Republic of the Philippines

CAMARINES NORTE STATE COLLEGE

F. Pimentel Avenue, Brgy. 2, Daet, Camarines Norte – 4600, Philippines

COLLEGE OF TRADES AND TECHNOLOGY

Chapter 2
STRUCTURE OF GLOBALIZATION
STUDY GUIDE

GLOBAL ECONOMY

GLOBAL ECONOMY is also referred to as world economy.

Refers to the international exchange of goods services that is expressed in monetary unit of money.
It may mean as the free movement in goods, capital, services, technology and the information

WORLD ECONOMY is exclusively limited to human economic activity and is typically judge in monetary terms.

GLOBAL ECONOMY or ECONOMIC GLOBALIZATION

is concerned on the globalization of production, finance, market, technology, organizational regimes, institutions, and
labor.
While economics globalization has been expanding since the emergence of trans-national trade. It has grown at an
increased rate due to an increase in communication and technological
Advances under the framework of general agreement on tariffs and trade and world trades’ organization, which made
countries gradually cut down trade barriers and open up their current accounts and capital accounts.

MARKET INTEGRATION
when prices among different location or related goods follow the same patterns over a long period of time, market
integration exist.
When group of prices often move each other and when this relation is very clear among different markets, then market
is integrated.

The market integration is an indicator how much different market are related to each other

Role of International Financial Institution in the Creation of Global Economy

INTERNATIONAL FINANCIAL INSTITUTION (IFIS)

Is chartered by more than one country and therefore are subject to international law.
The owners or shareholder are generally national governments, although other internationals occasionally figure as
shareholder
Most of the prominent IFI’s are creation of multiple nations, although some bilateral financial institutions (created by
two countries) exist and are technically IFI’s

The international financial institutions (IFIS) are.

1. International monetary fund (IMF)
2. Multilateral development banks (MDBs) which include
a. World bank group
b. African development bank
c. Asian development bank
d. Inter-American development bank
e. European bank for reconstruction and development

Membership composition of IFIs

 Republic of the Philippines
CAMARINES NORTE STATE COLLEGE
F. Pimentel Avenue, Brgy. 2, Daet, Camarines Norte – 4600, Philippines

COLLEGE OF TRADES AND TECHNOLOGY

1. Only sovereign countries are admitted as member – owner.
2. Broad country membership to include borrowing developing countries and developed donor countries.
3. Membership in regional development bank include countries around the world as members (not limited to
countries from the region)
4. It has its own independent legal and operational states.

Main objectives:
 MIF provides temporary financial assistance to member countries to help ease balance of payments adjustment.
 MDBs provide financing for development to developing countries through:

 Long term loans (with maturities of up to 20 years) at interest rates way below market rates. Funding comes
from international capital markets and relend to borrowing government in developing countries
 Very long-term loans (sometimes called credits with maturities of 30-40 years) at interest rates below market
rates. Funding for loans come from direct contributions by government in the donor countries
 Grant financing by some MDBs for technical assistance advisory service or project preparation

History of global market integration in the twentieth century

Labor market integration occurred between 1882 and 1936 in an area of Asia stretching from south India to
southeastern China and encompassing the three southeast Asian countries of Burma, Malaya, Thailand.

GLOBAL CORPORATION
Global Corporations is one that operates in more than one country

Michael porter at Harvard university, defined global businesses as one that maintain strong headquarters in one
country, but has investment in multiple foreign locations. The headquarters is its home country.

Global corporations strive to create economies of scale by selling the same products in multiple locations and limiting
local customization.

In the world of finance and investment. A global corporation is one that has significant investments and facilities in multi
countries but lacks a dominant headquarters. Global corporations are governed by the laws of the country where they
are incorporated. A global business connects its talents. Resources and opportunities across political boundaries.

International company is one that has a headquarters, for example in the United States, but also does business overseas
and might have a large presence in multiple areas. Such company would be governed by U.S regulations, assuming its
headquarters remain in U.S but may also foreign subsidiaries which is governed by local law.

GLOBAL INTERSTATE SYSTEM is defined by the existence of a division of labor. The modern world system has a multi-
state political structure (the interstate system) and therefore its division of labor is international division labor.

GLOBAL GOVERNANCE
This term global governance is sometime referred to as world governance. Global is a movement towards political
cooperation among transnational actors, negotiating responses to problem that affect more than one state or region.
Global governance is not a singular system. this no “world governance” but the many different regimes of global
governance to have commonalities.

EFFECTS of GLOBALIZATION GOVERNANCE

 Republic of the Philippines
CAMARINES NORTE STATE COLLEGE
F. Pimentel Avenue, Brgy. 2, Daet, Camarines Norte – 4600, Philippines

COLLEGE OF TRADES AND TECHNOLOGY

According to the disciplining hypothesis, globalization restrains governments by including increased budgetary pressure.
This globalization induced welfare state retrenchment is potentially mitigated by citizen’s preferences to be
compensated for the risks of globalization.

Internationalism vs Globalization
Internationalization refers to the increasing importance of international trade, international relations, treaties, alliances
and many more. International, means between among nations. The basic unit remains the nation, even as relations
among nations become increasingly necessary and important
Globalization refers to global economic integration of many formerly national economies into one global economy,
mainly by free trade and free capital mobility, but also by easy or uncontrolled migration. It is the effective erasure of
national boundaries for economic purposes. International trade (governed by comparative advantages) becomes
interregional trade (governed by absolute advantage).