UNIT I: INTRODUCTION TO GLOBALIZATION Globalization is the process of integration of

economies across the world through cross-border flow of

GLOBALIZATION CONCEPTS, MEANINGS, FEATURES, factors product and information. According to the International
AND DIMENSIONS Monetary Fund (IMF) globalization is the growing economic
interdependence of countries worldwide through increasing
volume and variety of cross border transactions in goods and
Globalization is the process in which people, and services and of international capital flows and also through
ideas and goods spread throughout the world, spurring more the more rapid and wide diffusion of technology.
interaction and integration between the world's cultures,
governments, and economies. Globalization is an expansion, and intensification of
Globalization is about growing worldwide connectivity social relations and consciousness across world time and
world space. It is about growing worldwide connectivity
Globalization is a process of interaction and according to Steger.
integration among the people, companies, and governments
of different nations, a process driven by international trade MANFRED STEGER
and investment and aided by information technology. This The expansion and intensification of social relations
process has effects on the environment, on culture, on and consciousness across world-time and across world-
political systems, on economic development and prosperity, space
and on human physical well-being in societies around the
world  Expansion
People are engaged in buying and selling from other Both the creation of new social networks and the
places in far-away lands like the famed Silk Road across multiplication of existing connections that cut across
Central Asia that connected China and Europe during the traditional political, economic, cultural and geographic
Middle Age for thousands of years and they also invested in boundaries.
enterprises in other countries for centuries.  Intensification
Refers to the expansion, stretching, and acceleration
There were similarities in features of those prevailing of these networks.
wave of globalization before the outbreak of the First World  Across world-time and across world-space
War in 1914 to the current wave. There is an increase cross Globalization processes do not occur merely at an
border- trade, investment, and migration due to policy and objective, material level but they also involve the subjective
technical developments in the past few decades. It is in the plane of human consciousness.
area of economic development that observers believe the
world has entered a new phase. Today’s globalization is GLOBALIZATION VS GLOBALISM
farther, faster, cheaper, and deeper in compared to earlier  Globalization
wave of globalization. Represents the many processes that allow for the
Example: Since 1950, the volume of world trade has expansion and intensification of global connections.
increased by 20 times and from1997 to1999, flows of foreign
 Globalism
investment nearly doubled from $468 billion to $827
Widespread belief among powerful people that the
domestically.
global integration of economic markets is beneficial for
everyone, since it spreads freedom and democracy across
In the years since the Second World War, and
the world.
especially during the past two decades, many governments
have adopted free-market economic systems, vastly
ANTHROPOLOGIST ARJUN APPADURAI’S “SCAPES”
increasing their own productive potential and creating myriad
 Ethnoscape – refers to global movement of people
new opportunities for international trade and investment.
Governments also have negotiated dramatic reductions in  Mediascape – flow of culture
barriers to commerce and have established international  Technoscape – refers to the circulation of
agreements to promote trade in goods, services, and mechanical good and software
investment. Taking advantage of new opportunities in foreign  Financescape – denotes the global circulation of
markets, corporations have built foreign factories and money
established production and marketing arrangements with  Ideoscape – realm where political ideas move
foreign partners. A defining feature of globalization, therefore, around
is an international industrial and financial business structure.
Further, globalization is considered a multi-
One principal driver of globalization is technology. dimensional process involving economic, political,
Economic life is dramatically transformed by advancement in technological, cultural, religious and ecological dimensions. It
information technology. All sorts of individual economic actors suggests a dynamic process of change that results in either
like consumers, investors, and businesses which are valuable positive or negative development. It leads to the creation of
new tools for identifying and pursuing economic opportunities, something new; it involves the multiplication of social
including faster and more informed analyses of economic connections and various activities that transgress traditional
trends around the world, easy transfers of assets, and and political, economic, cultural and geographical lines.
collaboration with far-flung partners are provided by
information technologies. ATTRIBUTES, QUALITIES OR CHARACTERISTICS OF
GLOBALIZATION
 1. It involves both the creation of new social networks In this period the invention of writing and the wheel
and the multiplication of existing connections that cut were great social and technological boosts that moved
across traditional, political, economic, cultural, and globalization to a new level. The invention of wheel in addition
geographical boundaries. to roads made the transportation of people and goods more
Example: Brazilian World Cup: Today’s efficient. On the other hand writing facilitated the spread.
media combine conventional TV coverage with
multiple streaming feeds into digital devices and 3. The Early Modern Period (1500-1750)
networking sites that transcend nationally based It is the period between the Enlightenment and the
services. Renaissance. In this period, European Enlightenment project
tried to achieve a universal form of morality and law. This with
2. Globalization is reflected in the expansion and the the emergence of European metropolitan centers and
stretching of social relations, activities, and unlimited material accumulation which led to the capitalist
connections. world system helped to strengthen globalization.
Examples: Reaching of financial markets
around the globe. Occurrence of electronic around 4. The Modern Period (1750-1970)
the clock. Emergence of gigantic and virtually Innovations in transportation and communication
identical shopping malls in all continents to cater to technology, population explosion, and increase in migration
consumers who can afford commodities all over the led to more cultural exchanges and transformation in
world-including products whose various components traditional social patterns. Process of industrialization also
were manufactured in different countries. This accelerated.
process is called SOCIAL STRETCHING.
5. The Contemporary Period (from 1970 to present)
3. Globalization involves the intensification and The creation, expansion, and acceleration of
acceleration of social exchanges and activities. worldwide interdependencies occurred in a dramatic way and
Examples: The worldwide web relays distant it was a kind of leap in the history of globalization.
information in real time. Satellites provide consumers
with instant pictures of remote events. Sophisticated DIMENSIONS OF GLOBALIZATION
social networking by means of Facebook or twitter There are six dimensions in globalization. These
has become routine activity for more than a billion include:
people around the globe. 1. Economic Dimension
The intensification of worldwide social 2. Political Dimension
relations means that local happenings are shaped by 3. Technological Dimension
events occurring far away, and vice versa. This 4. Cultural Dimension
means that there is intermingling of local and global, 5. Religious Dimension
with the national and regional in over lapping 6. Ecological Dimension
horizontal scale.
1. ECONOMIC DIMENSION
4. Globalization processes do not occur merely or an This refers to the extensive development of economic
objective, material level but they also involve the relations across the globe as a result of technology and the
subjective plane of human consciousness. Without enormous flow of capital that has stimulated trade in both
erasing local and national attachments, the sources and goods.
compression of the world into a single place has
increasingly made global the frame of reference for Major players in the current century’s global
human thought and action. economic order
Globalization involves both the  Huge international corporations (General Motors,
macrostructures of a global community and the micro- Walmart, Mitsubishi)
structures of global person hood. It extends deep into  International Economic Institutions (IMF, World Bank,
the core of the self and its dispositions, facilitating the The World Trade Organization)
creation of multiple individual and collective identities  Trading Systems
nurtured by the intensifying relations between the
personal and the global. They differ from each other The result of these powerful forces resulted in the
by an acceleration in the speed of social exchange wide gap between the rich and the poor countries. Major
and widening of geographical scopes. Sources of Economic Growth across Countries.
1. Property rights
HISTORICAL PERIODS OF GLOBALIZATION 2. Regulatory institutions
3. Institutions for macro-economics
1. The Prehistoric Period (10000 BCE-3500 BCE) 4. Stabilization
In this earliest phase of globalization, contacts among 5. Institutions for social influence
hunters and gatherers–who were spread around the world – 6. Institutions for conflict management
were geographically limited. In this period due to absence of
advanced forms of technology, globalization was severely 2. POLITICAL DIMENSION
limited. This refers to an enlargement and strengthening of
political interrelations across the globe.
2. The Pre-modern Period (3500 BCE- 1500 CE)
Political Issues that Surface in this Dimension There are eight (8) principles that summarize the
1. The principle of state sovereignty Roman Catholic Teachings:
2. Increasing impact of various intergovernmental 1. Commitment to universal human rights
organization 2. Commitment to the social nature of the human person
3. Future shapes of regional and global governance 3. Commitment to the common good
4. Solidarity (The principle of Solidarity affirms that
The globalization rendered almost powerless any political membership in the human family means that all bear
efforts to introduce restrictive policies affecting individual responsibility for one another.)
states, with the results that the world in many ways turned 5. Preferential option of the poor (In the Theology of the
into a borderless world. Governments often seek to restrict Incarnation- Christ God became poor for us so as to
the migration of peoples, especially those coming from the enrich us by his poverty. The poor are susceptible to
poor countries in the global South. the effects of environmental irresponsibility because
In the development of supra-national structures and they live in countries where cheap building materials
associations held together by common concerns and mutually and cheap labor are readily available. They regularly
agreed upon norm, the most obvious is political globalization. work in farming, fishing, and forestry, areas which
On the part of the involved parties, informal structures which suffer environmental damage).
are considered binding, bring together world power centers 6. Subsidiary (The Catholic Church teaches that
due to common interests. decisions should be made at the lowest level in order
to achieve the common good.
3. CULTURAL DIMENSION 7. Justice
This refers to the increase in the amount of cultural 8. Integral Humanism- is concerned with whole person
flows across the globe. Cultural interconnections are at the
foundations of contemporary globalization. and consumerism Justice is divided in three (3) categories:
which are the dominant cultural characteristics of our age and 1. Commutative justice
the drive for economic success stimulated by the internet and This aims at fulfilling the terms of contracts and other
other technological devices circulate much more easily than promises on both personal and social level.
they did in earlier periods. In the dissemination of popular 2. Distributive justice
culture, transactional media corporations play a major role This ensures a basic equity in how both the burden
which brought a sharp rise in homogenized popular culture and the goods of society are distributed and that ensures that
that is manifested in the dominance of fast food restaurant on every person enjoys a basically equal moral and legal
more aspects of life throughout the world. standing apart from differences in wealth, privilege, talent and
achievements
4. RELIGIOUS DIMENSION 3. Social justice
Religion is a personal or institutionalized set of This refers to the creation of the conditions in which
attitudes, beliefs, and practices relating to or manifesting the first two categories of justice can be realized and the
faithful devotion to an acknowledged ultimate reality or deity. common good identified and defended.
It is the most important defining element of any civilization as
contrasted with race, language, or way of life. As such, it is According to catholic teaching, a just society is one
also portrayed as a defining element in future conflicts. which these forms of justice are assured because they are
Whether the root cause of a particular conflict merely a required by human dignity
vehicle for the mobilization of nationalist or ethnic passions,
religion is certainly central to much of the strife currently 5. IDEOLOGICAL DIMENSIONS
taking place around the globe. Ideology is a system of widely shared ideas, beliefs,
Jihadist globalism is a religious response to the norms and values among a group of people. It is often used
materialist assault by the ungodly West in the rest of the to legitimize certain political interests or to defend dominant
world. Coming out of what they consider a pure form of Islam, power structures. Ideology connects human actions with
its disciples seek to destroy all those alien influences that some generalized claims. Globalization is a social process of
have been imposed on Muslim people. It applies to those intensifying global interdependence while globalism is an
extremely violent strains of religion that convert the global ideology that gives the concept of neo-liberal values and
imaginary into very concrete political agendas and terrorist meanings to globalization.
tactics. It is also applied to those violent fundamentalists in
the West who seek to transform the world into a Christian Major Ideological Claims of Advocates of Globalism
Empire. 1. Globalization is about the liberalization and global
Bin Ladin understands umma as a single community integration of markets.
of believers professing faith in the one and only God, but at The problem with this claim is that liberalization and
the same time committed to destroying not only alien invaders integration of markets happen through political project of
but also corrupt Islamic elites in order to return power to the engineering free markets by interference of centralized state
Muslim masses. power, and it is in contrast to the neoliberal idea of limited role
Since one third of the world’s Muslim population lives of governments.
in non Islamic countries, the restoration of God’s proper reign 2. Globalization is inevitable and irreversible.
must be a global event. Hence, Al-Qaeda established jihadist Globalists believe that spread of market forces driven
cells in various parts of the world. by technological innovations is inevitable in globalization.
Neoliberals use this claim to convince people to adopt the
Roman Catholic Teaching of Globalization natural discipline of the market if they want to prosper, which
implies the elimination of government controls over the Rapid development of science and technologies
market. served as basis for immediate globalization of the world
3. Nobody is in charge of globalization. economies which in turn provided an environment where
This claim seeks to depoliticize the public debate on there is a swift spreading of market economic system all over
globalization and neutralizing anti -globalist movements. the world. It is also developed based on the increasing cross-
4. Globalization benefits everyone. border division of labor which penetrates within the
Globalists talk about the benefits of market enterprises of different countries on the level of production
liberalization such as rising global living standards, economic chains.
efficiency, individual freedom, and technological progress. But
the reality is that the opportunities of globalization are spread DIMENSIONS OF ECONOMIC GLOBALIZATION
unequally and power and wealth are concentrated among a
specific group of people, regions and corporations.
5. Globalization furthers the spread of democracy in the 1. The globalization of trade of goods and services
world. 2. The globalization of financial and capital markets
For the globalists democracy and free markets are 3. The globalization of technology and communication
synonymous. 4. The globalization of production

The neoliberal explanation of globalization is DIFFERENCE BETWEEN ECONOMIC GLOBALIZATION

ideological because it is politically motivated and contributes FROM INTERNATIONALIZATION
to the construction of particular meanings of globalization
which stabilize existing power relations. Globalism tries to
create collective meaning and shape people’s identities. Economic globalization is a functional integration
between internationally dispersed activities which means that
it is a qualitative transformation rather than a quantitative
UNIT II: THE STRUCTURES OF GLOBALIZATION change while internationalization is an extension of economic
activities between internationally dispersed activities
2.1 THE GLOBAL ECONOMY Economic globalization produces its own major
players in the form of transnational corporations (TNCs), the
main driving forces of economic globalization of the last 100
Economic Globalization refers to the increasing years or roughly two-thirds of world export. Transnational
interdependence of world economies as a result of the corporation otherwise known as multi -national corporation is
growing scale of cross-border trade of commodities and a corporation that has a home base, but is registered,
services, flow of international capital and wide and rapid operates and has assets or other facilities in at least one
spread of technologies. It reflects the continuing expansion other country at one time.
and mutual integration of market frontiers, and is an Examples are the US-based General Electric (GE),
irreversible trend for the economic development in the whole the Coca-Cola Company of Atlanta, Georgia, US Nike and
world at the turn of the millennium. others.
According to the International Monetary Fund
economic globalization is a historical process, the result of
human innovation and technological progress. It refers to the ORIGIN OF ECONOMIC GLOBALIZATION
increasing integration of economies around the world,
particularly through the movement of goods, services, and Economic globalization is a process that creates an
capital across borders. It also refers to the movement of organic system of the world economy.
people (labor) and knowledge (technology) across In the 16th century world system analysts identify the
international borders. origin of modernity and globalization through long distance
In economic terms, globalization is nothing but a trade in the 16th century. This best known example of archaic
process making the world economy an organic system by globalization is the Silk Road, which started in western China,
extending transnational economic processes and economic reached the boundaries of the Parthian empire, and continued
relations to more and more countries and by deepening the onwards towards Rome. It also connected Asia, Africa, and
economic interdependencies among them Europe.
In the 17th and 18th century global economy exists
TWO MAJOR DRIVING FORCES FOR ECONOMIC only in trade and exchange rather than production as the
GLOBALIZATION world export to World GDP did not reached 1 to 2 percent.
In the 19th century the advent of globalization
approaching its modern form is witnessed. A short period
1. The rapid growing of information in all types of before World War I is referred to as golden age of
productive activities globalization characterized by relative peace, free trade,
2. Marketization (A restructuring process that enables financial and economic stability. Growth in international
state enterprises to operate as market-oriented firms exchange of goods accelerated in the second quarter of the
by changing the legal environment in which they 19th century. Global economy in the 19th and 20th centuries
operate and can be achieved through reduction of grew by an average of nearly 4 percent per annum, which is
state subsidies, organizational restructuring of roughly twice as high as growth in the national incomes of the
management such as corporatization, developed economies since the late 19th century.
decentralization, and privatization.
INTERNATIONAL MONETARY SYSTEMS AND GOLD controlling inflation or maintaining equilibrium in international
STANDARD transactions.

International monetary system (IMS) refers to a EUROPEAN MONETARY INTEGRATION

system that forms rules and standards for facilitating
international trade among the nations. It helps in reallocating European monetary integration refers to a 30-year
the capital and investment from one nation to another. It is the long process that began at the end of the 1960s as a form of
global network of the government and financial institutions monetary cooperation intended to reduce the excessive
that determine the exchange rate of different currencies for influence of the US dollar on domestic exchange rates, and
international trade. It is a governing body that sets rules and led, through various attempts, to the creation of a Monetary
regulations by which different nations exchange currencies Union and a common currency. This Union brings many
with each other. benefits to Member States.
IMS as rules, customs, instruments, facilities, and However, over the past decade, the build-up of
organizations for effecting international payments with the macroeconomic imbalances, and the imprudent fiscal policies
main task of facilitating cross-border transactions, especially of some Member States, resulted in the continuing double
trade and investment. It also reflects economic power and crisis in banking and sovereign. As a result of this crisis, many
interests, as money is inherently political, an integral part of individual Member States face difficult re-adjustment
high politics or diplomacy. processes, and Members States collectively must reappraise
In 1870 to 1914, with the help of gold and silver, the governance architecture of Monetary Union and adopt
trade was carried without any institutional support. Monetary new mechanisms to detect, prevent, and correct problematic
system during that time was decentralized while market economic trends.
based and money played a minor role in international trade in The European Monetary System (EMS) on the
contrast to gold. other hand is a 1979 arrangement between several European
Gold was believed to guarantee a non-inflationary, countries which links their currencies in an attempt to stabilize
stable economic environment, a means for accelerating the exchange rate. This system was succeeded by the
international trade and the gold standard functioned as a fixed European Economic and Monetary Union (EMU), an
exchange rate regime, with gold as the only international institution of the European Union (EU), which established a
reserve. common currency called the euro.
The European Monetary System originated in an
EVOLUTION OF THE INTERNATIONAL MONETARY attempt to stabilize inflation and stop large exchange rate
SYSTEM fluctuations between European countries. Then, in June 1998,
the European Central Bank was established and, in January
Gold Standard is a system of backing a country’s 1999, a unified currency, the euro, was born and came to be
currency with its gold reserves. Such currencies are freely used by most EU member countries
convertible into gold at a fixed price, and the country settles According to the European Commission in 2008, the
all its international trade transactions in gold. first ten years of the EMU were an evident success for
After World War I, the use of gold declined due to participating countries in terms of increased trade and capital
increased expenditure and inflation which were caused by transactions, more integrated economies, restored
war. Major economic powers were on gold standards but macroeconomic stability and the utilization of Euro as the
could not maintain it and failed because of the Great second most widely used reserve currency. But in 2008 to
depression in 1931. 2009 the European Union (EU) is presented with dramatic
In 1944, 730 representatives of 44 nations met at challenges brought by global financial and economic crisis.
Bretton Woods, New Hampshire, United States to create a The EU in 2010 in response to the crisis enacted the
new international monetary system called as the Bretton three- pillar financial rescue program which includes: the
Woods system, the aim of which is to create a stabilized European Financial Stability Mechanism, the European
international currency system and ensure a monetary stability Financial Stability Facility, the financial assistance of
for all the nations. International Monetary Fund (IMF). Since the three -pillar
Since the United States held most of the world’s gold, system is temporary EU in 2013 activated its own permanent
all the nations would determine the values of their currencies European Stability Mechanism. The future of EMU depends
in terms of dollar. The central banks of nations were given on the willingness of member states to agree on more
the task of maintaining fixed exchange rates with respect to fundamental changes in the governance of Eurozone.
dollar for each currency. The Bretton Woods system ended in The European Financial Stability Mechanism
1971 as the trade deficit and growing inflation undermined the (EFSM) is a permanent fund created by the European Union
value of dollar in the whole world. In 1973, the floating (EU) to provide emergency assistance to member states
exchange rate system, also known as flexible exchange rate within the Union. It raises money through the financial
system was developed that was market based to assess markets, and is guaranteed by the European Commission.
whether the gold standard was successful, the following roles Fund raised through the markets, use the budget of the
of a properly designed IMS must be considered: to lend order European Union as collateral. The European Financial
and stability to foreign exchange markets, to encourage the Stability Facility (EFSF) on the other hand, is an organization
elimination of balance-of-payments problems, and to provide created by the European Union to provide assistance to
access to international credits in the event of disruptive member states with unstable economies. The EFSF is a
shocks. The gold standard has never worked satisfactorily in special purpose vehicle (SPV) managed by the European
Investment Bank, a lending institution. The fund raises money
by issuing debt, and distributes the funds to eurozone
countries whose lending institutions need to be recapitalized local industries. The prices of imported goods in
who need help managing their sovereign debt or who need local markets are inflated due to high imported
financial stabilization. taxes to ensure demand of local products.
 SAFETY ensures that imported products in the
INTERNATIONAL TRADE AND TRADE POLICIES country are of high quality. Inspection regulations
laid down by public officials ensure the safety and
quality standards of imported products.
International trade is the exchange of goods,  TRADE BARRIERS are measures that
services and capital across national borders. It is a multi- governments or public authorities introduce to
million dollar activity, central to the Gross Domestic Product make imported goods or services less
(GDP) of many countries, and it is the only way for many competitive than locally produced goods and
people in many countries to acquire resources. In acquiring services. They are state-imposed restrictions on
products where demand is inelastic and domestic supply is trading a particular product or with a specific
inadequate absent traders, consumers and suppliers are nation. It can be linked to the product, service like
forced to either develop substitute goods or devote a large technical requirement and it can also be
percentage of their income. administrative in nature such as rules and
International trade is the exchange of goods or procedures of transactions. Tariffs, duties,
services along international borders. This type of trade allows subsidies, embargoes and quotas are the most
for a greater competition and more competitive pricing in the common trade barriers.
market. The two key concepts in the economics of  National Trade Policy – this safeguards the best
international trade are specialization and comparative interest of its trade and citizen.
advantage. Comparative advantage comes in; so long as the  Bilateral Trade Policy – to regulate the trade
two countries have different relative efficiencies, the two and business relations between two nations, this
countries can benefit from trade – the country with absolute policy is formed. Under the trade agreement the
advantage will still benefit by directing its resources to those national trade policies of both the nations and
goods where it is most productive and trading for the others their negotiations are considered while bilateral
while specialization refers to this process; countries as well as trade policy is being formulated.
individual businesses can maximize their welfare by
 International Trade Policy – This defines the
specializing in the production of those goods where they are
international trade policy under their charter like
most efficient and enjoy the largest advantages over rivals.
the International economic organizations, such as
More affordable products for the consumer is also the
Organization for Economic Co- operation and
result of competition. The economy of the world is also
Development (OECD), World Trade Organization
affected by the exchange of goods as dictated by supply and
(WTO) and International Monetary Fund
demand, making goods and services obtainable which may
(IMF).The best interests of both developed and
not be available globally to consumers. Trading globally gives
developing nations are upheld by the policies.
consumers and countries the opportunity to be exposed to
goods and services not available in their own countries.
Almost every kind of products can be found on the TRADE POLICY AND INTERNATIONAL ECONOMY
international market aside from services being traded like
banking, tourism, etc. Global trade allows wealthy countries to In most developed countries where open market
use their resources such as labor, technology, or capital more economy prevails, the international economic organizations
efficiently. Because countries are endowed with different support free trade policies. In the case of developing nations
assets and natural resources, some countries may produce partially-shielded trade practices are preferred to protect their
the same good more efficiently and therefore sell it more local trade industries. The following are dependent on
cheaply than other countries. Specialization in international globalization: sound trade policies for market changes,
trade happens if a country cannot efficiently produce an item establishment of free and fair trade practices and expansion
and obtain it by trading with another country that can. of possibilities for booming international trade.
Trade policies on the other hand refer to the
regulations and agreement of foreign countries. It defines
standards, goals, rules, and regulations that pertain to trade THE WORLD TRADE ORGANIZATION (WTO)
relation between countries. Each country has specific policies
formulated by its officials. Boosting the nation’s international The World Trade Organization (WTO) deals with
trade is the aim of each country. Taxes imposes on import the global rules of trade between nations with the main
and export, inspection, regulations, tariffs and quotas are all function of ensuring that trade flows smoothly, predictably and
part of country’s trade policy. freely. It is the only global international organization dealing
with the rules of trade between nations with WTO
FOCUSES OF TRADE POLICY IN INTERNATIONAL agreements, negotiated and signed by the bulk of the world’s
TRADE trading nations and ratified in their parliaments at its heart.
WTO is viewed as the means by which industrialized
countries can gain access to the markets of developing
 TARIFFS are taxes or duties paid for a particular countries.
class of imports or exports. Imposing taxes on
imported and exported goods is a right of every
country. Heavy tariffs on imported goods are GLOBAL ECONOMY OUTSOURCING
levied by some nations for the protection of their
 Outsourcing is an activity that requires search for a while shifting in supply and demand that has a spillover effect
partner and relation-specific investments that are governed by on several markets is another factor of market integration.
incomplete contracts and the extent of international One way of helping integration of market by reducing barriers
outsourcing depends on the thickness of the domestic and to trade and increasing fluidity between markets is through
foreign market for input suppliers, the relative cost of foreign trade.
searching in each market, the relative cost of customizing Market integration exists when there are exerted
inputs and the nature of the contracting environment in each effects that prompt similar changes or shifts in other markets
country. Subcontracting is a central element of the new that focus on related goods on events occurring within two or
economy. It is the practice of assigning part of the obligations more markets.
and tasks under a contract to another party known as a
subcontractor and especially prevalent in areas where Example:
complex projects are the norm like construction and China produces toys at a cheaper price than the US.
information technology If foreign trade increased between the two countries, toys
Outsourcing is a means of finding a partner with could be sold to the US more easily, making them more
which a firm can establish a bilateral relationship and having available, thus reducing price. If the demand for baby dolls
the partner undertake relationship-specific investments so within a given geographical market were to suddenly be
that it becomes able to produce goods and services that fit reduced by 50%, there is a good chance that the demand for
the firm’s particular needs. Often, the bilateral relationship is baby doll clothing would also decrease in proportion within
governed by a contract, but even in those cases the legal that same geographical market. Should the baby market
document does not ensure that the partners will conduct the increase, this would usually mean that the market for doll
promised activities with the same care that the firm would use clothing would also increase. Both markets would have the
itself if it were to perform the tasks. chance to adjust pricing in order to deal with the new
circumstances surrounding the demand, as well as adjust
One of the most rapidly growing components of other factors, such as production.
international trade is the outsourcing of intermediate goods
and business services. There are three essential features of a TYPES OF RELATED MARKETS WHERE MARKET
modern outsourcing strategy. INTEGRATION OCCURS
1. Firms must search for partners with the expertise that
allows them to perform the particular activities that
are required.  Stock Market Integration
2. They must convince the potential suppliers to This is a condition in which stock markets in
customize products for their own specific needs. different countries trend together and depict same
3. They must induce the necessary relationship-specific expected risk adjusted returns. Two markets are perfectly
investments in an environment with incomplete integrated if investors can pass from one market to
contracting. another without paying any extra costs and if there are
possibilities of arbitration which ensures the equivalence
of stock prices on both markets.
Possible Determinants of the Location of Outsourcing
 Financial Market Integration
1. Size of the country can affect the “thickness” of its
It is an open market economy between countries
markets.
facilitated by a common currency and the elimination of
2. The technology for search affects the cost and
technical, regulatory and tax differences to encourage
likelihood of finding a suitable partner.
free flow of capital and investment across borders. It
3. The technology for specializing components
occurs when lending rates in several different markets
determines the willingness of a partner to undertake
begin to move in tandem with one another. Emergence of
the needed investment in a prototype.
similar patterns within the capital, stock, and financial
4. The contracting environments can impinge on a firm’s
markets with those trends coming together to exert a
ability to induce a partner to invest in the relationship.
profound influence on the economy of that nation is
involved in the integration within a nation.
2.2 MARKET INTEGRATION
GLOBAL CORPORATION
Market integration refers to how easily two or more
markets can trade with each other. It occurs when prices
A global corporation is a business that operates in
among different locations or related goods follow similar
two or more countries. It also goes by the name "multinational
patterns over a long period of time. Groups of prices often
company". Several advantages are offered by global
move proportionally to each other and when this relation is
expansion of business over running a strictly domestic
very clear among different markets it is said that the markets
company. Success in different types of economies is
are integrated.
achieved by means of multiple countries operation while it
The term is further used in identifying related
causes also logistic and cultural challenges. Expanding
phenomenon of market of goods and services experiencing
revenue opportunities and diversifying business risk are the
similar patterns of increase or decrease in prices of products.
purposes of becoming global corporation. Access to more
It may also refer to the movement of prices of related goods
customers and capital is obtained through a model that works
and services sold in a defined geographical location in similar
domestically well and translates foreign markets well.
patterns. When government implement certain strategy to
control the direction of economy then integration is intentional
Example: Foreign Direct Investment (FDI) was of corporate
One can find more customers in a country whose origin. It is a major driver of extended global corporate
economy is vibrant and expanding in lieu of stagnant local development. It is an investment made by a company or
and domestic economy or market share that has hit a plateau. individual in one country in business interests in another
country, in the form of either establishing business operations
HISTORICAL PERIODS OF GLOBAL CORPORATION or acquiring business assets in the other country, such as
ownership or controlling interest in a foreign company and the
key feature of foreign direct investment is that it is an
An approach to the study of globalization that locates investment made that establishes either effective control of,
the phenomenon itself in early patterns of trade and or at least substantial influence over, the decision making of a
exchange is known as historical globalization. foreign business.
In early historical periods as both cities and countries Foreign direct investment is made open to
extended their reach beyond their own borders, a form of economies; frequently involves more than just a capital
globalization was initiated which then followed complex investment and includes provision of management or
patterns of interactive engagements organized through trade technology as well. There are many methods to establish
and industry directly influenced by the emergent and FDIs such as opening a subsidiary or associate company in a
subsequently dominant technologies especially in shipping foreign country; acquiring a controlling interest in an existing
and navigation. The entities operating within this environment foreign company, or by means of a merger or joint venture
were functionally and organizationally not different from with a foreign company.
contemporary organizations being possessed with head
offices, foreign branch plants, corporate hierarchies,
extraterritorial business law, and even bit of foreign direct BRICS ECONOMIES
investment and value-added activity.
Combination of invention and social organization Brazil, Russia, India, China and South Africa
resulting to increase in worldwide capital and wealth of nation (BRICS) is an acronym for the combined economies of Brazil,
is allowed by modern nation state system that emerged in the Russia, India, China and South Africa. BRIC, without South
period prior to the end of World War II. American Africa, was originally coined in 2003 by Goldman Sachs,
Corporations led the economic recovery and expansion after which speculates that by 2050 these four economies will be
the World War II destruction. This period up to the reentry of the most dominant. South Africa was added to the list on April
Japanese and European corporation to the global scene is 13, 2011 creating "BRICS". These five countries were among
viewed as multinational corporations (MNCs). From the end the fastest growing emerging markets as of 2011.
of World War II to the present is considered the period of Further, Brazil, Russia, India and China (BRIC) refer
transformation of global corporation. to the idea that China and India will, by 2050, become the
world's dominant suppliers of manufactured goods and
THE FINANCE FUNCTION IN A GLOBAL CORPORATION services, respectively, while Brazil and Russia will become
similarly dominant as suppliers of raw materials. Due to lower
labor and production costs in these countries now including a
As corporations go global, capital markets open up fifth nation, South Africa, many companies have also cited
within them, giving companies a powerful mechanism for BRIC as a source of foreign expansion opportunity i.e.
arbitrage across national financial markets. Chief financial promising economies in which to invest.
officers (CFOs) must balance the opportunities with the
challenges of operating in multiple environments in managing
their internal markets in building an advantage. GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)

THESE THREE FUNCTIONS CAN BE CREATED BY CFOS The General Agreement on Trade in Services
THROUGH EXPLOITING THEIR INTERNAL CAPITAL (GATS) is the first multilateral agreement covering trade in
MARKETS services which was negotiated during the last round of
multilateral trade negotiations, called the Uruguay Round, and
came into force in 1995. The GATS provides a framework of
 Financing rules governing services trade, establishes a mechanism for
A group’s tax bill can be reduced by the CFO countries to make commitments to liberalize trade in services
like borrowing in countries with high tax rates and and provides a mechanism for resolving disputes between
lending to operations in countries with lower rates. countries.
 Risk Management GATS has similar principle with the General
Global firms can offset natural currency Agreement on Tariffs and Trade (GATT) that deals with trade
exposures through worldwide operations instead of in goods. The two primary objectives of GATTS are to ensure
managing currency exposures through financial that all signatories are treated equitably when accessing
markets. foreign markets; and second, to promote progressive
 Capital budgeting liberalization of trade and services.
Getting smarter on valuing investment
opportunities CFOs can add value. 2.3 THE GLOBAL INTERSTATE SYSTEM

FOREIGN DIRECT INVESTMENT Globalization and the Nation- States

 Globalization in the early years of the 21st century NEOLIBERALISM AND ECONOMIC SOVEREIGNTY
has not displaced the state. Max Weber, a German social
theorist define state as a compulsory political organization Neoliberalism is the intensification of the influence
with a centralized government that maintains a monopoly of and dominance of capital. It is the elevation of capitalism as a
the legitimate use of force within a certain territory. Hedley mode of production into an ethic, a set of political imperatives,
Bull, a 20th century international philosopher stated that and a cultural logic. It is a project to strengthen, restore, or, in
states are independent political communities each of which some cases, constitute anew the power of economic elites. It
possesses a government and asserts sovereignty in relation values market exchange as an ethic in itself capable of acting
to a particular portion of the earth’s surface and a particular as a guide to all human action and substituting for all previous
segment of the human population. This means that held ethical beliefs. It emphasizes the significance of
government and constitutions come and go but states readily contractual relations in the marketplace. It also holds that the
endure. social good will be maximized by maximizing the reach and
frequency market transactions, and it seeks to bring all
Nation on the other hand is an imagined political community human action into domain of the market.
and imagined as both inherently limited and sovereign.
 It is imagined because the members of even the
smallest nation will never know most of their fellow- Economic sovereignty on the other hand is the
members, meet them, or even hear of them, yet in the power or national governments to make decisions
minds of each lives the image of their communion. independently of those made by other governments.
 The nation is imagined as limited because even the Globalization as an increase in the international integration of
largest of them, encompassing perhaps a billion markets for goods, services, capital and labor, is also a
human beings, has finite, if elastic, boundaries, counterpoint of national sovereignty. In a globalized world
beyond which lie other nations. economy, governments have no alternative but to adopt
neoliberal economic policies of privatization, deregulations,
THE STATE AND THE ECONOMIC INTERDEPENDENCE and reductions in public expenditures.
There are four different concepts of sovereignty.
The rising momentum of global free-market capitalism These include:
in the final decades of the 20th century, the accompanying  International Legal Sovereignty
rise in transnational enterprises, and the resulting disparities It refers to the acceptance of a given
between easy flows of money and commodities across state as a member of the international
international boarders and the legal barriers and logistical community.
hurdles that keep most workers tied to their home  Westphalian Sovereignty
communities are associated with globalization. It is based on the principle that one
The belief that globalization imposes a forced choice sovereign state should not interfere in the
upon states either to conform to free market principles or run domestic arrangements of another.
the risk of being left behind is termed into a phrase called  Interdependence Sovereignty
“Golden Straitjacket” by Thomas Friedman, a neoliberalism It is the capacity and willingness to
journalist and advocate, to illustrate the forcing of states into control flows of people, goods and capital into
policies that suit the preferences of investment houses and and out of the country.
corporate executives (Electronic Herd) who swiftly move  Domestic Sovereignty
money and resources into countries favored as adaptable to It is the capacity of a state to choose
the demands of international business and withdraw even and implement policies within the territory
more rapidly from countries deemed uncompetitive.
Further, countries are compared to individual stocks Global economic trends are influenced by economic
where the states and their government are rewarded and sovereignty of an individual member. The increase of the
punished similar to buying and selling shares of individual number of international organizations and the expansion of
companies. States also have lost an important element of their functions have undeniably restricted an individual
economic sovereignty and that neo-liberalism is beyond country's sovereignty to certain extent. The most typical
contestation. example is the increasingly extensive involvement of the
There are two things that will happen if a country is in world's three leading financial institutions the World Bank
Golden Straitjacket: the economy grows and politics shrinks. (WB), the International Momentary Fund (IMF) and the World
It is a straitjacket because it narrows the political and Trade Organization (WTO) in domestic economic affairs of
economic policy choices of those in power to relatively tight their members. The 60,000-plus transnational corporations,
parameters. This is the reason of the difficulty of finding any which developed rapidly in the latter half of the last century,
real differences today between ruling and opposition parties are now sharing or "encroaching upon“ individual country's
in those countries that have put on the Golden Straitjacket. "sovereignty" in the economic domain.
 Many underdeveloped nations that resorted to foreign
assistance and interventions resulted to the deprivation of 1. Preferential Trade Areas (PTAs)
government as regard control of their economy due to the Happens when there’s an agreement on reducing or
disorderly domestic economic establishments. Due to this, eliminating tariff (tax or duty to be paid on a particular class of
some scholars predicted the loss of their economic imports or exports) barriers on selected goods imported from
sovereignty under this form of neo- colonialism. More other members of countries within the geographical region or
importantly, some of the world's leading economic entities, areas. Agreement can either be bilateral (between two
such as the United States, the European Union and Japan, by countries), or multi-lateral (several countries). Free Trade
taking advantage of their predominant economic status, are Areas (FTAs) are created when two or more countries in a
affecting or infringing upon other countries' economic region agree to reduce or eliminate barriers to trade on all
sovereignty. Under these circumstances, an increasing goods coming from other members. The North Atlantic Free
number of scholars have concluded that the economic Trade Agreement (NAFTA) is an example of such a free trade
dominion of individual nations has come to an end. While area, and includes the USA, Canada, and Mexico.
countries inevitably cede some control over their economic
sovereignty to external actors, it is the “structural power” of 2. Free Trade Agreements (FTAs) or Preferential
sovereign states which still dictates the terms and tenets of Trade Agreements (PTAs)
globalization. Eliminate import tariffs as well as import quotas
between signatory countries. These agreements can be
ECONOMIC AND POLITICAL INTEGRATION (EUROPEAN limited to a few sectors or can encompass all aspects of
INTEGRATION) international trade. FTAs can also include formal mechanisms
to resolve trade disputes. The North American Free Trade
European integration is the process of industrial, Agreement (NAFTA) is an example of such an arrangement.
political, legal, economic, social and cultural integration of
states wholly or partially in Europe. European integration has 3. Custom Union
primarily come about through the European Union and its Removal of tariff barriers between members, together
policies. with the acceptance of a common or unified external tariff
against non-members is involved in the Custom Union. Single
European Union (EU) is an international payment or duty is made by countries exporting to customs
organization comprising 28 European countries and union. Goods inside the union can move freely with no
governing common economic, social, and security policies. In additional tariffs. Members shared tariff revenues while a
the early 21st century EU expanded into central and eastern small share is retained by the country that the collects the
duty. Removing internal barriers to trade and requiring
Europe with the following members: Austria, participating nations to harmonize their external policy as well
Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, as building a free trade area are put up by customs union.
Denmark, Estonia, Finland, France, Germany, Greece,
Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, 4. Common Market (CM)
the Netherlands, Poland, Portugal, Romania, Slovakia, One major step towards economic integration is
Slovenia, Spain, Sweden, and the United Kingdom. Common Market (CM). All barriers to the mobility of people,
capital and other resources within the area in question, as
Economic Integration. It can be described as a well as eliminating non-tariff barriers to trade, such as the
process and a means by which a group of countries strives to regulatory treatment of product standards are removed by CM
increase their level of welfare. It is an arrangement between aside from containing the provisions of a customs union. The
different regions that often includes the reduction or extension of free trade from just tangible goods, to include all
elimination of trade barriers, and the coordination of monetary economic resources which means that all barriers are
and fiscal policies. Reducing costs for both consumers and eliminated to allow the free movement of goods, services,
producers and increasing trade between the countries capital, and labor, including removal of tariffs and reduced
involved in the agreement are the aims of economic non-tariff barriers is the key feature of a common market.
integration.
5. Economic Union
Seven Stages of Economic Integration The trading bloc that has both a common market
1) Preferential trading area (PTA) between members, and a common trade policy towards non-
2) Free trade area members, although members are free to pursue independent
3) Customs union macro-economic policies is termed Economic Union. It
4) Common market requires coordinated monetary and fiscal policies as well as
5) Economic union labor market, regional development, transportation and
6) Economic and monetary union industrial policies. In economic union the use of a common
7) Complete economic integration
currency and a unified monetary policy is considered. The Leon Lindberg, also an American political scientist. Jean
best example of Economic union is the European Union (EU). Monnet's approach to European integration, which aimed at
integrating individual sectors in hopes of achieving spill-over
6. Economic and Monetary Union (EMU) effects. The core of neo-functionalism is the use of the
As a key stage towards complete integration, the concept ‘spill –over’, situations when an initial decision by
Economic and Monetary Union (EMU) involves a single governments to place a certain sector under the authority of
economic market, a common trade policy, a single currency central institutions creates pressures to extend the authority
and a common monetary policy. It represents a major step in of the institutions into neighboring areas of policy, such as
the integration of EU economies. EMU involves the currency exchange rates, taxation, and wages. This core
coordination of economic and fiscal policies, a common claim meant that European integration is self- sustaining:
monetary policy and a common currency, the euro. EMU is a ‘spill-over’ triggers the economic and political dynamics
means to provide stability and for stronger, more sustainable driving further cooperation.
and inclusive growth across the euro area and the EU as a
whole for the sake of improving the lives of EU citizens. Intergovernmentalism
This theory provides a conceptual explanation of the
7. Complete Economic Integration European integration process. The main concept of the
The final stage of economic integration in which Intergovernmentalism is emphasizing on the role of national
member states completely forego independence of both states in the European integration; in another words it argues
monetary and fiscal policies. States that participate in that "European integration is driven by the interest and
complete economic integration have no control of economic actions of nation states". This theory was suggested by
policy including economic trade rules. There is full monetary Stanley Hoffmann. The theory proposed the Logic of
union where regulations regarding labor and capital are Diversity, which 'set limits to the degree which the ‘spill-over’
shared between member states and this includes a single process can limit the freedom of action of the
currency. There is also a complete harmonization of fiscal governments...the logic of diversity implies that on vital
policy which includes shared regulation of tax and benefit issues, losses are not compensated by gains on other issues'.
rates. Involved in complete economic integration are single
economic market, a common trade policy, a single currency,
Liberal Intergovernmentalism
a common monetary policy, together with a single fiscal
This a dominant political theory developed by Andrew
policy, including common tax and benefit rates or the
Moravsik in 1993 to explain European integration. Application
complete harmonization of all policies, rates, and economic
of rational institutionalism to the field of European integration
trade rules.
is the aim of this theory. Moravcsik stated that 'state-society
relations--the relationship of state to the domestic and
Political integration
transnational social context in which they are embedded--
Refers to the integration of components within
have a fundamental impact on state behavior in world politics
political systems; the integration of political systems with
and that the 'universal condition of world politics is
economic, social, and other human systems; and the political
globalization.' It is the web of globalized economic, social and
processes by which social, economic, and political systems
political relationships that determines the living conditions of
become integrated . Creating common policy frame work that
individual citizens, corporations and civic groups and shapes
creates equal conditions for the functions of the integrated
what they want and thus what their governments want”.
parts of the economy is the aim of policy integration. Political
Liberal intergovermentalists stated that the bargaining power
integration is mainly based on welfare increasing effects of
of member states is important in the pursuit of integration,
integrated policy making according to the Economics of
and package deals and side payments also occur in the
European integration. It brings economic benefits by leading
process of making deals.
the recovery of effectiveness in policy making.

THEORIES OF EUROPEAN INTEGRATION New Institutionalism

This theory emphasized the importance of institutions
Neo-functionalism in the process of European integration. Its three key strands
This theory focuses on the supranational institutions are: rational choice, sociological and historical.
of the EU of which the main driving forces of integration are
interest group activity at the European and national levels, Multi-level Governance (MLG)
political party activity, and the role of governments and This is a new theory of European integration. Writers
supranational institutions. The European integration is mostly Liesbet Hooghe and Gary Marks defined MLG as dispersion
seen as an upper class-driven process-driven by national and of authority across multiple levels of political governance.
international political and economic upper crusts. They stated that over the last fifty years, authority and
It is a theory of regional integration, building on the sovereignty has moved away from national governments in
work of Ernst B. Haas, an American political scientist and Europe, not just to the supranational level with the EU, but
also to subnational levels such as regional assemblies and SOCIAL MEDIA AND THE STATE
local authorities.
Social media
TRANSNATIONAL ACTIVISM IN STATES Social media is a computer-based technology that
facilitates the sharing of ideas and information and the
Transnational activism building of virtual networks and communities. By design,
Transnational activism can be defined as the social media is internet based and offers users easy
mobilization of collective claims by actors located in more electronic communication of personal information and other
than one country and/or addressing more than one national content, such as videos and photos. Users engage with social
government and/or international governmental organization or media via computer, tablet or smartphone via web-based
another international actor. It is a social movements and other software or web application, often utilizing it for messaging. It
society organizations and individuals operating across state “empowers” individuals to have a voice.
borders. It also refers to the coordinated international Many social movements have increasingly seen
campaigns on the part of networks of activists against social media as a means to collaboratively crowdsource with
international actors, other states, or international institutions. diverse stakeholders. In large organizations, social media are
often supported because the technology can help foster the
sense of a “digital village” where individuals are able to “see”
Social movement
the lives of others within their organization and feel closer to
A social movement is a type of group action. It refers
them. Social media are used commercially as a key mode for
to the organizational structures and strategies that may
product exposure and messaging. Landscape of
empower oppressed populations to mount effective
organizational communication within social movements is
challenges and resist the more powerful and advantaged
shaped and often fundamentally influenced by social media.
elites". They are large, sometimes informal, groupings of
Rippling effects which touch many different aspects of the
individuals or organizations which focus on specific political or
movements process from resource mobilization to actual
social issues. They carry out, resist, or undo a social change.
interventions is often created by social media. Social
They provide a way of social change from the bottom within
movements can and do draw from accumulated knowledge
nations. A social movement is a collective challenges to
gleaned from previous movements and activities. Social
elites, authorities, other groups or cultural codes by people
media have changed the ways in which this knowledge is
with common purposes and solidarity in sustained
being recorded and passed on.
interactions with elites, opponents and authorities.
New forms of digital media are accompanied by
globalization in bringing to light the possibilities for merging
Global justice movement new kinds of communities via networks and creating new
The global justice movement describes the loose arenas for political interaction, identity and belonging. The
collection of individuals and groups often referred to as a concept of network society affirms that citizens and civil
“movement of movements”, who advocate fair trade rules and society organizations can increasingly use networks to gain
are negative to current institutions of global economics such power relative states by generating alternative discourses that
as the World Trade Organization. The movement is often have the potential to overwhelm the disciplinary discursive
labeled the anti-globalization movement by the mainstream capacity of the state as a necessary step to neutralizing its
media. Those involved, frequently deny that they are anti- use of violence. It is believed that states are making
globalization, insisting that they support the globalization of pragmatic transformation by adapting to fit in among decisive
communication and people and oppose only the global global networks in finance, education, science, technology,
expansion of corporate power. Anti- capitalist and universalist arts, culture and sports. New Media opens up potential for
perspective on globalization in also indicated in the term citizens to gain leverage. It is the only power of global civil
differentiating the movement from those whose politics are society acting on the public mind via the media and
based on a defense of conservative on national sovereignty communication networks that may eventually overcome the
as they identified opponents of globalization. historical inertia of nation states.

New transnational activism

The new transnational activism is as multifaceted as
2.4 CONTEMPORARY GLOBAL GOVERNANCE
the internationalism. Although globalization and global neo-
liberalism are frames around which many activists mobilize,
Global governance or world governance is a
the protests and organizations are not the product of a global
product of neo-liberal paradigm shifts in international political
imaginary but of domestically rooted activists who are the
and economic relations. It is a movement towards political
connective tissue of the global and the local, working as
integration of transnational actors aimed at negotiating
activators, brokers and advocates for claims both domestic
responses to problems that affect more than one state or
and international.
region. It tends to involve institutionalization. These
institutions of global governance – the United Nations, the
International Criminal Court, the World Bank, etc. – tend to peacekeeping is the most important feature of UN activity in
have limited or demarcated power to enforce compliance. peace and security.
Global governance is a tool to identify solutions to The UN aims to save succeeding generations from
problems created by neoliberal globalization. Its concept the scourge of war; to reaffirm faith in fundamental human
relates to the interaction of myriad collective or individual rights; to establish conditions under which justice and respect
entities emanating from various societal and professional for the obligations arising from treaties and other sources of
orientations, which form networks that engage to address international law can be maintained; and to promote social
issues that threaten local and global communities. It is progress and better standards of life in larger freedom.
concerned with issues that have become too complex for a
single state to address alone. Humanitarian crises, military Four Main Purposes of the UN Charter - a written
conflicts between and within states, climate change and grant by a country's legislative or sovereign power, by which
economic volatility pose serious threats to human security in an institution such as a company, college, or city is created
all societies; therefore, a variety of actors and expertise is and its rights and privileges defined.
necessary to properly same threats, devise pertinent policy, 1. Maintaining worldwide peace and security
implement effectively and evaluate results accurately to 2. Developing relations among nations
alleviate such threats. 3. Fostering cooperation between nations in order to
Global governance can be thus understood as the solve economic, social, cultural, or humanitarian
sum of laws, norms, policies, and institutions that define, international problems
constitute, and mediate trans-border relations between states, 4. Providing a forum for bringing countries together to
cultures, citizens, intergovernmental and nongovernmental meet the UN's purposes and goals
organizations, and the market. It embraces the totality of
institutions, policies, rules practices, norms, procedures, and There were five stages or main gaps meet by UN in the
initiatives by which states and citizens try to bring more 21st century. These are knowledge, norms, policy, institutions
predictability, stability, and order to their responses to and compliance. A critical hole in any of the five stages can
transnational challenges-such as climate change and cause efforts at problem solving to collapse.
environmental degradation, nuclear proliferation, and
terrorism which go beyond the capacity of a single state to CHALLENGES OF GLOBAL GOVERNANCE IN THE
solve. TWENTY-FIRST CENTURY
Global governance is viewed as the sum of
governance processes operating in the absence of world Global governance can be understood as the sum of
government. Both the international organizations (lOs) and laws, norms, policies, and institutions that define, constitute,
the United Nations (UN) being the only universal membership and mediate trans-border relations between states, cultures,
and general-purpose international organization, are essential citizens, intergovernmental and nongovernmental
to the understanding of contemporary global governance. The organizations, and the market. It is a process which allows
two types of International Organizations are those with interconnectivity across different borders and sovereign
universal membership and those with limited membership. territories. Global governance is governing, without sovereign
Examples of IOs with universal membership include: UN, authority, relationships that transcend national frontiers.
Bretton Woods institutions and World Trade Organization Global governance has evolved as one of the most
(WTO). Limited membership includes European Union (EU) influencing tools for globalization which has led to the
and the North Atlantic Treaty Organization (NATO). foundation of sustainable development projects around the
globe.
THE ROLES AND FUNCTIONS OF THE UNITED NATIONS Issues that involve interwoven domestic and foreign
challenges include threats at the beginning of the century
which include ethnic conflicts, infectious diseases, and
As an intergovernmental organization, the United
terrorism as well as a new generation of global challenges
Nation is tasked to promote international co-operation and to
including climate change, energy security, food and water
create and maintain international order. It is the largest, most
scarcity, international migration flows and new technologies.
familiar, most internationally represented and most powerful
The multiple links among climate change and resources
intergovernmental organization in the world.
issues, the economic crisis, and state fragility – ‘hubs’ of risks
The United Nations (UN) in the world of politics has
for the future – illustrate the interconnected nature of the
the roles of preventing and managing conflicts, regulating
challenges on the international agenda today. Domestic
armaments, championing human rights and international
politics creates tight constraints on international cooperation
humanitarian law, liberating the colonized, providing
and reduces the scope for compromise. Diverse perspectives
economic and technical aid in newly liberated countries,
on and suspicions about global governance, which is seen as
organizing elections, empowering women, educating children,
a Western concept, add to the difficulties of effectively
feeding the hungry, sheltering the disposed and displaced,
mastering the growing
housing the refugees, tending the sick and coordinating
number of challenges.
disaster relief and assistance. In policy motivation,
 The new governance challenges in the 21st century forced to engage to one another, while nation-state’s
being related to globalization entail multiple trajectories of domestic role is unchanged. Roles of some states were
change within states, among actors inside and outside nation diminished while others have exalted roles due to interactions
states, as well as new forms of resource mobilization and risk of various economic imbalances.
allocation. Within states the first trajectory or path is the
depoliticization which can be observed in the form of GLOBALIZATION’S IMPACT ON THE STATE
delegating decisions to independent regulators and experts,
central banks, or judiciaries. A second trajectory is the Factors which lead to the increase and acceleration
rescaling of economic and social relations well beyond the of movement of people,
territorial boundaries of nation states, facilitated by information, commodities and capital.
transnational legal arrangements that have their roots in 1. Lifting of trade barriers
national law. Law is also a critical ingredient for transforming 2. Liberalization of world capital markets
real assets into commodities and ultimately financial assets, 3. Swift technological progress (information technology,
that is, the third path which is the capitalization of assets. transportation and communication)
Different effects are expected on different constituencies
within and across domestic polities (an organized society; a Problems afflicting the world today which are
state as a political entity). Direct participation or inclusion in increasingly transnational in nature those that cannot be
these processes are benefitted by some though others face solved at the national level or State to State negotiations.
exclusion. Considered important for effective governance 1. Poverty
include recognition of these paths or trajectories and their 2. Environmental pollution
potentially destabilizing effects for polities. 3. Economic crisis
4. Organized crime and terrorism
THE ROLE OF THE NATION -STATE IN GLOBALIZATION
Effects of greater economic and social
Basic Elements of a State interdependence to national decision- making processes.
 Territory 1. It calls for a transfer of decisions to the international
 People level
2. It requires many decisions to be transferred to local
 Sovereign Power
levels of government due to an increase in the
demand for participation.
Nation- state role in globalization is complex. Since
nation-states are divided by physical and economic
Decision making processes in globalization is
boundaries, reduced barriers in international commerce and
complex as it takes place in various levels such as sub-
communication are considered their potential threat.
national, national, and global which lead to the growth of a
Sovereignty of individual nations is not abolished by
multi-layered system of governance. The following are
expanded trade among countries, instead globalization is a
guaranteed by nation-State: internal and external security,
force that changed the way nation-states deal with one
law established, national welfare systems funding, structures
another, particularly in the area of international commerce.
provided for popular representation, public accountability
Globalization has potential effects to globalization.
instituted, and framework for economic and social activities
These include favoring Westernization which means that
built.
other nation-states are at a disadvantage when dealing with
the Americas and Europe, most especially in the agricultural
In a world of expanded globalization, the need to
industry, in which second- and third-world nations face
supply collective public goods, to manage externalities and to
competition from Western companies and another is that
provide for minority needs persist. The State persists because
nation-states are forced to examine their economic policies in
its need grows and because of its undiminished local
light of the many challenges and opportunities that
resource pools and socioeconomic problems on which States
multinational corporations and other entities of international
are based. The State remains the key actor in the domestic
commerce present.
as well as international arenas and that States which are
Nation-states are challenged by multinational
effective are essential for both tasks, and their capacity for
corporations to address the issue of foreign direct
both needs strengthening.
investments to force nation-states to ascertain the allowable
international influence in their economies. A sense of
The following can be guaranteed only by the States
interdependence is created by globalization among nations to
through independent courts:
create among nations of differing economic strengths an
1. Respect of human rights and justice
imbalance of power.
2. Promote the national welfare
The role of the nation-state in a global world is largely a
3. Protect the general interest
regulatory one as the chief factor in global interdependence.
In setting international commerce policies, isolated states are
 The State has the roles in operating the intricate web education, poor infrastructure, improper sanitation and poor
of multi-lateral arrangements and inter-governmental regimes, access to health care mean living conditions are seen as
enter into agreements with other States, make policies which inferior to those in the world's more developed nations. As a
shape national and global activities, agenda of integration by result, the terms Third World country and developing nation
have become increasingly interchangeable in recent decades.
clearly pronouncing the problem of capacity inadequacy of
individual States. This indicates political leverage of some 2. The Global South captures a deterritorialized
States in shaping the international agenda while developing geography of capitalism’s externalities and means to
countries have less active roles. account for subjugated peoples within the borders of
wealthier countries, such that there are economic
Though State is required by globalization to improve Souths in the geographic North and Norths in the
its capacity to deal with greater openness, it must remain geographic South.
central to the well-being of its citizens and to the proper
3. It refers to the resistant imaginary of a transnational
management of social and economic development. It should
political subject that results from a shared experience
also be responsible for adopting policies, which are conducive of subjugation under contemporary global capitalism.
to greater economic integration not forgetting that further
global integration can be reversed by state policies inimical to The global South is not a directional designation or a
openness, as occurred between the two World Wars which point due south from a fixed north. It is a symbolic designation
means that globalization does not reduce the role of the meant to capture the semblance of cohesion that emerged
nation-State, but redefines it given the pressures and when former colonial entities engaged in political projects of
responses it must give at the local, national and international decolonization and moved toward the realization of a post-
colonial international order.
levels.
The process of globalization places into question
geographically bound conceptions of poverty and inequality.
UNIT III: THE WORLD OF REGIONS The increase and intensification of global flows spread both
poverty and affluence. Spaces of underdevelopment in
developed countries may mirror the poverty of the global
3.1
south, and spaces of affluence mirror those of the global
north.
GLOBAL DIVIDES: THE NORTH AND THE SOUTH
The strongest vehicle for social redistribution and the
(FOCUS: LATIN AMERICA)
main mechanism for social transfer is the state. The
redistributative function of the state becomes crucial in the
Global South refers to the regions of Latin America,
context of economic globalization where the goal of neo-
Asia, Africa, and Oceania mostly low- income and often
liberal economists and institutions is precisely to dismantle
politically or culturally marginalized. It may also be called the
local state oversight.
"developing World" such as Africa, Latin America, and the
The development of the global south must begin by
developing countries in Asia, "developing countries," "less
drawing most of the country’s financial resources for
developed countries," and "less developed regions” including
development from within rather than becoming dependent on
poorer "southern" regions of wealthy "northern" countries.
foreign investments and foreign financial markets.
In general, Global South refers to these countries'
The global south is not relevant for those who live in
"interconnected histories of colonialism, neo-imperialism, and
countries traditionally associated with it but also signifies that
differential economic and social change through which large
the south continues to be globalized. It also represents
inequalities in living standards, life expectancy, and access to
emergent forms of progressive cosmopolitanism. It is an
resources are maintained. Contemporary critics of neo-liberal
always emergent and provisional internationalism.
globalization use the global south as a banner to rally
countries victimized by the violent economic cures of
NEW INTERNATIONALISM IN THE GLOBAL SOUTH
institutions like the International Monetary fund.
The ills of the global south are being globalized.
THREE PRIMARY CONCEPTS OF GLOBAL SOUTH
Underdeveloped states of the global south are ravaged by
merciless IMF policies in the 1980’s. The economic
1. It refers to economically disadvantaged nation-states
prescriptions of the IMF as cures are recommended for
and as a post-cold war alternative to “Third World.”
countries in the global south. Other countries like Greece
realize the similarity of problems in the global south that
“Third World" is a phrase frequently used to describe
inspirations were drawn from poorer nations. The global south
a developing nation. The phrase "Third World" arose during
has provided model of resistance for the world like Gandhi’s
the Cold War to identify countries whose views did not align
non-violence that initially directed at colonial authority in India
with NATO and capitalism or the Soviet Union and
is now part of global protest culture, as well as benefits of
communism. The First World described countries whose
critiques of international financial institutions from the
views aligned with NATO and capitalism, and the Second
experiences and writings of intellectuals and activists from the
World referred to countries that supported communism and
global south.
the Soviet Union.
A similar globalization of the south’s concern is
arising from the issue about global environment. Amidst the
Third World countries are largely characterized as
existential threat of climate change the most radical notions of
poor and underdeveloped. In these countries, low levels of
climate justice are being articulated in the global south. As
global problems increase, it is necessary for people in the development, political progress, and social and cultural
north to support people from the south. diversity.
As a symbol and metaphor, global south is not only
relevant for those who live in countries traditionally associated REGION AS SOCIAL SYSTEM – LANGUAGE SIMILARITY
with it. The global in global south does not only mean that the
south is the globe but also signifies that the south continues
to be globalized. The global south while embedded in specific
geographic imaginaries, represents emergent forms of
progressive cosmopolitanism. It is always emergent and
provisional internationalism.

3.2

ASIAN REGIONALISM
ASIA PACIFIC AND SOUTH ASIA’S IMPACT ON
Regionalism refers to the decentralization of political GLOBALIZATION
powers or competencies from a higher towards a lower
political level. More specifically, it distinguishes between top- Asia was the central global force in the early modern
down from bottom up regionalism where top - down world economy. It was the site of the most important trade
regionalism describes the decentralization of competencies or routes and in some places more advanced in technology than
the establishment of regional institutions by the state while West such as science and medicine. Colonies in the Asia
bottom -up includes all patterns of endeavors toward political pacific and South Asia influenced the West and vice versa.
decentralization from within the particular region. They were often “laboratories of modernity.” Colonialism was
Globalization is the intensification of economic, not simply a practice of Western Domination but a product of
political, social, and cultural relations across borders and a what one thinks of as Western and modern.
consciousness of that intensification, with a concomitant
diminution in the significance of territorial boundaries. 1. Japan embarked on procuring raw materials like coal
and iron at unprecedented economies of scale
VIEWS OF GLOBALIZATION IN THE ASIA PACIFIC AND allowing them to gain a competitive edge in the global
SOUTH ASIA manufacturing market as well as globalized shipping
and procurement patterns which other countries
Globalization is an external phenomenon being modeled.
pushed into the region by world powers particularly the United 2. China pursues similar pattern of development at
States and Europe. From this perspective, globalization can present and is now the world’s largest importers of
be understood as a process that transforms the Asia Pacific basic raw materials such as iron and surpassed
and South Asia. It is a force for good bringing economic Japan, the US and Europe in steel production. It also
development, political progress, and social and cultural surpassed the World bank in lending to developing
diversity to the region. countries. It had an enormous impact on the
The Asia Pacific and South Asia refer together to availability and consumption of goods around the
the regions of East (or Northeast) Asia, South Asia, the world. This simple scale of China’s development is
Pacific Islands, and South Asia. It includes some of the shaping and furthering globalization.
world’s most economically developed states such as Japan, 3. India opened -up and emphasized an export-oriented
South Korea, Singapore, and Taiwan, and highly strategy. Textiles and other low wage sectors have
impoverished countries such as Cambodia, Laos, and Nepal. been a key part of the economy with highly
It also includes the largest and most populous states on the successful software development exports. It also
globe including China and India and some of the world’s plays a key role in global service provisions as trends
smallest such as the Maldives and Bhutan. in outsourcing and off- shoring increase.
The Asia and South Pacific has emerged over the 4. India and China have also become a major source of
past decade as a new political force in the world. The international migrant labor, which is also one of the
economies of Japan, Korea, Indonesia, Vietnam and Pakistan fundamental characteristics of the era of
have strategic relevance in today’s global system. They are globalization. This includes the migration of highly
the focused of global powers outside of the region. A foreign skilled labor into the high- tech industry based in
policy shift called “Pacific Pivot” was implemented by the Silicon Valley. India, China and the Philippines were
United States to commit more resources and attention to the three of the top four recipient states of migrant
region. This shift which is also called “Atlantic Century” was remittances.
termed “Pacific Century” by US Secretary of States Hilary 5. The trend of the rising regional free arrangements in
Clinton. He stated that the Asia Pacific has become a key the Asia Pacific and South Asia. This kind of
driver of global politics. It is the home to several key allies and regionalism would mean as bulwark to globalization
important emerging powers like China, India, and Indonesia. or as compatible and even pushing forward the
Globalization in the Asia Pacific and South Asia is an process of global economic integration. Regionalism
external phenomenon being pushed into the region by world can promote learning, assuage domestic audiences
powers like US and Europe. Globalization in this context is a to the benefits of free trade, and form the institutional
process that transforms the Asia Pacific and South Asia. It framework to scale up from regional cooperation to
can be viewed as a force for good, bringing economic
 global cooperation. Regionalism can act as South Korea, Taiwan, Hongkong and Singapore and led to
springboard for globalization. the formation of middle -class societies in these countries by
the 1980s.
One distinguishing feature of regional institutions in
Asia Pacific and South Asia is the adoption of “Open TWO SALIENT POINTS IN THE HISTORY OF EAST ASIAN
Regionalism” which aims to develop and maintain MIDDLE-CLASS FORMATION.
cooperation with outside actors. This is meant to resolve the
tension between the rise of regional trade agreements and 1. Middle class formation in Southeast Asia was driven
the push for global trade as embodied by World Trade by global and regional transnational capitalism
Organization (WTO), the only global international organization working in alliance with national states while middle
dealing with the rules of trade between nations. class in Japan, South Korea, and Taiwan were
created by developmental states and national
“Open” refers to the principle of non-discrimination, capitalism.
more specifically an openness in membership and openness 2. New urban middle classes in East Asia, whether in
in terms of economic flows. Open regionalism is embodied by Japan, South Korea, Taiwan, or Southeast Asia, with
Asia Pacific Economic cooperation or APEC. their middle-class jobs, education, and income, have
in turn created their own new lifestyles commensurate
with their middle-class income and status.
6. In culture and globalization in the region, the source
of a wide variety of cultural phenomena that have MIDDLE CLASSES IN THE PHILIPPINES
spread outward to the West and the rest of the world
is the region. Examples include “hello Kitty” created in New urban middle classes emerged in the post 1986
Japan including Anime, Pokemon, Power Rangers Philippines. They were created through growth in retail trade,
which become regional and global phenomenon; the manufacture, banking, real estate development, and an
regional and global rise of Korean popular culture expanding range of specialist services such as accounting,
called ‘K-Wave” comprising of Korean dramas, music advertising, computing, and market research. Fostered by
(K-pop) and the smash hit “Gangnam Style” of government policies of liberalization and deregulation, the
Korean pop star PSY. development of these new enterprises has been oriented both
toward the export and domestic markets and has entailed
Asia Pacific and South Asia are on the receiving end increasingly diverse sources of foreign investment and
of globalization. The region serves as the source of many variable subcontracting, franchise, and service relationships,
aspects of globalization process which can be seen in history, with a noticeable expansion of ties connecting the Philippines
economy, political structure and culture. to other countries in East and Southeast Asia.

THE REGION-MAKING IN SOUTHEAST ASIA AND REGIONAL IMPLICATIONS OF MIDDLE -CLASS

MIDDLE-CLASS FORMATION: THE THIRD WAVE FORMATION IN EAST ASIA
Complex historical forces shaped new urban middle
Regionalization entails complex and dynamic classes. They are product of regional economic development,
interactions between and among governmental and which has taken place in waves under the U.S. informal
nongovernmental actors which resulted to hybrid East Asia. empire over a half century, first in Japan, then in South
The main engines of hybridization are explained by the Korea, Taiwan, Hongkong, and Singapore, Thailand,
successive waves of regional economic development that is Malaysia, Indonesia and Philippines, and now in China. They
powered by developmental states and national and are product as well for development states. Their lifestyles
transnational capitalism that nurtured sizeable middle-classes have been shaped in very complex ways by their
that share a lot in common in terms of professional lives and appropriation of things American, Japanese, Chinese, South
their lifestyles, in fashion, leisure, and entertainment, in their Korean, Islamic and other ways of life, often mediated by the
aspirations and dreams. The middle-class occupies different market.
positions in their respective societies as well as in relation to The political consequences of the rise of East Asia
their nation-states as they constitute the expanding regional middle classes vary. The cultural and political hegemony of
consumer market. the South Korean middle classes is embodied by single
The product of regional economic development in the generation, while that of the Taiwanese middle classes
post war era are the middle classes in east Asia. Regional manifest itself in the political assertiveness of an ethnic
economic development took place within the context of the majority. Southeast Asian middle classes also exemplify the
American informal empire in “Free Asia”, with the US-led diversity and complexity of class formation. Thai middle
regional security system and the triangular trade system as its classes are coherent socially, hegemonic culturally, and
two major pillars. Furthermore, the national states in the ascend politically; their counterparts in Malaysia and
region promoted it actively under democratic or authoritarian Indonesia are socially divided, dependent on the state,
developmentalist regimes, both of which espoused the politics politically assertive and vulnerable; and the Philippine middle
of productivity, a politics of that transformed political issues classes are socially coherent, less dependent on the state,
into problems of output and sought to neutralize class conflict culturally ascendant, but politically vacillating.
in favor of a consensus on economic growth.
The first wave of regional economic development
took place in japan from mid- 1950’s to the early 1970s and
led to the emergence of a middle-class by the early 1970s.
The second wave took place between the 1960s and 1980s in