Republic of the Philippines

Commission on Higher Education

OAS COMMUNITY COLLEGE
Oas, Albay

MODULE 2: The Structures of Globalization

SUBJECT CODE: GE 4

SUBJECT TITLE: The Contemporary World

MODULE TITLE: The Global Economy

MODULE DESCRIPTION:

This module exposes the learners to economic and political arenas as structures of globalization. In
Section 1. The Global economy, the discussion focuses on the process of making the world economy an integral
element of a whole. Also, it elaborates on the important players of economic globalization. Section 2. Market
Integration covers the position of international financial institutions in global market integration. In Section 3. The
global Interstate System, the discussion tackles the consequences of globalization on governments and institutions
that govern nation- state relations. Section 4. Contemporary Global Governance presents the United Nation’s role,
function, and the challenges of global governance.

This section introduces the learners to the concept of economic globalization and the important actors
that facilitate the interdependence of world economies.

This course introduces the students to the contemporary world by examining the multifaceted
phenomenon of globalization. Using the various disciplines of the social sciences, it examines the economic, social,
political, technological, and other transformations that have created an increasing awareness of the
interconnectedness of peoples and places around the globe. To this end, the course provides an overview of the
various debates in global governance, development, and sustainability. Beyond exposing the students to the world
outside the Philippines, it seeks to inculcate a sense of global citizenship and global ethical responsibility.

EXPECTED OUTCOME/ OBJECTIVES: At the end of this module, you are expected to:
1. Define economic globalization;
2. Analyze the factors that facilitate economic globalization; and
3. Articulate a stance on global economic integration.

1|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

PRE- TEST

I. Before we proceed with the topic, may I ask you to answer the following. Give at least 5 corporations
you are familiar with and their line of business.
1. _________________
2. _________________
3. _________________
4. _________________
5. _________________

II. Direction: Write Agree if you think the statement is correct; otherwise, write Disagree.

__________ 1. Economic globalization includes borderless exchange of goods and services.

__________ 2. McDonalds is a transitional corporation.
__________ 3. Global economy is influenced by global politics
__________ 4. Unilever is a multinational corporation
__________ 5. Economic globalization can refer to the increasing integration of economies around the world.

LESSON CONTENT

Globalization has brought enormous changes to the lives of the people. Humans are the major
contributors to the development of the economy. But also, at the same time, humans are the
direct descendants of the success and failures of decisions made throughout history. It is therefore, a necessity to
be acquainted with the trends and changes of our modern world. With such, knowledge and understanding of the
various concepts of globalization and how it affects each economy is vital for the survival and success of every
human. The world is moving in fast pace as technology changes every quarter of the year. Distance from each
other is no longer an issue because of technology and easy travel opportunities. There is shorter waiting time and
everything is fast because communication is reaching even at the farthest part of the world.

2|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

ECONOMIC GLOBALIZATION

During the last decades we saw a rapid increase of economic globalization. This fact is due to
technological progress and different levels of scarcity of resources in individual countries. Sometimes it seems that
the increase of cross-border exchange of goods, services, capital and other factors of production is inevitable. But
as a matter of fact, the development of globalization is not determined by any laws of nature. Political decisions
and institutions are central adjustment screws.

Steger’s (2014) definition of globalization as the expansion and intensification of social relations and
consciousness across world time and space implies that there are various forms of connectivity. Globalization is
a multidimensional phenomenon, creating economic, political, cultural and even technological forms of
connectivity. This section focuses on the economic dimension.

Academic literature commonly subdivides globalization into three major areas

1. Economic globalization
2. Cultural/ social globalization
3. Political globalization

Economic globalization
 refers to the expanding interdependence of world economies.
 Refers to the widespread international movement of goods, capital, services, technology and
information
 Primarily comprises the globalization of
1. Production
2. Finance
3. Markets
4. Technology
5. Organization
6. Regimes
7. Institutions
8. Corporations
9. labor
 one most often mentioned in the media and is associated with massive amounts of financial traded
daily on the different stock markets around the label “new economy”

Shangquan (2000) attributes economic globalization to the following:

 GROWING SCALE OF CROSS-BORDER TRADE COMMODITIES AND SERVICES

 In the Philippines, this can be illustrated by the country’s trading partnerships with China,
United States and Australia

 FLOW INTERNATIONAL CAPITAL

 Can be observed in foreign direct investments (FDI), a type of investment in which a company
establishes a business in another country for production of goods or services and still takes
part in the management of the business. An example of this is Toyota Motor Philippines
Corporation which is a subsidiary of Toyota Motor Corporation based in Toyota, Japan.
3|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

 Can also be observed in foreign portfolio investments, trade flows, external assistance and
external commercial borrowings and private loan flows.
 WIDE AND RAPID SPREAD OF TECHNOLOGY.

Activity 1.
Why do you think American companies set up subsidiaries in the country? Explain

In 2008, the International Monetary Fund (IMF) defined economic globalization as 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” (IMF, 2008)

Silk road is a network of trade routes that connected the East, particularly China and the West.

 Economic globalization can be traced from the time when there was economic movement in Asia,
Africa and Europe through Silk Road.
 Historically, these routes led to the discovery of the Philippine Islands when Portuguese and Spanish
envoys were in search of spices, which then spawned colonization.
 In the contemporary period, foreign expatriates come to the country to manage their company’s
foreign subsidiaries. Likewise, the Philippines sends thousands of skilled workers to the Middle East as
construction workers, seafarers and nurses.

Benczes (2014) identifies four interconnected dimensions of economy, namely

 Globalization of trade of goods and services;
 Demonstrated in the establishment of the WORLD TRADE ORGANIZATION (WTO) that eases
trade among countries. WTO , established in 1995, “ensures that trade flows as smoothly,
predictably, and freely as possible” (WTO,2012)
 Emergence of China as major supplier and exporter of manufactured goods that has affected
the world economy. China made products or parts are sent to the United States. To meet this
demand, China creates more jobs for its citizens.
 Increasing number of business process outsourcing (BPO) companies in the Philippines. Cheap
labor cost, English proficiency and customer service skills are the reason.
 Globalization of financial and capital markets
 Liberalization of financial and capital markets. This is seen in cross-listing of shares on one or
more foreign stock exchange, cross hedging and diversification of portfolio, and round the
clock trading worldwide.
 Globalization of technology and communication; and
 Various transaction and interactivities that transpire instantly dur to the internet and
communication technology.
 Globalization of production
 Best illustrated by the existence of multinational corporations (MNCs) and transnational
companies (TNCs)

4|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

A multinational corporation (MNC)

 a large corporation incorporated in one country which produces or sells goods or
services in various countries.
 their worldwide activities are centrally controlled by the parent companies.
 Examples: Coca- Cola, Toyota Motor Corporation,
A transnational corporation (TNC)
 is an enterprise that is involved with the international production of goods or services, foreign
investments, or income and asset management in more than one country.
 generally, are decentralized, with many bases in various countries where the corporation
operates.

ACTIVITY 2.
Read the article below. Enumerate the reasons why McDonalds is considered a
transnational corporation.
Why Is McDonald's a Transnational Corporation?
McDonald's is a transnational corporation because it operates facilities and does business in many
countries around the world. It does not consider one country its national home.

McDonald's is a company centered on globalization. The definition of globalization is to extend to

other parts of the world. According to a case study published in "The Ecologist," as of 2011, there
were 32,000 Why Is McDonald's a Transnational Corporation?

McDonald's stores in 117 countries, making it the world's largest fast-food chain. An advantage of
being a transnational corporation is that McDonald's can respond quickly to local markets, should
there be an issue or if the company wants to make sudden changes.
In order for globalization to succeed, companies must take into account the cultures and traditions of
other countries. One way they do this is by varying the menu from country to country. In Australia,
the McDonald's menu features Vegemite in order to incorporate the tastes of Australians. In Japan,
McDonald's has a shrimp burger called the EBI Filet-O. In Singapore where Thai cooking and heavy
spices are prevalent, McDonald's serves the Shaka Shaka Chicken, which is marinated in soy sauce and
has five spices added to it. In Italy, the Chicken McNuggets are actually filled with spinach and
Parmesan cheese.

Reference:
 https://www.reference.com/business-finance/mcdonald-s-transnational-corporation-faff8a72d2e6b012

In past, most corporations were linked/identified with a country, but today corporations are now transnational.
Companies move their production and capital to any market that will benefit the company (increase profits and
share values)

EG: Ford has plants in Mexico Coca Cola, Nike, Shell are all over the world

5|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

Advantage: increased global wealth means increase in standard of living

Disadvantage: economic globalization tends to increase diff. btw “haves” and “have nots” and leads to the
corporation having more power than countries

Szentes’ (2003) define economic globalization as the process of “making the world economy an ‘organic system’
by extending transnational economic process and relations to more and more countries and by deepening the
economic interdependencies among them.”

 This implies that the world economy is no longer controlled by the nation-states, but it must be seen
from a global context---the reliance and integration of world economies.
 To illustrate, the price movements of imported fuels in the Philippines are affected not only by the
National Tax Reform for Acceleration and Inclusions (TRAIN Law) excise on tax fuels but also by the
peso-US dollar exchange rate.
 At the same time this exchange rate is also affected by the global market and the international
economy’s interest rates like the European Union (EU) and the United States Federal Governments’
interest rates.
 Global corporations directly affect the inflow of US dollars in the Philippines.

ACTIVITY 3

Answer the question in a brief and concise explanation.

How do international conflicts arise from competition for economic power? Site a certain situation and
explain.

After recognizing the definition of economic globalization, we will discuss the different agents that bring about
the interdependencies of global economies. There are different views on who or what the actors are that
facilitate economic globalization.

 On one hand, some scholars believe that it is still the nation-state but of different levels.

Boyer and Drache (1996) state that the role of nation-states as manager of the national economy is being
redefined by globalization. Although such is in the case, nation-states still act as buffer to negative effects of
globalization.

In support, Brodie (1996) calls the government as the “midwives” of globalization. It means that nation-states
are still relevant despite assuming a global perspective and act as mediators between the effects of globalization
and the national economy. Government policies and regulations either permit or deny the smooth connection
among world economies. In the looming trade war between China and the United States, each government
imposes high tariffs on goods and services. Thus, this trade war does not only affect their economies but also
the rest of the world.

 On the other hand, some experts claim that the actors are now the global corporations.

6|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

Ohmae (1995) argues that the nation-state has ceased to exist as the primary economic organization unit in the
global market. Filipino consumers, for instance, prefer to consume and avail of global products and services like
H & M, Uniqlo, Accenture, Amazon, Alibaba and FedEx. As a result of transforming the national economy into a
global one, Reich (1999) posits that national products, technologies, corporations, and industries become
obsolete. San Miguel Corporation and Jollibee Foods Corporation are good illustrations of this effect. These two
Filipino companies have expanded outside their home country as they are present in Europe, U.S., and the rest
of Asia.

According to Gereffi (2005), such TNCs are the main driving force of economic globalization accounting for two
thirds of the world export. Forbes list down companies from 63 countries that together account for $35 trillion
in revenue, $2.4 trillion in profit, $162 trillion assets and have a combined market value of $44 trillion (Schaefer,
2016).

An international structure for money, power and interest was created in order to set a system in the financial
and economic relations in the modern day.

 The establishment of an international monetary system (IMS) is one of the actors that facilitate
economic globalization.

IMS refers to internationally agreed rules, conventions, and institutions for facilitating international trade,
investments and flow of capital among nation-states.

Historically, there are three global IMS –

 the gold standard,

The gold standard functions as a fixed exchange rate regime, with gold as the only international reserve and
participating countries determine the gold content of national currencies (Benczes,2014).

 the Bretton Wood System

the US dollar was the only convertible currency. Thus, it was agreed by 44 countries to adopt the gold-exchange
standard.

Also, two financial institutions were established:

 The International Bank for Reconstruction and Development (IBRD)
now known as the World Bank, is responsible for post-war reconstructions
 the IMF.
aims to promote international financial cooperation and strengthen international trade.

 the European Monetary System (EMS).

It came about after the collapse of the Bretton Woods System. EMS was successful in the stabilization process of
exchange rates. It then prompted the foundation of a new European Economic and Monetary Union
(EMU).National currencies were abandoned and member states delegated monetary policy onto a supranatural
level administered by the European Central Bank (European Commission, 2008).

The development of international trade and trade policy is also a form of such economic integration. Trade
patterns must not be stagnant. Flow of goods must be voluntary but restricting it might affect the relationship
between among states.

7|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

With the nation-states, global corporations, and international monetary systems as actors of economic
globalization, the world is now confronted with a number of ongoing debates as to whether economic
globalization unites or divides the world.

ADVANTAGES

Benczes (2014) believes that economic globalization fosters universal economic growth and development.

For one, globalization allows a worldwide distribution of incomes. Australia, for instance, cannot provide all the
raw materials they need for certain products or services, so it needs other nation-states to produce or provide
these materials.

Also, economic globalization reduces poverty (World Bank, 2002). As foreign countries are in need of workforce
and human capital, Filipino nurses become overseas workers; they go to Europe and other countries to support
their families in the Philippines.

Lastly, globalization creates mutual dependence between developing and developed countries (Arrighi, 2005).
Some developing countries rely on developed countries for employment and income while the latter relies on
the former for raw materials and services like labor.

DISADVANTAGES

On the other hand, some observers of economic globalization believe that it divides the world further.

First, one might observe that the sources of goods and services are exploited. Since these economically poor
nation-states depend on industrialized countries for employment and income, these industrialized countries
compensate their labor with cheap cost. The industrialized countries even source materials from natural
resources of poor nation-states as another form of exploitation. Some even destroy nature without doing
anything to rehabilitate it.

Second, economic globalization does not benefit all nations (World Bank, 2002). There is an uneven experience
among nations. Workers in TNSs are paid less compared to their counterparts in the companies’ home
countries. This shows how cheap labor is in the Philippines.

Third, Wallerstien (2005) claims that capitalism created the different levels of wages in the economic arena of
world systems. It further subdivides the world for it leads to inequality according to expertise, experience and
skills.

ACTIVITY 4

Discuss whether economic globalization is something that unites or further divides the world.
Write a short explanation of your stand.

8|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

Activity 5

Analyze the editorial cartoon and write your

own interpretation about it.

SUMMARY

In conclusion, economic globalization affects all nations and citizens through the increasing integration of
economies around the borderless world. Its important players are the nation-states, global corporations and the
international monetary systems. Though some people believe that economic globalization brings unity of all
economic movements, others believe that globalization brings unity of all economic movements, others believe
that globalization furthers the separation among nation-states around the world.

REFERENCES:

 The Contemporary World 2019 by Tumoroh C. Brazalote and Ryan M. Leonardo

 The Contemporary World by Lisandro E. Claudio and Patricio N. Abinales
 https://www.studocu.com/ph/document/polytechnic-university-of-the-philippines/the-
contemporary-world/lecture-notes/the-global-economy/3175033/view
 “The Globalization of Economic Relations” by István Benczes Wallerstein,
 Wallerstein, Immanuel. 2004. “The Modern World-System as a Capitalist World Economy:
Production, Surplus Value, and Polarization.” In World Systems Analysis: An Introduction.
Durham & London: Duke University Press

9|P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

POST TESTS:

Answer the following questions below.

1. Based from the discussion, define globalization in your own understanding. (5 points)
2. What is the difference between globalization and globalism? (5 points)
3. Site an example of cultural imperialism in the following factors and explain each.
a. Music (3 points)
b. Fashion (3 points)
c. Movies (3 points)
4. Based from the different concepts and definition of globalization, on whose perspective do you agree
most? Why? (5 points)
5. Give 1 advantage of globalization that can greatly affect you as a student? Explain. (6 points)

KEY TO CORRECTION:

Prepared by:
10 | P a g e
MARY R. GAMBOA
OCC Instructor
 Republic of the Philippines
Commission on Higher Education
OAS COMMUNITY COLLEGE
Oas, Albay

_______________

MARY R. GAMBOA
Instructor

Noted:

______________________

GEMMA G. ESPINEDA, MBA

Prog. Head, BSOA Dept.

Recommending Approval:

___________________________

RICHARD R. BERMUNDO, MAEng. Ed

Director for Administration

Approved: ______________________

EMERITA R. RELLEVE, Ph. D.

College Administrator

11 | P a g e
MARY R. GAMBOA
OCC Instructor