Pros and Cons Globalization

Globalization is a matter that everyone talks about this days and it will continue to be a big challenge for the next decade. We can see through this document different types of debates, against or for it but the one thing that is sure is that globalization will always be among us. In this article we are exposing our pros and cons concerning globalization.

Pros

  • It will favor the development of trade. And trades are correlated with the GDP. By developing international trades countries develop their GDP.
  • Globalization helps countries increasing their competiveness. That will then intensify the growth of the country and the well being of the people.
  • NTIC is something that has been driven by globalization. People need to connect with each other because they are now working together and this has to be as simple as possible. Companies kept on pushing the development of NTIC because this is one of the perfect ways to connect with each other all around the world.
  • Development of free trade zones and monetary zones. This is part of globalization, more and more countries gather together in order to be more stable and have stronger economies.
  • More peace around the world: globalization helps us understanding more how others are thinking and this brings peace in the world. Since we understand the others, we are more tolerant towards them.
  • You can now do more economies on a global scale. You can divide the production of one product between many countries: that way you have bigger scale economies effects and you use the real specialization of each one of those countries. We can take the iPhone for example.

Cons

  • Job destructions in developed countries, even if there is new types of jobs created. People are not always able to adapt.
  • Higher competition between people and companies. Now companies and people have to think that they are in competition with the entire world.
  • The globalization favors the fiscal evasion, because it is harder to follow the movement of cash.
  • Globalization helps creating the idea of “to big to fell”. This is a big problem because we have seen in 2008 that the “to big to fell” doesn’t exist. This can create a problem of trust in the different countries.
  • Higher risk of epidemics: now people travel all around the world, all the time. People can bring back dangerous diseases. This is something difficult to control when people are crossing the borders.
  • Problems of wealth gap. Globalization makes countries get richer, but the problem is that this money added doesn’t always go into the pocket of poor people. In fact most of the time the wealth that has been created goes into rich people pocket and this increase the wealth gap.
  • Linked economies can also be dangerous as we can see with the sanction that UE took against Russia. It is difficult to have sanctions against Russia since our country has a lot of investments in Russia and we use a lot of gas and petrol they are producing. It is than difficult to take measures against a country with who we are linked.

Carrefour China: Lessons From A Global Retailer

Carrefour’s hypermarkets in China are the Bosporus of retailing–commercial centers where East and West splash against each other. Tanks of live fish, eels, bullfrogs and turtles dominate the fresh food sections, while vacuum-packed strips of bacon and slices of pepperoni lie in refrigerated cases a short distance away. Modern formats mix with local tastes in the French retailer’s stores: Shoppers stroll down wide, brightly lit aisles, past displays of dried pork snouts and whole ducks hanging limply by the neck, as “Hotel California” plays on the speakers overhead.

Carrefour, whose name means “crossroads,” wasn’t the first foreign retailer in mainland China to open a hypermarket–a giant outlet that offers “everything under one roof,” from consumer electronics to groceries. [ Wal-Mart is also becoming interested in China.] But since Carrefour opened its first store, in 1995, it has become the largest. Today it operates 73 hypermarkets in 29 cities, from Urumqi (in the western reaches of the Middle Kingdom) to Harbin (near the Russian border) to Kunming (in the south). Carrefour also operates the Champion supermarkets and Dia convenience stores. Its 2005 turnover was about $2 billion (including value-added tax), making China Carrefour’s fifth-largest market. The company expects its sales in China to go on growing by 25% to 30% annually over the next five years.

Jean-Luc Chéreau, who came to the mainland after running the company’s business in Taiwan for seven years, has led Carrefour China since 1999. He recently met with Peter Child, a director in McKinsey’s Paris office, in his 25th-floor office in the Shanghai Stock Exchange building and discussed Carrefour’s hits and misses as it expanded beyond China’s largest cities.

The McKinsey Quarterly: What were your first experiences in China when you took over Carrefour’s mainland operations?

Jean-Luc Chéreau: When I arrived here, in 1999, the market was just beginning to open. We were in the main cities–Shanghai, Beijing, Guangzhou and Shenzhen–but not much in the others. I had only 17 stores in 6 cities. Step by step we increased the number of stores, and today we have 73 hypermarkets in 29 cities. We learned about the Chinese consumer by starting with the main cities on the coast and continuing into the rest of China.

In reality, though, we began our experience in China 18 years ago, in Taiwan. For the hypermarkets in the big mainland cities, we have exactly the same hypermarket style as in Taiwan. But as you enter middle and western China, there is a much less mature market. For example, 50% of the televisions offered in a store in Shanghai would be flat-screen TVs. When you go into the middle of China, it’s only 20% because today flat screens are too advanced and too expensive for those areas. For MP3 players, digital cameras and so on, it’s the same. The people are not able to buy, at least not enough for us.

How did your experience in Taiwan influence your activities in mainland China?

We discovered Chinese culture and the way to work with the Chinese in Taiwan when the retail sector in mainland China was totally closed. International companies that decided to enter Taiwan–not Hong Kong–15 or 20 years ago have a fantastic advantage in China, and that was the case for Carrefour.

For example, you learn how to adapt. When Carrefour arrived in Taiwan, we had a very clear picture of what we wanted to do–open a 10,000-square-meter store on the ground floor, with a big parking lot in front, just as in France. But it was impossible to do that kind of store. Then we tried something different: We opened a 3,500-square-meter store in a basement in Kaohsiung, Taiwan’s second-largest city, with 250 parking spaces for motorcycles. That was the beginning of Carrefour in Taiwan.

Another aspect was Chinese business dealing. When I arrived in Taiwan, my former boss told me I was lucky: I was set for the first year because he had already signed five contracts for five new stores. Then I started talking with one of our Chinese partners who had signed those contracts, and nothing seemed to be happening. Finally, my assistant told me, “Just because he signed a 20-year contract two years ago with your former boss–a person who is not you–does not mean he will respect the contract.” That was a big shock to me; the contract was notarized and everything. But we started to renegotiate article by article. Five years later, during the Asian crisis, I invited this same partner to my office and said, “Just because I signed a contract with you does not mean I will respect it. We are in a crisis.” So he said, “Fine,” and we started to renegotiate, to reduce the rent.

It was these very interesting experiences that showed me that we are in another world. If you come to China with preconceived ideas after having been successful in Europe or the U.S., you make mistake after mistake.

http://www.forbes.com/2006/10/25/carrefour-china-chereau-qanda-biz-cx_pnc_1025mckinsey.html

Group 6 FMI PARIS: How to Get It Wrong by Paul Krugman

Last week I participated in a conference organized by Rethinking Economics, a student-run group hoping to promote, you guessed it, a rethinking of economics. And Mammon knows that economics needs rethinking in the wake of a disastrous crisis, a crisis that was neither predicted nor prevented.

It seems to me, however, that it’s important to realize that the enormous intellectual failure of recent years took place at several levels. Clearly, economics as a discipline went badly astray in the years — actually decades — leading up to the crisis. But the failings of economics were greatly aggravated by the sins of economists, who far too often let partisanship or personal self-aggrandizement trump their professionalism. Last but not least, economic policy makers systematically chose to hear only what they wanted to hear. And it is this multilevel failure — not the inadequacy of economics alone — that accounts for the terrible performance of Western economies since 2008.

In what sense did economics go astray? Hardly anyone predicted the 2008 crisis, but that in itself is arguably excusable in a complicated world. More damning was the widespread conviction among economists that such a crisiscouldn’t happen. Underlying this complacency was the dominance of an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly.

Now, idealized models have a useful role to play in economics (and indeed in any discipline), as ways to clarify your thinking. But starting in the 1980s it became harder and harder to publish anything questioning these idealized models in major journals. Economists trying to take account of imperfect reality faced what Harvard’s Kenneth Rogoff, hardly a radical figure (and someone I’ve sparred with) once called “new neoclassical repression.” And it should go without saying that assuming away irrationality and market failure meant assuming away the very possibility of the kind of catastrophe that overtook the developed world six years ago.

Still, many applied economists retained a more realistic vision of the world, and textbook macroeconomics, while it didn’t predict the crisis, did a pretty good job of predicting how things would play out in the aftermath. Low interest rates in the face of big budget deficits, low inflation in the face of a rapidly growing money supply, and sharp economic contraction in countries imposing fiscal austerity came as surprises to the talking heads on TV, but they were just what the basic models predicted under the conditions that prevailed postcrisis.

But while economic models didn’t perform all that badly after the crisis, all too many influential economists did — refusing to acknowledge error, letting naked partisanship trump analysis, or both. “Hey, I claimed that another depression wasn’t possible, but I wasn’t wrong, it’s all because businesses are reacting to the future failure of Obamacare.”

You might say that this is just human nature, and it’s true that while the most shocking intellectual malfeasance has come from conservative economists, some economists on the left have also seemed more interested in defending their turf and sniping at professional rivals than in getting it right. Still, this bad behavior has come as a shock, especially to those who thought we were having a real conversation.

But would it have mattered if economists had behaved better? Or would people in power have done the same thing regardless?

If you imagine that policy makers have spent the past five or six years in thrall to economic orthodoxy, you’ve been misled. On the contrary, key decision makers have been highly receptive to innovative, unorthodox economic ideas — ideas that also happen to be wrong but which offered excuses to do what these decision makers wanted to do anyway.

The great majority of policy-oriented economists believe that increasing government spending in a depressed economy creates jobs, and that slashing it destroys jobs — but European leaders and U.S. Republicans decided to believe the handful of economists asserting the opposite. Neither theory nor history justifies panic over current levels of government debt, but politicians decided to panic anyway, citing unvetted (and, it turned out, flawed) research as justification.

I’m not saying either that economics is in good shape or that its flaws don’t matter. It isn’t, they do, and I’m all for rethinking and reforming a field.

The big problem with economic policy is not, however, that conventional economics doesn’t tell us what to do. In fact, the world would be in much better shape than it is if real-world policy had reflected the lessons of Econ 101. If we’ve made a hash of things — and we have — the fault lies not in our textbooks, but in ourselves.

http://www.nytimes.com/2014/09/15/opinion/paul-krugman-how-to-get-economic-policy-wrong.html?action=click&pgtype=Homepage&region=CColumn&module=MostEmailed&version=Full&src=me&WT.nav=MostEmailed&_r=0

FMI Paris Group 6 : How Globalization will impact our professional careers ?

Since the last century changed, our approach of the world changed, “Think local”, previous world trend, focus on commerce in interior market, is over. We are going through a new way of thinking: “Think global” where people and companies view the world as exchange platforms without barriers, always connected without time and limit. Globalization imposes new rules, so we need to find balance between local needs and global needs.

Since the financial deregulation, the world is divided between financial institutions which pursue the only ways of earning money, and the law and regulation. We need to find a way to balance the system with more regulation and law around our financial world who allows lot of kind of excess but not too much in order not to break the free entrepreneurship and the innovation.

Globalization creates many issues; the key challenge for us during our professional career will be to tackle them. Our ability to find a good balance for our world will impact directly our professional career, our approach of the working world.

Exchange of information and people across countries is the new rule of the game leading to a multi-cultural environment with different people from all around the world interacting and competing with each other. These people from different countries have several experiences that can lead us to learn from each other but it also creates new competition.

A global competition across the world, where schools try to be more and more international, students from all countries learn everywhere and companies become worldwide corporation creates work requirement extremely competitive. That’s the reason why, understanding world issues will give us a global perspective in order to improve our future work approach across multi-cultural environment.

Group 6 – FMI – Paris – Gobalization: a major challenge for the international monetary system

Globalization: a major challenge for the international monetary system

 Introduction

I.         The worldwide extension of the market economy seems to be a good opportunity for the global monetary system.

  1. Globalization has led to a flexible way to manage the currency system…
  2. And the competition between countries fosters the emergence of monetary zones…
  3. Which promotes cross borders investments and financial flows.

II.         Although the market’s liberalization and deregulation put the stability of the system at stake.

  1. Because of the “flat world” (M.Friedman), monetary crises are no longer national but also systemic…
  2. And states have no control on their currency…
  3. The danger of “currency wars”.

III.         Which is why there is a need for another global governance

  1. The weakening role of institutions…
  2. Encourages new initiatives…
  3. Is a return to the gold standard a solution ?

Conclusion

FMI-Paris-Group 6 : Could fixed exchange rate be coming back ?

The International Monetary Fund or IMF, long a citadel of free-market thinking, conceded in a little-noticed official report in February that controls on the international movement of capital may be appropriate in some circumstances. This report deserved more attention, because this is big.

Before socialists break out their long-dormant bottles of Swedish champagne and capitalists make plans to emigrate to some planet with free markets, it’s important to understand what capital controls really are. They are restrictions on the ability of (primarily) financial institutions and multinational corporations to move large blocks of capital around the world.

Such restrictions were in force in most major capitalist economies during the Bretton Woods era of fixed exchange rates (1945-1971) — otherwise known as the Golden Age of the American economy, or what the French to this day call les trente glorieuses, the Thirty Glorious Years. The American and world economies performed better in this period than ever before or since. And therein lies the tale.

Consider the problem of currency manipulation.

China currently manipulates its currency to make its goods artificially cheap in the U.S., which is a big reason why it’s running a huge trade surplus against us. As the United States is thus painfully learning, floating exchange rates and a free market in currencies are not a real option. The profits to be made from manipulating one’s currency are so great that key governments cannot resist the temptation. (Japan and the Europeans do it, too, in different ways.) As a result, our only real choices are fixed rates or manipulated rates.

What’s the place of capital controls in this? Without free movement of capital, there’s no manipulating currencies. That’s one big reason why, pre-1971, America was a net creditor nation, and ran either small trade surpluses or deficits tiny by present standards. So if you bring back capital controls, you necessarily force the world back towards much more balanced trade.

And if you have fixed exchange rates, you can’t keep them fixed if huge amounts of capital are allowed to slosh around the world economy without restraint. You have to have capital controls if you want fixed exchange rates. This is something that nations like Thailand, which tried to maintain fixed exchange rates without firm global capital controls, learned the hard way a few years ago.

As a result, fixed exchange rates are quite likely America’s best bet to avoid being victimized by exchange-rate manipulation on the part of other nations. This is one big reason why America supported fixed exchange rates for so long — even Richard Nixon tried desperately to save the Bretton Woods system with the Smithsonian Agreement of 1971, but he failed when domestic economic conditions forced the Fed to cut interest rates, sinking the dollar.

Fixed exchange rates are definitely not some scheme of socialistic central planning. They are a stabilizing mechanism for a capitalist global economy that is not, laissez-faire mythology notwithstanding, self-stabilizing. (Presumably, Americans realize that much by now.)

America’s current titanic trade deficits must eventually come to an end. Their end may be a gradual and gentle winding down, but there’s absolutely no guarantee of that, especially as the only way this will happen is either if nations like China voluntarily agree to stop manipulating their exchange rates, or if the U.S. develops the fortitude to stop this manipulation on its own.

Why doesn’t the U.S. just unilaterally stop currency manipulation? Because the way currency manipulation works is that, for example, the Chinese government forbids China’s exporters from using the dollars they earn from overseas exports as they please. Instead, they are required to swap these dollars for Chinese currency at China’s central bank, which then “sterilizes” these dollars by sending them back to the U.S. to buy not American goods, but American debt and assets, largely Treasury securities. So if we ever did stop selling foreigners our T-bills and other assets (the Swiss did something similar in 1972), the problem would be solved pronto.

Unfortunately, the U.S. has grown so addicted to this cheap international credit that we can’t forswear it right now, or we’d starve our economy for capital to lend and borrow, and interest rates would go sky-high, quite likely knocking us into recession. This is true even though we know perfectly well that the party must end sometime, as no nation’s indebtedness can expand forever. (Ask Greece.)

If we ever do forswear cheap foreign capital, we’ll need to raise our domestic savings rate, which has dropped abysmally low due to the consumption splurge of the last two decades. But as the consumption splurge that killed our savings rate was itself enabled by cheap foreign capital resulting from our import binge coming back to us in the form of international debt, all these issues are linked. And as we certainly ought to raise our own decadent savings rate for a whole host of reasons, this may be exactly the kick in the behind that we need anyway. (We’re probably going to get it.)

The possibility that the world may return (granted, a fairly speculative “may” at this point, but the underlying logic is remorseless and will grind away) to capital controls and fixed exchange rates is just another part of the emerging trend of a repudiation of the excessively laissez-faire thinking that has dominated the world since about 1980. But all eras in economics eventually come to an end, so this should be no surprise.

This doesn’t mean the end of international capitalism any more than it did in 1970, when multinational corporations were doing just fine, thank you, albeit under somewhat different rules. They’ll adapt just fine this time, too.

Source: By Ian Fletcher http://www.americanthinker.com/2010/04/could_fixed_exchange_rates_be.html