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Globalization Globalization and and

AustraliaAustralia

Alan OxleyAustralian APEC Centre,

Monashwww.worldgrowth.org

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Three aspectsThree aspects

The impact of globalization

What is globalization

Impact on Australia

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What is What is the impact the impact

of of globalization?globalization?

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The wealth gap is The wealth gap is narrowingnarrowing

Gap between richest 20 percent and poorest 20 percent falls

- from 15 to 1 in 1970

- to 13 to 1 in 1997

- i.e. by 10 percent

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Incidence of poverty is Incidence of poverty is fallingfalling

1987 1998

East Asia 26.6% 15.3%

(- China) 23.9% 11.3%

Europe/Central Asia

0.2% 5.1%

Sub-Saharan Africa

46.6% 46.3%

WORLD 28.3% 24%

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Quality of life Quality of life improvingimproving

1970 1990’s

People undernourished

920m 810m

Average life expectancy

58 66

Infant survival rates/1000

44 67

Global literacy 80% 67%bb

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Countries open to trade Countries open to trade grow fastergrow faster

-1

01

23

456

7

63-73 86-92

Open Mod Open Mod Closed Closed

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The evidence shows that the The evidence shows that the poorest people within countries poorest people within countries share in the gains from share in the gains from national national income growth. Generally, as a income growth. Generally, as a country ’s average income country ’s average income rises,the poorest share rises,the poorest share proportionately in those gains. proportionately in those gains. More specifically,the poorest 20 More specifically,the poorest 20 per cent in an economy gain by the per cent in an economy gain by the same percentage as the country same percentage as the country does. And as a country ’s average does. And as a country ’s average income per person rises,the income per person rises,the proportion of its population living proportion of its population living in extreme poverty falls.in extreme poverty falls.

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What is What is Globalization?Globalization?

Defining it

The drivers

The effects

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Defining globalizationDefining globalization

An open economic system

Non-discrimination

Global brands

Global structures

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The Drivers The Drivers

Cheap travel

Trade liberalization

Information technology

High technology

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Exports % share of world Exports % share of world productionproduction

0

5

10

15

20

25

1913 1950 2000

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Annual % Growth of trade and Annual % Growth of trade and GDPGDP

1959 – 961959 – 96

0

2

4

6

8

10

12

World USA

GDP GDPTrade

Trade

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US investment now more US investment now more globalglobal

Percentage of foreign stocks held by US

investors

Cumulative US direct

foreign investment

% of GDP

0

5

10

15

20

1980 1995

1975 1996

One percent

Ten percent

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Effects of Effects of globalizationglobalization

On business

On work

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Effects of globalization on Effects of globalization on businessbusiness

Cheap offshore production

Reduced transport costs

Virtual communication

Standardization of logistics

Global marketing

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Bigger and smallerBigger and smaller

Greater scale in manufacturing

- commodities are globally priced

Specialization in manufacturing

Globalization of specialist manufacturing

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New importance of New importance of BrandsBrands

Selling Fords like Coca Cola?

- Ford sold its components business for $1.5 billion

- That business, Visteon, supplied 22% of a new Ford vehicle

- Ford spent $9 billion buying brands: Jaguar and Volvo

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Globalized businessGlobalized business

Greater specialization of production - Hewlett Packard

More outsourcing – Soap and medicines

Greater increase in brand values- LG

New technology niches – steel mini mills

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Effects of globalization on Effects of globalization on workwork

Jobs in services rather than manufacturing

Workers provide services rather than “do a job”

End of “lifetime” employment

Individuals manage more of their own affairs

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A globalized worldA globalized world

Greater freedom of movement of goods, services, capital, people

Global citizens

The Information Age – has only just begun

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Australia and Australia and GlobalizationGlobalization

How is Australia positioned?

Examples of globalized industries

The Future

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Australia: globalization’s Australia: globalization’s childchild

Australia has grown on

- trade- foreign investment- immigration- adaptation of

technology

Australia is the branch office model of development

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Australia’s positionAustralia’s position

Openness

IT/E readiness

Culture

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Australia’s opennessAustralia’s openness

One of the most open economies in the world

- average tariffs – 5 percent

- open financial and telecoms

- open to foreign investment

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Australia’s IT/EreadinessAustralia’s IT/Ereadiness

Ranking Score (of 10)

US 1 8.73

Australia 2 8.29

UK 3 8.10

Canada 4 8.09

Norway 5 8.07

Sweden 6 7.89

Singapore 7 7.87

Source: Economist Intelligence Unit

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Australia’s globalized Australia’s globalized economyeconomy

Global industries - mining and agriculture

Services – distribution, logistics, transport, financial services

Manufacturing – a new contender

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Manufacturing Manufacturing exportsexports

0 5 10 15

Exports

Manufactures

Growth in manufactured exports vs

all exports 1980 - 2000

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Globalized industriesGlobalized industries

Toyota - manufactures and exports a global carHowe Leather – a tier one supplier

to FordRosemount/Southcorp – exporter & offshore producerWestfield – real estate management

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The futureThe futureThe information Age

- computing power continues to expand exponentially

- More global distribution of activity- Greater interconnectivity- Bigger organizations- Greater fragmentation- Greater personal freedom

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Australia ready to Australia ready to thrivethrive

Globally oriented economy

High adaptation of IT

Workforce adjusting

Open society

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www.globalizationguide.org