THE GLOBAL ECONOMY

Discussant: Angela Beatrise R. Barredo

Economics - the careful management of available wealth and resources of

a country or region

Global: universal, international, world-wide (whole world)

Globalization - the growing interdependence of the world’s economies,

cultures, and populations that is influenced by the universal trade of people
(manpower), technology (information), goods and services (flows of investment).

INTERNATIONALIZATION VS. GLOBALIZATION

Internationalization: political, economic and cultural cooperation between nations

Globalization: an ideology based on the belief that people, goods and information
ought to be able to cross national borders unrestricted

✗ KENICHI OHMAE:

“Globalization transforms the national economy into a global one where “there
will be no national products or technologies, no national corporations, no national
industries.”

- a borderless world
ACTORS FACILITATING ECONOMIC GLOBALIZATION

1. International Economic & Financial Organizations

- play a major role in the social and economic development programs of
nations with developing or transitional economies
- composed of international banks to provide loans and grants to world's
poorest developing countries
- PURPOSES:

• to support sustainable economic, social and institutional development

• to promote regional cooperation and integration

EXAMPLES: World Bank, Asian Development Bank, United Nations Conference

on Trade and Development

2. Non-Governmental Organizations (NGOs)

- independent from the government
- not-for-profit bodies (no commercial interest)
- with charitable purposes and intent
- PURPOSE: To address various concerns and issues prevailing within
the society, typically those that neglects human rights.
- GOALS: Networking, Strengthening human rights movement, Lobbying

EXAMPLES: Red Cross, ABS-CBN Foundation

3. International Governmental Organizations

- an organization composed primarily of sovereign states, or of other
organizations through formal treaties for handling/serving common interests
and governed by international law
- established by a treaty that acts as a charter creating the group
 - PURPOSE:
• To help set the international agenda
• To mediate political bargaining
• To provide a place for political initiatives

EXAMPLES: World Health Organizations, ASEAN, World Institute for

Development Research

4. TransNational Corporation (TNC)

- 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.
- sets up factories in developing countries as land and labor are cheaper there
- usually large and booming businesses that creates franchises and factories in
the different parts of the world
- GOAL: To make a profit and reach their financial goals

EXAMPLES: McDonald's, Coca Cola

Modern World System

- a geographical division of labor between two regions of the
world, the core and the periphery

• Periphery
- labor-intensive and less sophisticated technology
- smaller scale

- PURPOSE: To produce raw materials (agricultural, animal and mineral products) on

a foundation of forced and/or cheap labor, to export to the core
 • Core
- uses raw materials imported from the peripheral activities involved
- application of advanced technology
- larger scale

✓ Semi-Peripheral Countries
- manufacture goods and the same time export raw materials to
other core countries
- less developed than core nations but more developed than
peripheral nations

Social Division of Labor: contributes to economic development of core and

hinders development at the periphery

REASONS WHY THERE IS INEQUALITY

✗ Periphery also functions as a

market for the surplus manufacture
goods of the core.

✗ The core will have much greater

diversity in manufacturing, higher levels
of technology, higher wage levels and
higher levels of consumption.

Modern World Economy: The economic activities throughout the

world that are related to one another through an extensive division of labor
 I. THE GOLD STANDARD
- First out to operate in U.K. 1821
✓ Silver had been the principal monetary metal while gold was already
used for coinage in one or another country but never a standard.

1820 – 1871: A Bimetallic Regime of gold and silver was used outside U.K.

1870s: Monometallic gold standard was adopted by Germany, France and the
U.S after having gold discoveries in western north America.

1904: Gold could be bought or sold in unlimited quantities at a fixed price.

1870 (WWI): The reign of the full gold standard only lasted from 1870s to the
outbreak of World War I (1914)

✓ The war saw the efficiency of inconvertible paper money.

➢ Gold-Exchange Standard

- central banks are supplemented gold reserves with currencies at

stable price

Great Depression: the gold-exchange standard collapsed and by 1937, not a

single country remained full-gold standard.

II. THE BRETTON WOODS SYSTEM

- a set of unified rules and policies that provided the framework necessary to
create fixed international currency exchange rates
• John Maynard Keynes
- recommended the creation of an international clearing union, a kind of
global bank
International Banks for Reconstruction and Development

- responsible for post-war reconstruction

International Monetary Fund (IMF)

- safeguard the smooth functioning of the gold-exchange standard by providing

short-term financial assistance in case of temporary balance of payments
difficulties

III. EUROPEAN MONETARY INTEGRATION

- Emerged during the Post-World War II era
- ORIGINAL FOUNDING MEMBERS: German, France, Italy. Netherlands,
Belgium, Luxembourg

AIM: To create a common market where goods, services, capital and labor
moved freely.

Post-War Programs:
Morgenthau Plan:
US wanted to implement to ➢ Marshall Plan, 1948

downsize the German ➢ Organization for Economic Cooperation and

economy into a pastoral and Development
agricultural one.
➢ European Coal and Steel Community, 1951

➢ Rome Treaty, 1957

(This plan was abandoned.) ➢ European Economic Community

✓ The European Monetary Integration collapsed due to design flaws along with
global financial and economic crisis.
WHERE IT ALL WENT WRONG: The European 6 did not plan any direct
cooperation in the field of finance or exchange rate policies.

IV. INTERNATIONAL TRADE AND TRADE POLICIES

Comparative Advantage Theory
- David Ricardo
- an economy's ability to produce a particular good or service at a lower
opportunity cost paid more attention to than its trading partners

✓ A country with a prevalent natural resource shall use this said resource
as a raw material to produce goods to be exported across the world.
REFERENCES

“What Is Globalization?” PIIE, 26 Aug. 2021, www.piie.com/microsites/globalization/what-is-

globalization.

“What Are the Actors That Facilitate Economic Globalization?” Bartleby Learn, 29 Aug. 2021,
www.bartleby.com/questions-and-answers/what-are-the-actors-that-facilitate-economic-
globalization-international-economic-and-financial-orga/934d8a2b-1a5d-418d-903a-
d8d86e6dbe62.

“The Modern World-Economy.” Global Learning, Sierra Creation, 2 Aug. 2013,

www.globallearning-cuba.com/blog-umlthe-view-from-the-southuml/the-modern-world-
economy.

Benczes, István, et al. “9.” The SAGE Handbook of Globalization, edited by Manfred Steger,
Paul Battersby, Joseph M. Siracusa, SAGE Publications Ltd, 2014, pp. 1–14.

“gold standard.” Britannica, The Editors of Encyclopaedia Britannica, 11 Sept. 2019,

https://www.britannica.com/topic/gold-standard#ref1273894

“What is the Bretton Woods Agreement?” Corporate Finance Institute,

https://corporatefinanceinstitute.com/resources/knowledge/finance/bretton-woods-
agreement/#:~:text=The%20Bretton%20Woods%20System%20is,for%20currencies%20around
%20the%20world.

“Unilateral trade arrangements.” European Commission,

https://trade.ec.europa.eu/access-to-markets/en/content/unilateral-trade-arrangements