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Four Forms of Capital in Globalization: Types & Examples

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  • 0:01 The Four Forms of Capital
  • 0:38 Human Capital
  • 1:36 Financial Capital
  • 2:28 Resource Capital
  • 3:11 Political Capital
  • 3:46 Lesson Summary
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Lesson Transcript
Instructor: Ian Lord

Ian has an MBA and is a real estate investor, former health professions educator, and Air Force veteran.

The movement of capital between countries is more than just foreign monetary investment. In this lesson we will look at four forms of capital relevant to international trade, define them, and give examples of how capital flows between countries.

The Four Forms of Capital

As the world marketplace has grown into a globalized network of business activity, it's important to know what forms capital can take and how flow of capital occurs between nations. Dave is an MBA student receiving refresher instruction in different forms of capital as part of a business globalization unit.

While a fixture such as real estate or a factory is by nature confined to a given place, other forms of capital can easily move from country to country. Let's look at four forms of capital and what their movement looks like in a globalized economy.

Human Capital

Human capital refers to the contributions of people and their intelligence, skills, and labor. The first thing Dave thinks of when considering human capital in the context of globalization is the Internet. Thanks to the Internet, teams of people can work in different countries directly on a project or order parts and services from anywhere in the world.

As demand for labor and the availability of workers change, we see patterns of migration between countries. In openly globalized markets, a worker will work for or in other countries if their skills, knowledge, and abilities bring more income and a higher standard of living than what's available in their home country.

One of the more visible examples in recent years has been immigration from Mexico as well as from Central and South American countries to the United States. These workers come to the US because their earning and lifestyle potential (as well as safety) is greater in the US compared to remaining in their home countries.

Financial Capital

Financial capital is the use of money and other monetary tools. These include cash, borrowing money through loans and bonds, and the monetary policies that influence currency value. Nations may invest in other countries to expand product lines to new markets or take advantage of lower tax costs.

Doing business in a foreign country may also help save money if it involves trading at favorable currency exchange rates. Developed countries offer foreign aid and assistance to countries in need, which helps stabilize regions. Aside from meeting humanitarian needs, this can improve the quality of life, increase safety and business opportunities, and ultimately help create stronger business opportunities for both countries involved. For example, the United States provided considerable financial aid to European countries following World War II as part of the rebuilding process.

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