GLOBAL ECONOMY

Economic Globalization
- refers to the increasing integration of economies around the world, particularly
through the movement of goods, services, and capital cross borders.
- It is a spread of trade, transportation, and communication systems on a global
scale in the interest of promoting international commerce.

2 types of Economies
1.Protectionism - is protecting one’s economy from foreign competition by creating
trade barriers
2.Lliberalization - is the act of reducing trade barriers to make international trade
easier between countries.
Tariffs -These trade barriers usually required fees on imports or exports and quota.
-It limit quantity of a particular product.

Historical process- the result of human innovation and technological progress.

According to Gills and Thompson (2006), globalization processes have been ongoing
ever since Homo sapiens began migrating from the African continent ultimately to populate the
rest of the world. Minimally, they have been ongoing since the sixteen-century’s connection of the
Americas to Afro-Eurasia.

 Silk Road- best known example of old-fashioned globalization

- It is an ancient network of trade routes, formally established during the Han
Dynasty of China, which connected Asia, Africa, and Europe.
 Adam Smith- Writer of magnum opus, An inquiry into the nature and causes of the wealth of
nations (1776)
2 greatest achievements in human history.
Christopher Columbus - discovery of America
Vasco de Gama -discovery of the direct sea route to India.
- as the which serve as pathways to network and trade.
British Industrial Revolution- overshadowed the land & route discoveries.
-It boomed breathtaking technological advances and organization methods.
 1800s- industrial revolution
-Time of Napoleonic wars.
-It spread to Continental Europe and North America.
-This time period saw the mechanization of agriculture and textile manufacturing
-Revolution in power, including steam ships and railroads which affected
social, cultural and economic conditions.
 The British and the Dutch East India Companies-
-Coupled with monopolized trade (such as the first multinational corporations,
-Did not favor, international economic integration.

 World export to world Gross Domestic Product (GDP)

Gross domestic product (GDP) -is the monetary value of all the finished goods an services
produced within a country's borders in a specific time period.
-GDP is commonly used as an indicator of the economic health of a country,
-as well as a gauge of a country's standard of living.

 1870 to 1913- golden age of globalization.

-since it was characterized by relative peace, free trade and financial and economic
stability.
-The relatively short period before World War I.
Transnational Corporations (TNCs)
- the major players of present-day global economy
-Are incorporated or unincorporated enterprises comprising parent enterprises
and their foreign affiliates.
e.g. such as Procter & Gamble and Coca-Cola Company.
Parent enterprise -an enterprise that controls assets of other countries.
-A foreign affiliate is an incorporated or unincorporated enterprise in which an
investor, who is resident in another economy.
Multinational Corporation- has an international identity as belonging to a particular home country
where they are headquartered.
Transnational company - is borderless, as it does not consider any particular country
as its base, home or headquarters.
- is a type of multinational corporations.

Global commodity chain - an idea that reflects upon the increasing importance of global
buyers in a world of dispersed production.
-a process used by firms to gather resources, transform them into goods or
commodities, and finally, distribute them to consumers.
-It is the result of economic integration

ISSUES ABOUT GLOBALIZATION

Capitalism - also known as the free-enterprise or free-market system,

- is an economic and political system in which a country's trade and industry are
controlled
by private owners for profit, rather than by the state.
- Powerful Transnational Corporations tend to transfer manufacturing jobs from
developed nations to less developed countries through outsourcing to reduce the
cost of products because economically disadvantaged countries have l ess
government
regulations and cheaper labor cost.
-Workers in these countries work for very little money therefore they often remain
poor and sometimes they do not have sufficient social and health insurance cover.
-Capitalism is exploitative in nature which divided society and the rich has more
power over the working-class posing threats to human rights.

Income Inequality - is the unequal distribution of household or individual income across the
various participants in an economy.
- It is often presented as the percentage of income related to a percentage of the population.
-Less equal societies have less stable economies.
-High levels of income inequality are linked to economic instability, financial
crisis, debt and inflation.

Environmental Problems
* Global warming, climate change, and the abuse of natural resources.
*The use of airplanes, ships and trucks to transport goods over international borders is
constantly on the increase.
*Manufacturing companies and factories release chemicals into the atmosphere. This causes
more carbon dioxide to be released into the atmosphere which in turn is the main
cause of global warming which is the gradual increase in the overall temperature of
the
earth's atmosphere generally attributed to the greenhouse effect caused by increased
levels of carbon dioxide, chlorofluorocarbons, and other pollutants
 INTERNATIONAL MONETARY SYSTEMS

Regimes - all the implicit and explicit principles, norms, rules, and decision-making procedures
around which actors’ expectations converge

International monetary system or regime(IMS) - refers to the rules, customs,

instruments, facilities, and organizations for effecting international payments.
-Facilitates cross-border transactions, especially trade and investment.

The gold standard- functioned as a fixed exchange rate regime, with gold as the only
international reserve. Participating countries determined the gold content of
national currencies(fixed exchange rates).
-The modern-day IMS originated back to the early19th century, when the UK adopted
gold mono-metallism in 1821. In 1867, the European nations &the United States,
propagated a deliberate shift to gold at the International Monetary Conference in
Paris.

Gold - believed to guarantee a non-inflationary, stable economic environment,

- a means for accelerating international trade (Einaudi, 2001)
Joined the monetary regime with gold as standard before World War I
- Germany, France , United States , Italy and Russia (1897).Roughly 70 percent of the

THE BRETTON WOODS SYSTEM AND ITS DISSOLUTION

Delegates also agreed on the establishment of two international institutions:

1. International Banks for Reconstruction and Development (IBRD)

- responsible for post-war reconstruction
2. International Monetary Fund (IMF) -promotes international financial cooperation and
buttress international trade.
-It is expected to safeguard the smooth functioning of the gold-exchange
standard
by providing short-term financial assistance in case of temporary balance of payments
difficulties.

EUROPEAN MONETARY INTEGRATION

In the post-World War II era, the United States advocated an economically and militarily
strong Germany and Western Europe. It activated its post-war reconstruction programme, the
Marshall Plan, in1948, which was administered by the Organization for European Economic
Cooperation. European Economic Community (EEC) was established and was the first major
step towards an ever-closer union.
European six (Germany, France, Italy, Netherlands, Belgium and Luxembourg) aimed at
the creation of a common market, where goods, services, capital and labor moved freely but
not in the field of finance or exchange rate policies. But the collapse of the Bretton Woods
system pressured EEC to set up a regional monetary regime—the European Monetary
System (EMS) in 1979. The EMS was a unique system, since neither the US dollar,
nor gold could play a role in the stabilization process of exchange rates. Instead, a symmetric
adjustable peg arrangement, the European Exchange Rate Mechanism, was created (Gros and
Thygesen, 1998).
Activity
Global Products Survey: How globalized are you.
Direction: List things that you posses that are made in foreign country.

Item Country Company

Quiz
Essay: Answer each question in exactly 140 words:
(1) What is your own stance with the statement “The global free trade has done more harm than
good.”

(2) Do you believe in “buying Filipino” even if you have to pay a higher price? Why?