Lesson 2:

The Structures of Globalization

The Global Economy

Market Integration
The Global Interstate System
Contemporary Global Governance

Prepared by:
Joymee D. Mallo
 GLOBALIZATION

⊹ “May be thought of initially as the widening, deepening and speeding up of

worldwide interconnectedness in all aspects of contemporary social life (Held,
et. Al, 1999)
➢Aspects means the political, technical, cultural and economic features (Giddens,
1999:10).

➢Meaning, globalization is a multidimensional phenomenon

2
 The global economy
1
 Learning outcomes

1. Define economic globalization.

2. Identify the actors that facilitate economic globalization.
3. Define the modern world system.
4. Articulate a stance on global economic integration.

4
 ECONOMIC GLOBALIZATION

⊹ …a historical process, the result of human innovation and technological progress. It

refers to the increasing integration of economies around the world, particularly
through the movement of goods, services, and capital across borders. The term
sometimes also refers to the movement of people (labor) and knowledge
(technology) across international borders (IMF, 2008 as cited in Benczes, 2014: 900).

5
 INTERCONNECTED DIMENSIONS OF ECONOMIC
GLOBALIZATION

⊹ 1. The globalization of trade goods and services.

⊹ 2. The globalization of financial and capital markets.
⊹ 3. The globalization of technology and communication.
⊹ 4. The globalization of production.

6
 ECONOMIC GLOBALIZATION

⊹ We should note that globalization is multidimensional, complex, and does not

influence or affect nation-states in the same way which makes it an uneven
process as well.

7
 GLOBAL ACTORS IN ECONOMIC GLOBALIZATION
TRANSNATIONAL CORPORATIONS (TNCs)

- TNCs are business organization whose activities are located to more than two countries and is
the organizational form that defines foreign direct investment (Lazarus 2001, p 10197)
- Regarded as another important economic development that involves the changing nature of
global production.
- TNCs are believed to be the main driving force of economic globalization.
- For realists, TNCs still represent national interests and have means through which the rich
can exploit the poor.
- The availability of cheap labor, resources, and favorable production conditions in the
Third World enhanced both the mobility and the profitability of TNCs.
- TNCs' ability to ‘outsource’ manufacturing jobs—that is, to cut labor costs by dispersing
economic production processes into many discrete phases carried out by low-wage workers in
the global south—is often cited as one of the hallmarks of economic globalization.
- Enterprises like Wal-Mart, General Motors, Exxon-Mobil, Mitsubishi, and Siemens belong to
the 200 largest TNCs, which accounts for over half of the world’s industrial output.

8
 GLOBAL ACTORS IN ECONOMIC GLOBALIZATION
INTERNATIONAL MONETARY FUND (IMF)

- Founded at the Bretton Woods Conference in July 1944

alongside the International Banks for Reconstruction and
Development (Now called World Bank)—which was responsible for post-
war reconstruction, as two international institutions.
- The mandate of IMF was to promote international financial
cooperation and strengthen international trade.
- The IMF was expected to provide short-term financial assistance
(loans) to countries.
- Official organization for securing international monetary cooperation.
- Help less-developed countries through research and giving monetary
advice.
9
 GLOBAL ACTORS IN ECONOMIC GLOBALIZATION

WORLD TRADE ORGANIZATION (WTO)

- WTO was launched on January 1, 1995 and has

become an official forum for trade negotiations.
- It is a formally constituted organization with legal
personality.

10
 GLOBAL ACTORS IN ECONOMIC GLOBALIZATION

WORLD BANK

- Two mandates of the institution: end extreme

poverty and promote shared prosperity.
- Offers financial and technical assistance to
developing countries.

11
 GLOBAL ACTORS IN ECONOMIC GLOBALIZATION

WTO, IMF, and WORLD BANK

- 3 institutions that underwrite the basic rules and regulations of economic,

monetary, and trade relations between countries.
- Many developing countries have loosened their trade rules because of the influence
and pressure of these institutions.

12
 Is Economic Globalization a New
Phenomenon?
⊹ There is no consensus (agreement) on its origin
⊹ Best known example of archaic (old) globalization is through the Silk road →
long distance trade

13
 Is Economic Globalization a New
Phenomenon?
⊹ Silk road is the oldest known international trade route (From China to Middle
East to Europe) (trivia: one of the most profitable products traded here is silk)
⊹ However, silk road was international but NOT truly “global” because it had no
ocean routes that could reach the American continent

14
 Is Economic Globalization a New
Phenomenon?
⊹ Historians Dennis O. Flynn and Arturo Giraldez claims that globalization
began when “All heavily populated continents began to exchange products
continuously – both with each other directly and indirectly via other
continents
× Traced it back to 1571 with the establishment of galleon trade (connected
Manila to Acapulco, Mexico, thus Americas become connected to trading
routes)

15
 Is Economic Globalization a New
Phenomenon?
⊹ Later, a more open trade emerged in 1857 when UK, US, and other European nations adopted the
gold standard at an international monetary conference in Paris.
× Its goal is to create a common system for more efficient trade
× But during World War I, countries exhausted their gold reserves when they funded their
armies, causing a downfall in their economy resulting to the abandonment of gold standard
× They adopted floating currencies that were no longer redeemable in gold.
× Today, the world economy operates on fiat currencies - currencies not backed up by gold
but their cost relative to other currencies
⬩ This allowed countries to control their economies by increasing or decreasing the
amount of money in circulation 16
 Some Historical notes

TIME EVENT

130 BCE – 1453 BCE Silk Road, oldest known international trading route from China to the Middle East to Europe

1571 Establishment of the galleon trade which connected Manila to Mexico; made the connection
between the Americas and the trading routes possible
1867 A more open trade system was established when nations like the United Kingdom, the
United States, and other European countries adopted the gold standard.
World War I (1914 – 1918) To support the war efforts, the countries depleted their gold reserves, forced them to
abandon the gold standards. European countries adopted floating currencies.

1920s – 1930s The Great Depression happened—the worst and longest recession ever experienced by the
Western world.

17
 Some Historical notes
TIME EVENT

Early 20th century The world economy operates based on fiat currencies—currencies that are not backed by
precious metals and whose value is determined by their cost relative to other currencies. This
system allows governments to freely and actively manage their economies by increasing or
decreasing the amount of money in circulation as they see fit.
1944 Bretton Woods Conference gave birth to International Banks for Reconstruction and
Development (IBRD or World Bank), and International Monetary Fund (IMF).
1957 Establishment of the European Economic Community (EEC).

1964 The United Nations Conference on Trade and Development (UNCTAD) was established with
the joint effort of the developing world.
1986 – 1994 Multilateral trade negotiations were carried out under the Uruguay Round.

1995 The Uruguay Round gave birth to a ‘real’ international trade institution, the World Trade
Organization (WTO).

18
⊹ Today, because of the developments in transportation and communication,
economic interdependence also intensified
⊹ Countries trade with each other due to lack or insufficient resources to satisfy
their needs and wants.
× Countries develop their own resources and then trade it for the resources
they need. This can be seen long time ago when people travelled long
distances to exchange goods and commodities , i.e BARTER SYSTEM

19
⊹ Countries import goods and services because of the following reasons:
× There are better or cheaper qualities of commodities somewhere
× Commodities are more appealing
× There are no alternatives in their home country

20
 Market integration
2
 Market integration

⊹ Because of globalization which created the world economy, markets has also
become integrated

22
 Market integration

⊹ Fusing of many markets into one

⊹ Global market integration means that price differences between countries are
eliminated as all markets become one.
⊹ One way to the progress of globalization is to look at trends as to how prices
converge or become similar across countries.

23
 Market integration

⊹ In one market, a commodity has a single price if these areas were part of the
same market.
⊹ Today, markets are MORE INTEGRATED than before because transportation
costs have continued to fall, and most tariffs have been scrapped altogether.

24
Thanks!
Any questions?

25
REFERENCES:
Benczes, I. (2014). “The Globalization of Economic Relations. In The SAGE Handbook of
Globalization. SAGE Publications Ltd., pp. 899-920 [e-copy pagination]
http://dx.doi.org/10.4135/9781473906020.n9

Claudio, L. E. and Abinales, P. N. (2018). The Contemporary World. C & E Publishing, Inc.

International Monetary Fund. (2020, March 13). IMF and the World Trade Organization.
https://www.imf.org/en/About/Factsheets/The-IMF-and-the-World-Trade- Organization

Mendoza, C., Tabajen, R., Tomas, EA., Austria R. (2019). Worktext in the Contemporary
World. Nieme Publishing House Co. Ltd., pp. 9-18

World Trade Organization. (n.d.). The WTO and World Bank.

https://www.wto.org/english/thewto_e/coher_e/wto_wb_e.htm

World Bank. (2016, October 19). World Bank, IMF, and WTO Stand Together for Global
Trade. https://www.worldbank.org/en/news/feature/2016/10/13/world-bank- imf-
and-wto-stand-together-for-global-trade 26