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The Global Economy: Lesson 2: The Structures of Globalization

This document provides an overview of globalization and its key structures. It discusses four main aspects: [1] the global economy, [2] market integration, [3] the global interstate system, and [4] contemporary global governance. Specifically, it defines economic globalization and outlines its main drivers, including the globalization of trade, finance, technology, and production. It also discusses the roles of transnational corporations, the IMF, World Bank, and WTO in facilitating the global economy.

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DIANE SORIANO
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196 views

The Global Economy: Lesson 2: The Structures of Globalization

This document provides an overview of globalization and its key structures. It discusses four main aspects: [1] the global economy, [2] market integration, [3] the global interstate system, and [4] contemporary global governance. Specifically, it defines economic globalization and outlines its main drivers, including the globalization of trade, finance, technology, and production. It also discusses the roles of transnational corporations, the IMF, World Bank, and WTO in facilitating the global economy.

Uploaded by

DIANE SORIANO
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Lesson 2: The Structures of Globalization

(The Global Economy, Market Integration, The Global Interstate System, Contemporary Global Governance)

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

1. THE GLOBAL ECONOMY


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.

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).

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.

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.

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.

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.

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.

WORLD BANK
- Two mandates of the institution: end extreme poverty and promote shared
prosperity.
- Offers financial and technical assistance to developing countries.

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.

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
- 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
- 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)

- 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

TIME EVENT
130 BCE – 1453 Silk Road, oldest known international trading route from China to the Middle East
BCE to Europe.
1571 Establishment of the Galleon Trade which connected to 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 To support the war efforts, the countries depleted their gold reserves, forced them to
(1914 – 1918) 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.
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 (IBRC 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).

- 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

- 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

2. Market Integration
- Because of globalization which created the world economy, markets have also become integrated.
- Fusing of many markets into one
- Global market integration means that price differences between countries are eliminated as all markets become one.
- 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.

Market Integration is the fusing of many markets into one. Global market Integration means that price differences
between countries are eliminate as all markets become one.

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