Joreil R.

Vicentuan

BSED-1A

Activity 5 Essay

1. What are the different factors that enable economic globalization?

- Put simply, globalization is the connection of different parts of the world. In

economics, globalization can be defined as the process in which businesses,
organizations, and countries begin operating on an international scale.
Globalization is most often used in an economic context, but it also affects and is
affected by politics and culture. In general, globalization has been shown to
increase the standard of living in developing countries, but some analysts warn
that globalization can have a negative effect on local or emerging economies and
individual workers.

2. Compare and contrast the assumptions of the original Bretton Woods

system with those of the Washington Consensus.

- The Bretton Woods system sought to guarantee international financial stability

through a system of strict exchange controls. For most of its existence, this
enabled western countries to run economies with low inflation and full
employment, but if you went abroad, you were only allowed to take a small
amount of spending money. People who lived through the time, with family bases
in more than one country, have memories of smuggling banknotes in their
underwear.

It was blown apart by the oil crisis in the early 1970s. The Washington Consensus
describes the broad principles of international finance since, involving absence of
exchange controls, and a policy balance of unemployment against inflation, plus a
few other general rules for operating such a system. The world has become so
used to these since the 1970s that they have acquired a psychological status
almost of laws of nature, but that was also true of the Bretton Woods and Gold
Standard principles before. The remarkable thing about the Washington
Consensus system is that it has survived being blown out of the water, in 2007–
2008, perhaps just because of inertia, with no other system commanding enough
respect to replace it.

One thing they have in common is austerity: the notion that the cure for most ills
is starvation. A little like the economic equivalent of bleeding and leeches in early
modern medicine.