International

Organizations and
Economic Globalization
Course: Ekon3065
Lecturer: Mārcis Dzelme
Bio
Education: Bachelor of Political Science, Master of Laws. Currently, a
doctoral student in economics and management
Experience: Representing economic interests of the enterprises for
over 15 years
Geography: EU, USA, China and South Korea

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The aim of the Course

To introduce economic aspects of globalization, its historical

development, influencing factors and consequences.

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Course Plan
1. The nature and forms of globalization L4 S4
2. Economic manifestations of globalization L4 S6
3. An impact of globalization on the economy L4 S4
4. International organizations L6 S4 (some)
5. The nature and forms of economic integration L4 S4
6. Regional economic blocks L4 S4
7. Economy of European Union

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Requirements for the credit points
Intermediate assessment:
1. Participation in class activities - 20% (10%)
2. Essays and practical assignments - 40% (20%)

Final assessment:
3. Exam (written) - 40%

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The nature and forms of
globalization
Lecture: 1

Course: Ekon3065
Lecturer: Mārcis Dzelme
Questions for Discussion

• What is globalization?
• When and how did it start?
• Who benefits from globalization the most?

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Structure
• Globalization
• Stages of Globalization
• Regionalization
• Opportunities and Challenges

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1. Globalization

... process by which the

people of the world are
unified into a single society
and function together

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Definition
From historical perspective
•the result of human innovations and development of technological opportunities

From today’s perspective

•... globalization is the integration of markets, finance, and technology in a way that shrinks
the world from a size medium to a size small. / Thomas Friedman

•This process is a combination of economic, technological, sociocultural and political

forces. / Sheila L. Croucher

•Globalization as a concept refers both to the compression of the world and the
intensification of consciousness of the world as whole. /Roland Robertson

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Definition 2
Economic
Globalization

Flow of Goods Flow of Capital Flow of People

International Trade International Investments Migration

Increasing interdependence of countries Globalization, 2011, 8:10 min.

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2. Stages of Globalization
Is globalization a new phenomenon?
Before 1870 it's not meaningful to talk about a global economy

• G 1.0: 1870-1914 – industrial revolution

• G 2.0: 1950-1980 – international trade
• G 3.0: 1980-20??s – ICT, GVC revolution, offshoring

• G 4.0: the fusion of digital and physical worlds, it happens when digitech allows arbitrage of
international wage differences without the physical movement of workers. 

Future Globalization | Jason Inch | TEDxSuzhou

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G 1.0: Industrial Revolution 1870-1914
• Triggered by a combination of falling transport costs (e.g., switch from
sail to steamships, railroads) and reduction in tariff barriers
• Opened-up the possibility of using abundant land
• People immigrated to other countries and capital was invested in
manufacturing in these countries
• Land-abundant countries: Argentina, US, Australia, New Zealand
• Labor exporting countries: European countries, others

 The WWI stops the global development

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Protectionist Policies: 1914-1945
• Policies that seek to increase domestic demand for the local products.
Imports are reduced to the minimum and domestic supply is increased
by reducing export of capital abroad.
• Post-WWI economic depression led countries to institute protectionist
trade policies

Since 1945, both Republican and Democratic presidents have sought to

lower trade barriers and negotiate reciprocity agreements. Those efforts
have been reflected in the GATT, the WTO and the NAFTA.

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G 2.0: International Trade 1950-1980
• Re-building world after WWII
• Trade liberalization
• By 1980, trade between developed countries in manufactured goods
was free of barriers
• Barriers facing developing countries were removed only for those
primary commodities that did not compete with agriculture in
developed countries
• Transport costs continued to fall

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Advantages of the Trade Liberalization

• Consumers: have choice of products and services for a competitive

prices
• Producers: have opportunities to access international markets
• National Economy: has an opportunity to benefit from the
international division of labour vs. the necessity to survive a strong
competition from the global market

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G 3.0: ICT, GVC, Offshoring 1980 – 20??

• ICT + many developing countries broke into the global markets for the
first time (China, Bangladesh, Sri Lanka, India, Turkey, Morocco,
Indonesia, Philippines, Mexico)
• High GDP growth
• Constantly increasing international trade
• Growth of GVCs

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 What is GVC?
It breaks up the production process across countries. Firms specialize in
a specific task and do not produce the whole product.

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 How does it work?
• Interactions between
firms typically involve
durable relationships
• Economic
fundamentals drive
countries’ participation
in GVCs
• But policies matter—
to enhance
participation and
broaden benefits
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Kas ir globālā vērtību ķēde? 2

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 Key facts about GVCs

• GVCs account for 50% of global trade. Over the past 30 years helped
poor countries grow faster, lifting out of poverty.
• Trade conflict and the lack of major reforms inhibit GVCs from
remaining a force for prosperity.
• GVCs can further boost inclusive and sustainable growth, create better
jobs and reduce poverty, if developing countries implement deeper
reforms and industrial countries pursue open, predictable policies.

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 Key facts about GVCs

• GVCs powered an economic revolution over the past three decades:

growth accelerated, incomes rose, and poverty rates plunged.
• The expansion of GVCs has plateaued since 2008 due to a decline in
overall economic growth and the slowing pace of reforms. The
absence of major trade initiatives and growing trade conflict make it
more difficult for developing countries to benefit from GVCs. 

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 Why GVCs are important?
• GVCs can continue to be a force for sustainable and inclusive development if:
• Developing countries speed up trade and investment reforms, and improve connectivity
• Advanced economies pursue open, predictable policies
• All countries strengthen social and environmental protection, to ensure the benefits of GVC
participation are shared and sustained
• In the age of GVCs, the need for international cooperation is urgent:
• Public policies and economic conditions in one country affect trade partners through
production linkages. The benefits of coordinated policy action are larger with GVCs than
conventional trade, as goods and services cross borders multiple times
• All countries need to work cooperatively to address policies that distort trade and to keep
markets open

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Results of Globalization

• National monopolies are being broken down

• Natural monopolies are disappearing
• Competition is increasing and market forces are asserting their
dominance in determining the economic decisions that influence the
position of national economies

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Protectionist Policies: 20?? – 20?? ?

• What effect Financial Crises of 2008 had on globalization?

• Have we reached peak globalization?
• What are Trump’s policies?
• Slowbalization?

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G 4.0: Has it started?
• Every industrial revolution has driven a wave of globalization. We're on the cusp of a
new era, as the data-driven technologies of the 4.0 IR rewrite the rules of the global
economy.

• It’s the fusion of digital and physical worlds - it happens when DigiTech allows
arbitrage of international wage differences without the physical movement of workers. 

• Globalization 4.0 | The Geopolitical Challenges, 2019, 3:17 min.

• Anil Gupta at Davos 2019 - on Globalization 4.0, 2019, 6:35 min.
• WEF, Globalization 4.0, 2018, 55:56 min

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Driving forces

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3. Regionalization

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Choosing Partners

• North - North
• North - South
• South - South

... Most of regional blocks involve neighbouring countries …

North - South usually works the best

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Levels of Regionalization

Free Trade Custom Union

Types

Economic Union Common Market

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 Regionalization
Complimentary vs. contra process to
globalization

- reduction of trade, capital movement - barriers between regions, competition

and labour movement barriers
- diminishing role of national countries
development over-national institutions
and political issues between the blocks
- greater autonomy for countries
(regional blocks seen as a way to
protect from globalization)

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NAFTA - USMCA
- The North American Free
Trade Agreement was signed by
Canada, Mexico, and the United
States. The NAFTA trade bloc
was the largest trade blocs in
the world by GDP.
- Replaced by US-Mexico-
Canada Agreement that took
effect on July 1, 2020, replacing
NAFTA.
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Regional Comprehensive Economic
Partnership
The race is on to secure the wo
rld’s biggest trading bloc
- More than 3 billion people or
45% of the world's population
- A combined GDP of about
$21.3 trillion or 40 % of world
trade
- Huge potential for growth

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4. Opportunities and Challenges
Who benefits?
• During the last decades, the structure of the international trade has
changed towards trade between developing and developed
countries. The last have benefited much more, due to significantly
higher added value
• Countries, including transition economies, have understood the
importance of globalization and switched to more liberal politics

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Effects of globalization
• Industrial - emergence of worldwide production markets and broader access to a
range of foreign products for consumers and companies
• Financial - emergence of worldwide financial markets and better access to external
financing for borrowers. As these worldwide structures grew more quickly than any
transnational regulatory regime, the instability of the global financial infrastructure
dramatically increased, as evidenced by the financial crises of 2008
• Economic - realization of a global common market, based on the freedom of
exchange of goods and capital
• Political - the most powerful economies significantly increase the political influence
• Informational - ICT development

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Effects of globalization 2
• Language - the most popular language is English
• Competition - more competition and on global scale
• Cultural - growth of cross-cultural contacts, cultural diffusion, "world culture"
• Ecological - global warming, climate change, pollution but also international
cooperation in regulations
• Social - increased movement of people of all nations with fewer restrictions.
Spreading multiculturalism and better individual access to cultural diversity. Greater
tourism and migration, including illegal. Worldwide culture, events, media ...
• Legal/Ethical - global cooperation on fighting crime, development of internet,
legislation

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Globalisation Index
Globalisation has been on the rise since the 1970s, receiving a
particular boost after the end of the Cold War. Index measures the
economic, social and political dimensions of globalisation.

• Economic integration: trade, investments …

• Social integration: international travel, tourism, international
communication, international transfer of capital
• Political integration: membership in international organizations,
number of embassies ...
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Global opportunities and threats
Opportunities Threats
Global markets, global technologies, global solidarity Loss of the national sovereignty
and broader perspective of life

Less economic restrictions, greater mobility, global Increased inequality and environmental degradation
leadership and access to worldwide information

Market and multinational corporations have greater

power than governments do

Prosperity and greater freedom?

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Social movements
• Demonstrations in Seattle
against WTO
• Protest actions in Prague
during the Summit of WB
and IMF
• G8 meeting in Genoa and
discussions about the
global problems in the
world
•…

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Globalization and Pandemic?

The pandemic will accelerate not the demise

of globalization but its transformation.

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Seminar 17.09.

• MERCOSUR: Elans, Dennis, Daniela

• ECOWAS: Jekaterina, Meret, Lena
• USMCA: Maureen, Iana
• ASEAN: Jana, Christoforos

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Task due on 24.09.20.
• Please, find and write down 3 definitions of globalization and list the
most common globalization forms. Choose one of the forms listed and
describe it in more detail. Provide references to the sources.

• Upload in one file (1-2 pages) on e-studies by the lecture of 24.09.20.

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Paldies!