MODULE 2

Prepared by:
Ma. Myrdred G. Rumbaoa. MN
• The
. International Monetary Fund (IMF) is an organization of 190
countries, working to foster global monetary cooperation, secure
financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and reduce
poverty around the world.
 Created in 1945, the IMF is governed by and accountable to the
190 countries that make up its near-global membership.
 The IMF's primary purpose is to ensure the stability of the
international monetary system—the system of exchange rates and
international payments that enables countries (and their citizens)
to transact with each other. The Fund's mandate was updated in
2012 to include all macroeconomic and financial sector issues that
bear on global stability.
• The International Monetary Fund (IMF)
regards “Economic Globalization” as a
historical process representing the result of
human innovation and technological progress.
• It is characterized by the increasing integration
of economics around the world, through the
movement of goods, services, and capital
across borders.
• .
International trade, economic transactions that are
made between countries. Among the items commonly
traded are consumer goods, such as television sets and
clothing; capital goods, such as machinery; and raw
materials and food. Other transactions involve
services, such as travel services and payments for
foreign patents .
International Trading System
• International trading system is not new. The
oldest known international trade route was
the Silk Road – a network of pathways in the
ancient world that panned from China to
Middle East and West (today’s Europe).

• Traders used the Silk Road regularly from 130

BCE when the Chinese Han dynasty opened
trade to the West until 1453 BCE when the
Ottoman Empire closed it.
• According to historian Dennis O. Flynn
and Arturo Giraldez, the age of
globalization began when “all important
populated continents began to exchange
products continuously – both with each
other directly and indirectly via other
continents- and in values sufficient to
generate crucial impacts on all trading
partners”.
Galleon
• . Trade
 established on 1571 according to Flynn
and Giraldez
 Connected Manila in the Philippines and
Acapulco in Mexico.
 This was the first time that the Americans
were directly connected to Asian trading
routes.
 During the age of mercantilism
 Mercantilism is a system of global trade
with multiple restrictions.
• The galleon trade was part of the age of
Mercantilism. From the 16th century to the 18th
century.
• Countries, primarily in Europe, competed with
one another to sell more goods as a means to
boost their country’s income (called monetary
reserves later on).
• To defend their products from competitors who
sold goods more cheaply, these regimes (mainly
monarchies); Impose high tariffs, forbade
colonies to trade with others nations, restricted
trade routes, and subsidize its exports.
• Mercantilism system of global trade with
multiple restrictions.
Gold Standard
 Following the lead of the United Kingdom,
the United State and other European Nation
adopted this at an International Monetary
Conference in Paris.
Its goal was to create a common system that
would allow for more efficient trade and
prevent the Isolationism of the Mercantilism
Era.
Established a common basis for currency prices and a
fixed exchange rate system – all based on the value of
gold.
Compelled countries to back their currencies with fixed
gold reserves.
During the World War I, when countries depleted their
gold reserves to fund to their armies, many were forced
to abandon the gold standard.
Great Depression – governments having no money.
This limited the amount of circulating money reducing
demand and consumption.
• the Great Depression started during the
1920’s and extended up to 1930’s, .
• This depression was the worst and longest
recession experienced by the Western World.
Some economists argued that it was largely
caused by the gold standard, since it limited
the amount of circulating money and,
therefore, reduced demand and consumption.
World War II
• Economic historian Barry Eichengreen
argues that the recovery of United States
really began when, having abandoned the
gold standard, the US government was
able to free up money to spend on
reviving economy.
• .
Though more indirect versions of the gold
standards were used until as the late as the
1970’s, the world never returned to the
Gold Standard of the early 20th century.
Fiat Currencies
Today, the world economy operates based on
this currencies that are not backed by
precious metals and whose value is
determined by their cost relative currencies.
Allows governments to freely and actively
manage their economies by increasing or
decreasing the amount of money in
circulation as they see fit.
The Bretton Woods System
 Was inaugurated in 1944 during the United Nations Monetary
and Financial Conference to prevent the catastrophes of the
early decades of the century from reoccurring affecting
international ties.
 The Bretton Woods agreement established a new global
monetary system. It replaced the gold standard with the U.S.
dollar as the global currency. By so doing, it established
America as the dominant power in the world economy. After
the agreement was signed, America was the only country with
the ability to print dollars.
 Under the agreement, countries promised that their central
banks would maintain fixed exchange rates between their
currencies and the dollar. If a country's currency value became
too weak relative to the dollar, the bank would buy up its
currency in foreign exchange markets
 The Bretton Woods system was largely influenced by the ideas
of British economist John Maynard Keynes
• Bretton Woods create two financial
institutions.
• The first was the International Bank for
Reconstruction and Development (IBRD, or
World Bank) to be responsible for funding
postwar reconstruction project.
• . The second institution was the International
Monetary Fund (IMF), which was to be the
global lender of last resort to prevent
individual countries from spiraling into credit
crises..
• Shortly after Bretton Woods, various
countries also committed themselves to
further global economic integration through
the General Agreement on Tariffs and Trade
(GATT) in 1947. GATT’s main purpose was to
reduce tariffs and other hindrances to free
trade.
Neoliberalism?
• .
 Neoliberalism is a policy model that encompasses both politics and
economics and seeks to transfer the control of economic factors
from the public sector to the private sector.
 Many neoliberalism policies enhance the workings of free market
capitalism and attempt to place limits on government spending,
government regulation, and public ownership.
 Originally the term was used by a group of liberals who helped
shape social market economy in the mid 20th century.
Neoliberalism is characterized by free market trade,
deregulation of financial markets, mercantilism and the shift
away from state welfare provision.
KEY TAKEAWAYS
• The
. policies of neoliberalism typically supports
fiscal austerity, deregulation, free trade,
privatization, and a reduction in government
spending.
 Neoliberalism is often associated with the
economic policies of Margaret Thatcher in the
United Kingdom and Ronald Reagan in the United
States.
 There are many criticisms of neoliberalism,
including its tendency to endanger democracy,
workers’ rights, and sovereign nations’ right to
self-determination
Neoliberalism and Its Discontents
• Governments poured money into their
economies (increase the demand –increase
the prize)
• The theory went that, as prices increased,
companies would earn more, and would have
more money to hire workers.
• Early 1970’s, however, the prices of oil rose
sharply as a result of imposition of an
embargo in response to the decision of the
United States and other countries to resupply
the Israeli military with needed arms during
the Yom Kippur War.
• The result was a phenomenon called
stagflation, in which a decline in an economic
growth and employment (stagnation) takes
place alongside a sharp increase in price
(inflation).
Washington Consensus
• World Bank, the IMF, and eventually the
World Trade Organization (WTO)- a new
organization founded in 1995 to continue the
tariff reduction under the GATT.
• 1980 to 2000 Its advocates pushed for
minimal government spending to reduce
government dept. They also called for the
privatization of government-controlled
services like water, power, communications,
and transport, believing that the free market
can produce the best result.
Economic Globalization Today
 Imports – the purchase of foreign manufactured goods in the buyer's
domestic market.

 Exports – the sale of goods to a foreign country

 Gross Domestic Products (GDP) – the total value of everything produced

within a country's borders. When economists talk about the "size" of the
economy, they are referring to GDP.

 Transnational Corporations (TNCs) - any enterprise that undertakes

foreign direct investment, owns or controls income-gathering assets in
more than one country, produces goods or services outside its country of
origin, or engages in international production.
Localizing the Material
Many Philippine Industries were devastated by
unfair trade deals under the GATT and
eventually the WTO. One sector that as
particularly affected was Philippine Agriculture.
According to Walden Bello and a team of
researchers at Focus on the Global South, the US
used its power under the GATT system to
prevent Philippine importers from purchasing
Philippine poultry and pork-even as it sold meat
to the Philippines.
• Although the Philippines expected to make up
losses in sectors like with gains in areas such as
coconut products, no significant Change was
realized. In 1993, coconut exports amounted to
1.9 billion dollars in 1997, it returned to 1.9
billion dollars in 2000.
• Most strikingly, Bello and company noted that the
Philippines became a net food importer under
GATT. In 1993, the country had agricultural trade
surplus of 292 million dollars. It had a deficit of
764 million dollars in 1997 and 794 million dollars
in 2002.
• -Belo, Walden, H. Docena, M. de Guzman, and M.L. Malig. The Anti-
Development State: the Political Economy of Permanent Crisis in the
Philippines. London and New York: Zed Books, 2006, 140-142..
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Discuss scholarly in 150-200 words the given question. Grammar 5 points. Content 15
points Organization 10 points
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