Transcript | 1. lecture: What is the globalisation? - University for modern Slovakia

Globalisation means that the world is getting smaller and interconnected. Of course, smaller means that the movement of people, goods, services, money, and especially of information is becoming easier and more affordable for the growing population of the planet. A new era of globalisation is particularly associated with two events. The first is the collapse of communism, and second, the most crucial is the development of information technology, particularly the Internet and everything associated with it. The fall of communism, knocked down the barriers to the free movement of people, goods, services, and capital; and the Internet created a new, yet unseen in history conditions for information and communication interconnection of the world. It is particularly important that the low (and still decreasing) price and high (and still growing) quality of information technology allows its massive expansion into the world, even in relatively poorer countries.

Globalisation has many faces, manifestations, accompanying phenomena, there are both advantages and disadvantages associated with it; however, we are particularly interested in the economic aspects of globalisation. And in this field, globalisation means sharpening competition on the one hand along with new opportunities for development and growth on the other. And that is true for all levels - from individuals through companies to whole countries.

How does it work and progress? For example, customers from their homes can more easily and virtually free compare the prices and parameters of similar products and services provided by different manufacturers and dealers. For instance, a person from the house, without having to visit a variety of shops, can find out how much do the same goods cost at Tesco, Billa, Carrefour, and elsewhere. This pushes businesses to a constant downward pressure on prices. The markets that were concluded and local in the past have become open and global markets.

The fact that Slovakia currently has one of the largest car productions per capita in the world was also a manifestation of global competition. VW, Peugeot, and Hyundai came to us because we can produce cars of the same quality as in Western Europe, or Asia, but unlike them, we are cheaper, especially labour costs are lower.

And by far this is not just a product market; it is valid for the services market even more.

For example, an American from Billings, Montana buys a computer and is going to run it. However, he has got problems with it, so he calls the customer service hotline, where the keen operator advises him what to do and how to resolve the issue. Customer has no idea that while he runs a computer in Montana, person who advises him, is located in India, for instance, in Bangalore. Why? Because it is more efficient and, therefore, it is better for everyone. Since salary costs in India are lower than in the U.S. the price of this service is lower (the difference of labour cost is greater than the price difference of local and international telecommunications services). The result is lower prices of computers for customers, higher profits for a computer company, and more jobs and thus less poverty in poorer countries.

Dozens, hundreds, and thousands of businesses such as legal, advocatory, computer, software, analytical, designing and similar companies move their activities, or at least part of them to cheaper countries. For example, the tax companies use to work in a way that the parent company in the U.S. or Western Europe collects data from their client, sends them via the Internet to their offices in India or China, where the local employees process the data, and send the prepared tax report, or other statement back to the parent company via the Internet. It is not only cheaper, but still also saves time because the time shift allows working nonstop for no extra cost.

In this way what is called outlocation, or outsourcing takes place on a global scale. Globalisation caused that the world has fundamentally changed. While a few decades ago, 90% of finished products were produced in developed countries and developing countries exported almost only the raw materials, now poorer countries (especially China and India) produce the majority of world products and their share on services is growing rapidly.

Globalisation is a challenge even for rich countries, particularly challenging in the sense of how and with what to replace the work that is being moved to cheaper countries by sharpening global competition.

Globalisation is a reality; it means a chance, but also a threat. A chance for prepared, wise and passionate; a threat to the others. In the context of globalisation, we have only two certainties. The first is that uncertainty is growing, and the second is that the rate and intensity of global competition will only just grow.

SUGGESTED READING FOR FIRST TRIMESTER OF THE FIRST YEAR:

Friedman, Thomas, L.: „The World is Flat“, Farrar, Straus and Giroux, New York, 2005
Smith, Adam: "An Inquiry into the Nature and Causes of the Wealth of Nations", Hackett Publishing Co., London, New York, 1993
Collier, Paul: Miliarda nejchudších, Vyšehrad, 2009
Moyo, Dambisa: Dead Aid. Why Aid is not Working and How that is a Better Way for Afrika, Farrar, Straus and Giroux, 2009