.au http://www.rba.gov.au http://www.dfat.gov.au http://www.treasury.gov.au International http://www.iie.com http://www.oecd.org http://www.wto.org http://www.worldbank.org http://www.imf.org http://www.adb.org http://www.ilo.org http://www.unctad.org 17