GLOBAL

ECONO
MIC
FLOWS
 1. Supply Chain
2. International
production
networks.
3. Global
commodity
chains
4. Global value
chains.
Gary Gereffi (2005)
 Supply This a Economic
chains. Trade:
Global general label for value -
Chains
adding
andactivities
Networksin the production process.
A supply chain begins with raw materials and
follows the value - adding process through a
variety of inputs and outputs and ultimately
to a finished product.

 International production networks. This

involves the networks of producers involved in
the process of producing a finished product.
Multinational corporations (MNCs) are seen as
playing a central role, as being the flagships
in these networks.
International production networks.

• Involves the networks

of producers involved
in the process of
producing a
finished product.

• Multinational
corporations (MNCs)
are seen as playing a
central role
 Global commodity chains. This
brings together the idea of
value- adding chains and the
global organization of
industries. It also accords a
central place to the growing
importance of the sellers of
 Globalglobal
value products.
chains. Gereffi
argues that this is emerging
as the overarching label for
all work in this area and for
all such chains
 Global value chains

• Emphasis on the relative

value of those economic
activities that are required
to bring a good or service
from conception to,
through the different
phases of production
delivery to final consumers,
and final disposal after use.
Global Value Chains: China
and the US

1.Scrap
metal
2.Paper
3.T-shirt
4.iPhones
 Scrap metal. An important example of a
Global
global Value
value chainChains:
involves China and the US
scrap metal.
This seems like a rather prosaic commodity,
but it is more important than many think and
its fate tells us a great deal about
globalization. For one thing, about two-
thirds of the steel made in the US comes
from recycled steel rather than from iron ore
and coke.
 • This a general
label for value -
adding activities
in the production
process.
• Begins with raw
materials and
follows the value -
adding process
through a variety
of inputs and
outputs and
ultimately to a fi
nished product.

Supply chains
Global
commodity
chains

• Brings together
the idea of value -
adding chains and
the global
organization of
industries.
• This includes
buyer - driven
chains such as
Wal – Mart.
• “ Brand
companies, ” or “
manufacturers
without factories ”
STEEL
LIFE
CYCLE
AMERICAN SCRAP
Chinese
hydraulic
Scrap
metal
recycler
“ China ’ s industrial might is being
constructed out of the ruins of [the US]
”
• Waste paper. One of the richest women in the
world is Zhang Yin (estimated to be worth $1.5
billion and her family is worth billions more).
The source of her wealth? Her business, Nine
Dragons Paper (72 percent of which is controlled
by the Zhang family) and Los Angeles- based
America Chung Nam (the largest exporter to
China), takes mountains of waste paper from the
US, ships it to China, recycles it into corrugated
boxes, the boxes are used to ship goods to
various places around the world – including the
US – and, once the boxes have arrived at their
destination and been unpacked, they are turned
into scrap and the process begins all over again.
Waste paper
Recycling
 T shirts. The global value chain here
involves, among other things, cotton
grown in and shipped from the US; T-
shirts manufactured in China; the shipping
to, and sale in, the US of those new T-
shirts; the eventual disposal of them (often
very quickly); and finally the shipping and
sale of those used T - shirts in Africa.
The American cotton industry is
aided – unfairly – in other
ways. For example, American
textile manufacturers are
prevented from using foreign
cotton even when they can get it
at a lower price. The US
government pays American textile
manufacturers to use American
cotton. And the US government
helps in other ways as well, such
as its Crop Disaster Program and
 iPhones The global value chain
for the Apple iPhone is
fascinating. The story starts
with the mystery that while 3.7
million iPhones were sold in
2007, only 2.3 million were
registered on the wireless
networks that are Apple ’ s
exclusive partners in the US and
Europe.
The phones themselves are manufactured in China and exported to
the US and Europe. The phones are being bought in the US and
Europe, sometimes in large quantities, by tourists, airline
personnel, small businesspeople, and full - time smugglers, and
brought back to China. The phones need to be “ unlocked ” and to
have Chinese software added so that they will work in China and
outside the official networks, but that is quick, easy, and
inexpensive In fact, stores in China that sell the iPhones also offer
unlocking as an additional service. In this way, about one- third of
the iPhones manufactured by Apple in China end up, contrary to
the company’ s policies and wishes, right back in China (after a
brief excursion to the US or Europe). Apple has been negotiating
with China Mobile. With 350 million subscribers, it is the largest
mobile- p hone service provider in the world.
THE ECONOMIC
IMPACT OF THE • Oil wells far out in the
FLOW OF OIL ocean are more
Oil Wealth expensive to build than
those on land, and the oil
This huge and growing income
has enormous implications, itself is harder to get out
but at the minimum those
nations, their leaders, and
and, as a result, more
their corporations (private and
state - run) have huge sums of
expensive.
money to invest.
• The high price of oil and
gasoline has led to
increased efforts to
create and use various
biofuels, especially
ethanol
RACE TO THE
BOTTOM AND • A dominant idea in
UPGRADING thinking about less
developed economies
from a global
perspective is the so -
called “ race to the
bottom . ”
• Countries involved in
a downward spiral of
competitiveness.
RACE TO THE
BOTTOM AND • For less developed
UPGRADING countries to compete and
succeed in the global
economy, they must
undercut the competition
in various ways, such as
offering lower wages,
poorer working
conditions, longer hours,
ever - escalating pressure
and demands, and so on.
Upgrading in the Less Developed
World?
• The current global economic system is based, at
least in part, on a race to the bottom by less
developed countries and the exploitation of them
and their industries by the more developed
countries.

• The early success of Chinese industry was

based on their victory in the race to the bottom,
but now they are to the production of higher -
value products, with higher pay and better
working conditions for at least some Chinese
workers.
Maquilad • First - generation
were labor - intensive, employed limited
oras of technologies, and assembled finished
Mexico products for export.
• Second – generation
less oriented toward assembly and
more toward manufacturing processes that
use automated and semi - automated
machines and robots in the automobile,
television, and electrical appliance sectors
• Third generation
maquiladoras “ are oriented to research,
design, and development, and rely on highly
skilled labor such as specialized engineers
and technicians, ”
Industrial Four
upgrading Sequential
Nation - states, firms
and even workers
Stages
move from low-value 1. Assembly
to relatively high-value
production. 2. Original equipment
manufacture (OEM)
3. Original brand name
manufacturing
(OBM)
4. Original design
manufacturing
(ODM)
OUTSOURCING • A complex phenomenon that is
not restricted to the economy,
Outsourcing is the not only a macro - level
transfer of activities phenomenon, and not simply
once performed by an global in character.
entity to a business (or Offshore outsourcing
businesses) in Transfer of activities to
exchange for money. entities in other countries.
In-sourcing
Involves the fact that
offshore outsourcing
necessarily involves tasks being
taken in by fi rms in other
countries.
FINANCIAL GLOBALIZATION

• The world ’ s economies have become

more tightly interconnected as a result of
globalization.
• “ When the American economy sneezes,
the rest of the world catches a cold. ”
• The corollary however is that problems in
weaker economies have less of an effect
across the globe.
 The Great
Recession • Sovereign wealth
funds: Funds
1. Sub-prime controlled by nation -
mortgage crisis states that often invest
• had its roots in problems
associated with a dramatic in other countries.
increase in the issuing of
highly risky “ sub - prime ”
mortgages by American
banks. These were
mortgages sold primarily to
relatively low - income
people (whose ability to
repay those loans was not
checked closely) in order
to allow and induce them
to buy homes.
 • Consumption is highly complex,
CONSUMPTIONinvolving mainly consumer
objects, consumers, the
consumption process, and
consumption sites.
• The global flow of many of the
same goods and services, and the
increasing global use of credit
cards and other credit
instruments, leads more and
more societies throughout the
world in the direction of
American – style hyperconsumption
and hyperdebt.
• Hyperconsumptio • Hyper debt :
n Owing more than
Buying more one will be able to
than one can afford. repay.
• China and India, with their enormous
populations enjoying an unprecedented
economic boom, also appear to be headed
in much the same direction.

• globalization means that

hyperconsumption and hyperdebt, as well
as the problems associated with them, are
increasingly likely to become global
phenomena and problems.
• US and Japan can be seen as consumer
societies, but Japan differs from the US in
many ways including the fact that it never
fully embraced the idea of a consumer
society and, more specifically, continues to
manage to save a signifi-cant amount, in
contrast to the US where the savings rate
.approaches zero
Consumption Processes
• This includes knowing how consumers work
their way through a shopping mall, use a credit
card, or make a purchase online.

Consumption Sites
• American and Western - style consumption sites
– shopping malls, fast - food restaurants,
clothing chains, discounters such as Wal - Mart,
Disney - like theme parks, Las Vegas - style
casino hotels, Internet sites such as
Amazon.com and ebay – have spread
throughout much of the world.