THE

GLOBALIZATION OF
ECONOMIC
RELATIONS Istvan Benczes
Prepared:
Ms Joanna Marie Fuentes-Baroman, MA PS
INTRODUCTION
• The debate on globalization in the past 30 years 🡪 on going

• approaching globalization from a purely economic perspective is a categorical mistake

• economic globalization does not constitute the whole story of contemporary globalization, relations but
in order to fully understand its meaning and implication, the econonuic dimension, as one of the major
driving forces of the process of globalization, requires special attention.
FLOW OF DISCUSSION

❑ Definition, origin, and consequences of economic globalization

❑ evolution of the major international monetary regimes (finance and trade)

❑Trade relations and trade policies

 DEFINITION

❑IMF (2008): [e]conomic globalization is a historical process, the result of human innovation and
technological progress, It refers to the increasing integration of economies around the world,
particularly through the movement of goods, services, and capital across borders. The term
sometimes also refers to the movement of people (labor) and knowledge (technology) across
international borders

❑Interconnected dimensions:
❑Globalization of trade of goods and services
❑the globalization of financial and capital markets
❑the globalization of technology and communication
❑the globalization of production
 CLARIFICATION

❑ Economic Globalization vs. Internationalization

❑the latter is about the extension of economic activities of nation states across borders, the former is
'functional integration between internationally dispersed activities' Dicken (2004: 12).

❑'In economic terms globalization is nothing but a process making the world economy an ' 'organic system"
by extending transnational economic processes and economic relations to more and more countries and by
deepening the economic interdependencies among them. ‘
❑ integrated world economy.
 CLARIFICATION

❑ Debates on the role of the state

❑ Ohmae (1995): states ceased to exist as primary economic organization units in the wake of a global market. People are
consuming highly standardized global products and services produced by global corporations in a borderless world.
Globalization transforms the national economy into a global one where 'there will be no national products or
technologies, no national corporations, no national industries' (Reich, 1991: 3).

❑Boyer and Drache: '[g]lobalization is redefining the role of the nation state as an effective manager of the national
economy' (1996: 1), but refuse the hypothesis of uniform state policies and conceive the state as the main shelter from the
perverse effects of a free market economy. It is, therefore, misleading to assume that globalization has relegated the
nation state and its policies to an obsolete or irrelevant status; governments instead 'are acting as the midwives of
globalization' (Brodie, 1996: 386)
 CLARIFICATION

❑ Globalization Players
❑ State
❑ UN
❑ NGOs
❑ TNCs

❑Gereffl (1999): develop the concept of global commodity chains, an idea that reflects upon the increasing
importance of global buyers in a world of dispersed production
 ORIGIN
❑ Gills and Thompson (2006: I):have been ongoing since the sixteenth century's connection of the Americas to
Afro-Eurasia'.

❑Frank and Gills (1993: 3) : existed some 5000 years ago🡪 Silk Road (Asia, Africa, Europe)🡪long distance
trading

❑Adam Smith (1776): Columbus’ discovery of America (1492); Vasco De Gama’s discovery of sea route to India
(1498)🡪 British Industrial Revolution (1800)🡪 spread to Continental Europe and North America

❑Economic Nationalism (17th -18th centuries)🡪monopolized trade🡪 yet no international economic integration
 ORIGIN

❑ 19th century breakthrough🡪 world wide trading increased🡪 as a result of transportation revolution (steamships
& railroads)🡪 the period before WWI is the “golden age of globalization” (relative peace, free trade, and
financial and economic stability ((O'Rourke and Williamson, 1999).

❑Structural Transformation (western world)🡪 intensified division of labour of the modern economy (19 th century)
 ORIGIN

❑ Convergence versus Divergence

❑Globalization is a myth (Bairoch, 1993)

❑Dollar and Kraay (2002) argue that only nonglobalizer countries failed to reduce absolute and relative poverty in the last
few decades

❑'the problem is not that there is too much globalization, but that there is far too little' (Wolf, 2004: xvii).

❑the World Bank (2002) claims that globalization can indeed reduce poverty but it definitely does not benefit all nations.
Sub-Saharan Africa, where roughly half of the population lives on less than US$ 1.25 (in purchasing power parity) a day,
has been especially marginalized by globalization.
 ORIGIN

❑ Convergence versus Divergence

❑by the start of contemporary globalization countries became highly stratified (Baldwin and Martin, 1999

❑ Wallerstein, capitalism, 'a historical social system' (1983: 13), created the dramatically diverging historical level of wages
in the economic arena of the world system. Thus, growing inequality, along with economic and political dependence, are
not independent at all from economic globalization.

❑Underdevelopment is consequence of colonialism and imperialism (Rostow, 1960)

❑Hobson (1902/2005) imperialism was a kind of 'conscious policy' adopted by leading capitalist nations, Wallerstein and his
followers identified imperialism as the product of the world capitalist system which has perpetuated unequal exchange
 ORIGIN
❑ Convergence versus Divergence

❑The modem capitalist system is unique in the sense that it created political structures that guaranteed
an endless appropriation and accumulation of surpluses from the poor (or the periphery) to the
emerging (or the semiperiphery) and — in particular — the advanced industrialized (or the core) countries. It is,
however, not just that the periphery is dependent on the core: the latter's development is also conditioned on the former. The
link between these groups is provided via trade and financial transactions, and is organized by a dense web of
businessmen, merchants, financial entrepreneurs and state bureaucrats. Globalization, the product of the long process
of capitalist development, is, therefore, nothing new for world-system analysts; it is simply the relabelling
of old ideas and concepts (Arrighi, 2005).
 INTERNATIONAL MONETARY
SYSTEMS
❑ International Monetary System or regime (IMS)

❑'refers to the rules, customs, instruments, facilities, and organizations for effecting international
payments' (Salvatore, 2007: 764).

❑ the main task of an MS is to facilitate cross-border transactions, especially trade and investment.

❑more than just money or currencies; it also reflects economic power and interests, as money is inherently
political, an integral part of "high politics" of diplomacy' (Cohen, 2000: 91).
 INTERNATIONAL MONETARY
SYSTEMS
❑ THE GOLD STANDARD (early 19th century)

❑https://www.youtube.com/watch?v=LdyHso5iSZI

❑https://www.youtube.com/watch?v=d3PCjk7YAo0

❑THE BRETTON WOODS SYSTEM

❑https://www.youtube.com/watch?v=xB9ToM4D5AI
 INTERNATIONAL MONETARY
SYSTEMS
❑THE BRETTON WOODS SYSTEM
❑https://www.youtube.com/watch?v=xB9ToM4D5AI
 INTERNATIONAL MONETARY
SYSTEMS
❑ THE EUROPEAN MONETARY INTEGRATION
https://www.youtube.com/watch?v=TAlcFwGIQBg

https://www.youtube.com/watch?v=GKffc7WboS4
 INTERNATIONAL TRADE AND TRADE
POLICIES
❑
❑David Ricardo’s Comparative Advantage: a country such as England could benefit from
voluntary trade even if its trading partner (which in the original example was Portugal) was
more effective in producing both wine and clothing.

❑Unequal Exchange Theory (Wallerstein & Amin): unequal exchange is a fundamental and
systemic distinguishing characteristic ofmodem world economy.

❑ Stolper— Samuelson theorem: international trade benefits the domestically abundant factor
of production (land, labour or capital) and weakens the scarce factor
 UNILATERAL TRADE RELATIONS
❑ Mercantilsim & Protectionism

https://www.youtube.com/watch?v=wFO8FDvLoms
 MULTILATERAL TRADE AGREEMENTS
❑ From GATT to WTO
https://www.youtube.com/watch?v=KKi0lW3boqE