GE 104: THE CONTEMPORARY WORLD

Lesson 1: Introduction to the Study of Globalization 2. Financial globalization – development of worldwide

- Defining Globalization. financial markets and better acess to external financing
borrowers.
Why do we need to study the world? 3. Economic globalization – establishment of global common
market, based on the freedom of exchange of goods and
Your daily experiences are considered interactions with your
capital.
country.
4. Political globalization – creation of international
The media and the internet are also your windows to the
organizations to regulate the relationships among governments
contemporary world.
and to guarantee the rights arising from social and economic
Finally, your consumption habits are global.
globaliztion.
Globalization word is derived from the word “globalize” – referes 5. Informational globalization – increase in information flows
to the emergence of an international network of economic system. between geographically remote locations.
6. Cultural globalization – sharing ideas, attitudes and values
- In economic terms, it usually refers to the integration of the across national borders.
national markets to a wider global signified by the increased
free trade. (Bird & Kopp, 2019) Elements of Globalization

On the upside, it can raise the standard of living in poor and less 1) Trade Agreements – bilateral, regional or multilateral
developed countries by providing job opportunity, modernization, economic arrangements designed to reduce or eliminate
and improved access to goods and services. On the downside, it trade barriers.
can destroy job opportunities in more developed and high-wage 2) Capital Flow – measurement of increase or decrease in a
countries as the production of goods moves across borders. (Bird & nation’s domestic or foreign assets.
Kopp, 2019) 3) Migration Patterns – impact of labor market fluidity on
production costs thorouh the loss (emigration) or gain
A trend toward greater economic, cultural, political, and (immigration) of potential workers especially those with
technological interdependence among natural institutions and particular skills.
economies – Wild/Wil/Han 4) Information Transfer – communication trend that helps
mitigate the assymetric functioning of markets and
It is the process of trade, communication, and cultural exchange in
economies.
which it promotes wealth of all nations that increase growth in the
5) Spread Technology – rapid diversion of the means and
economy. methods of producing goods and services.
Globalization is a word used to describe the growing Globalization Can Be Divided Into 5 SCAPES
interdependence of the world’s economies, cultures, and (Arjun Appadurai [Anthropologist])
populations, brought about by cross border trade in goods and
services, technology and flows of invesment, people, and in 1) Ethnoscape – refers to the global movement of people.
formation. 2) Mediascape – is about the flow of culture.
3) Technoscape – refers to the circulation of mechanical goods
Globalization is the communication and assimilation among and software.
individuals, ethnicities, races, institutions, governments of various 4) Financescape – denotes the global circulation of money.
nations supported by technology and compelled by international 5) Ideoscape – is the realm where political ideas move around.
trade. Due to globalization, the more you exposed to diversity.
Trends in Globalization
In simple terms, globalization is the process by which people and
goods move easily across border. (Gray, 2017) There are several major trends pertaining to
globalization which consists of demographic, scientific,
Globalization has brought many benefits to many people but not to
governance, and economic interdependence (Nye and Donahue,
everyone. (Gray, 2017) 2002).
Globalization – the expansion and intensification of social 1. Population trends;
relations and consciousness across world-time and across world- 2. Science and technology;
space. – Manfred Steger
3. Increasing integration and interdependence; and
Globalization is a process by which goods, services, capital, 4. Governance.
people, information and ideas flow across national borders. –
Steger (2005) in his “Ideologies of Globalization” outlined the
Grewal/Levy
six core claims of globalization.
Technology drives globalization. The internet has revolutionized
1. Globalization is about the liberalization and global integration
connectivity and communication, and help people share their ideas of markets.
much more widely.
2. Globalization is inevitable and irreversible.
Globalization has various aspects which affect the world n 3. Nobody is in charge of globalization.
several different ways. These aspects include: 4. Globalization benefits everyone.
5. Globalization furthers the spread of democracy in the world.
1. Industrial globalization – development of worldwide 6. Globalization requires the war on terror.
production and broader acess to a range of foreign products
for consumers and companies involving particularly Internalization, Globalization, and Globalism
movement of materials and goods between and within national A. Internalization – refers to the increasing importance of
boundaries. international trade, international relations, treaties, alliances,
etc. International means between or among nations, even as
 GE 104: THE CONTEMPORARY WORLD

relations among nations become increasingly necessary and and poverty, their level of industrialization and economic
important. development, and related factors.
B. Globalization – refers to global economic integration of many
formerly national economies into one global economy, mainly The different typologies of global stratification are the
by free trade and free capital mobility, but also easy or following:
uncontrolled migration.
1) First Typology
C. Globalism – Keohane and Nye, Jr. defined globalism as a
a. First World – The Western Capitalists dmocracies of
state of the world involving networks of interdependence at
North and Europe, and certain other nations (Australia,
multi-continental distances.
New Zealand, and Japan).
The (2) special characteristics of globalism b. Second World – Nations belonging to the Soviet Union.
c. Third World – All the remaining nations, almost all of
1) Globalism refers to networks of connections (multiple them from Central and South America, Africa, and Asia.
relationships), not simply to simple linkages. 2) Replacement Typology
2) Globalism doesn’t imply universality. a. Developed
b. Developing
Lesson 2: The Structures of Globalization c. Undeveloped
- The Global Economy 3) Popular Typology
a. Wealthy (or high income)
Intended Learning Outcomes (ILOs):
b. Middle-income
Trace the origin of global economy; c. Poor or low-income
Define economic globalization;
Theories of Global Stratification
Understand global stratification;
Explain the theories of global stratification; • Modernization Theory – According to this theory, rich
Define the modern world system; and nations became wealthy because early on they were able to
Articulate a stance on global economic integration. develop the correct beliefs, values, and practices.
The Global Economy - A system of trade and industry across the • Dependency Theory – According to this view, the poor
world that has emerged due to globalization. nations never got the chance to pursue economic growth
The origins of a global economy can be traced back to because early on they were conquered and colonized by
the expansion of long-distance trade during the period of 1450- European ones.
1640, which Wallerstein has labeled the “long sixteenth century.” • World System Theory – This theory states that some
nations become modernized by exploiting other nations.
Economic Globalization - It is a historical process, a result of
human innovation and technological progress. It refers to the Five Institutions in the Modern World System – Wallerstein
increasing integration of economies aroud the world, particularly (2006) enumerated the five institutions that are existing in the
through the movement of goods, services, and capital across Modern World System.
borders. It may also refer to the movement of people (labor) and
1) Market
knowledge (technology) across international borders (IMF, 2008).
2) Firms
Economic Globalization Today - Economic globalization remains 3) States
an uneven process, with some countries, corporations, and 4) Household
individuals benefiting a lot more than others. The series trade talks 5) Classes
under the WTO have led to unprecedented reductions in tariffs and 6) Identities
other trade berriers, but these processes have often been unfair.
Types of Global Poverty
Economic Globalization
1. Relative Poverty – is the condition in which people lack the
Commodity – is a basic physical asset often used as a raw material minimun amount of income needed in order to maintain the
in the production of goods and services. average standard of living in the society in which they live.
- To be traded on the markets, a commodity must be 2. Absolute Poverty – refers to a condtion where a person
interchangeable with another commodity of the same time and does not have the minimum amount of income needed to
grade. That means that to a trader, gold is gold: no matter where it meet the minimum requirements for one or more basic
was mined, or which company mined it. The term for this quality in living needs over an extended period of time.
commodities is fungible. 3. Subjective Poverty – describes poverty that is composed of
many dimensions; it is subjectively present when your
Capital – Capital is identified with money, wealth (W. Stafford) actual income does not meet your expectations and
– Growth of wealth, surplus value, formed by the labour. (K. Marx) perceptions.
– Accumulation of wealth with the help of wage labour. (A. Smith)
Lesson 3: Global Interstate System
Labor Market – refers to the supply of and demand for labor, in
which employees provide the supply and employers provide the Intended Learning Outcomes (ILOs):
demand.
1. Explain the effects of globalization on governments:
Global Stratification – Refers to the hierarchical arrangement of Economic interdependence;
individuals and group in societies around the world. Economic and political integration; and
International law and universal principles;
Classifying Global Stratification – According to sociology, the Identify the different institutions that govern international
best way to understand global stratification, is to think of the world relations.
composed of categories of nations, based on their degree of wealth
 GE 104: THE CONTEMPORARY WORLD
Global Interstate System – Is the fundamental basis of the
competitive commodity economy at global system level. It is a
system of international relations. International Relations (IR) – is
defined as the study of interconnectedness of politics, economics
and law on a global level.
• Economic Interdependence – A relationship between
countries in which each country is dependent on another for
necessary goods or services.
• Economic Integration – A process whereby countries
cooperate with one another to reduce or eliminate barriers to
the international flow of products, people and capital.
• Political Integration – It refers to the integration of
components within political system.
- The integration of political system with economic, social,
and other human system; the political process by which social,
economic and political become integrated.
- It includes the creation of regional political institutions. It is
a process that developed much more slowly outside of Europe.
International Organization - is an organization established
by a treaty or other instrument governed by international law
and possessing its own international legal personality.
Different types of International Organizations
1. Intergovernmental Organization (IGO)
2. International Non-Governmental Organization (INGO)
3. Multinational Enterprises (MNE)
1. Intergovernmental Organization (IGOs) – or
international organization is an organization composed
primarily of sovereign states (referred to as member of
states), or of other intergovernmental organizations.
Regional and Economic Partnerships
o ASEAN – Association of Southeast Asian Nation
o EU – European Union
o WTO – World Trade Organization
o NAFTA – North American Free Trade Agreement
o OECD – Organization for Economic Cooperation and
Development
Association of Southeast Asian Nation (ASEAN)
(One Vision, One Identity, One Community) – It was established
on 8 August 1967 in Bangkok, Thailand with the signing of the
ASEAN Declaration (Bangkok Declaration) by the founding
fathers of ASEAN namely, Indonesia, Malaysia, Philippines,
Singapore, and Thailand. Brunei Darussalam (1984), Vietnam
(1995), Lao PDR and Myanmar in 1997 and Cambodia (1999)
makes up what is today the 10 member-state of ASEAN.
The ASEAN Vision 2020, adopted by the ASEAN
leaders on the 30th Anniversary of ASEAN, as a concert of
Southeast Asian Nations outward looking, living in peace, stability
and prosperity, bonded together in partnership in dynamic
development and in a community of caring societies.
The ASEAN Community is comprised of three pillars,
namely the ASEAN Political Security Community, ASEAN
Economic Community and ASEAN Socio-Cultural Community.
European Union (EU)
(United in Diversity) – The EU began in 1957 when six countries
signed Treat of Rome. The six countries were called the European
Economic Community. The first six countries were Belgium,
France, Italy, Luxembourg, Netherlands and Germany. The
Union reached its current size of 28 EU countries. The euro is the
common currency for the EU area.
The goals of the European Union are:
1. Promote peace, its values and the well-being of its
citizens;
2. Offer freedom, security and justice without internal
borders;
3. Sustainable development based on balanced economic
growth and price stability;
4. Highly competitive market economy with full
employment and social progress;
5. Combat social exclusion and discrimination;
6. Promote scientific and technological progress;
7. Environment protection;
8. Enhance economic, social and territorial cohesion and
solidarity among EU countries;
9. Respect its rich cultural and linguistic diversity; and
10. Establish an economic and monetary union whose
currency is the Europe.
The EU in the World:
TRADE. The European Union is the largest trade block in the
world. It is the world’s biggest exporter of manufactured goods and
services, the biggest import market for over 100 countries.
HUMANITARIAN. The EU is committed to helping victims of
man-made and natural disasters worldwide and supports over 120
million people each year.
DIPLOMACY AND SECURITY. The EU plays an important
role in diplomacy and works to foster stability, security and
prosperity, democracy, fundamental freedoms and the rule of law at
international level.
ASIA-PACIFICIC ECONOMIC COOPRATION (APEC)
(Advancing Free Trade for Asia-Pacific Prosperity) – The idea of
APEC was first broached by former Prime Minister of Australia
Bob Hawke during a speech in Seoul, Korea on January 31, 1989.
Ten months later, 12 Asia-Pacific economies met in Canberra,
Australia to establish APEC. The founding members were
Australia, Brunei Darussalam, Canada, Indonesia, Japan, Korea,
Malaysia, New Zealand, the Philippines, Singapore, Thailand and
the United States. China, Hong Kong, China and Chinese Taipei
joined in 1991. Mexico and Papua New Guinea followed in 1993,
Chile acceded in 1994. In 1998, Peru, Russia, and Vietnam joined,
taking the full membership to 21.
APEC: Multilateral Economic Forum – Operates as a
cooperative, multilateral economic and trade forum. It is the only
international intergovernmental grouping in the world committed
to reducing barriers to trade and investments without requiring its
members to enter into legally binding obligations.
APEC Members Economies report progress toward achieving
free and open trade and investment goals through Individual Action
Plans (IAPs) and Collective Action Plans (CAPs).
World Trade Organization (WTO)
(Peace and Stability Through Trade) – It has 164 member-states. Its
objective is to ensure that trade runs as smoothly, predictably, and
freely as possible.
North American Free Trade Agreement (NAFTA) – In 1994,
North American Free Trade Agreement (NAFTA) came into effect
creating one of the world’s largest free trade zones and laying
foundations for strong economic growth and rising prosperity for
Canada, the United States of America, and Mexico.
Organization for Economic Cooperation and Development
(OECD) – European Economic Cooperation (OEEC) was
established in 1948 to run the US-Financed Marshall Plan for
 GE 104: THE CONTEMPORARY WORLD

reconstruction of a continent ravaged by war. By making individual
governments recognize the interdependence of their economies, it
paved the way for a new era of cooperation that was to change the
face of Europe. Canada and USA joined OEEC.
Today, OECD focused on helping governments around
the world to;
1. Restore confidence in markets and the institutions that
make them function.
2. Re-establish healthy public finances as a basis for future
sustainable economic growth.
3. Foster and support new sources of growth through
innovation, environmentally friendly’ green
4. Ensure that people of all ages can develop the skills to
work productively and satisfyingly in the jobs tomorrow.
Lesson 4: Contemporary Global Governance
Intended Learning Outcomes (ILOs):
Explain global governance;
Identify the roles and functions of the United Nations;
Identify the challenges of global governance in the 21st
century; and
Explain the relevance of the state and globalization.
Introduction: The journey of a nation towards development is not
a smooth one. In advancing itself from one level to another,
problems in technological, economic, cultural and institutional
transformation will arise. These problems in the different sectors of
the country must be addressed. The state is the frontline of these
undertakings.

ORGANIZATION OF THE PETROLEUM EXPORTING THE UNITED NATIONS – The United Nations is an
COUNTRIES (OPEC) international organization founded in 1945.It is currently made up
of 193 Member States. The mission and work of the United
It is a permanent intergovernmental organization of 15 Nations are guided by the purposes and principles contained in its
oil-exporting developing nations that coordinates and unifies the founding charter.
petroleum policies of its member countries. It is created at the
Baghdad Conference on September 10-14 by Iran, Iraq, Kuwait, Prior to the UN – Prior to the establishment of the United Nations,
Saudi Arabia and Valenzuela. the League of Nations existed as the premier organization for
international cooperation. Established in 1919 under the Treaty of
OPEC objective is to coordinate and unify petroleum Versailles, the League of Nations was established to ensure
policies in order to secure fair and stable prices for petroleum international peace, security and cooperation between nations
producers; an efficient, economic and regular supply of petroleum following the First World War. At its height, the League of Nations
to consuming nations; and a fair return on capital to those investing had 58 members. In the 1930s, its success waned as the Axis
in the industry. Powers (Germany, Italy, and Japan) gained influence, eventually
leading to the start of World War II in 1939.
2. International Non-Governmental Organization
(INGO) – a group having members from more than one The Charter is the constituting instrument of the UN,
country, government or non-governmental, profit or non- setting out the rights and obligations of member states, and
profit. An international organization not created by an establishing the United Nations organs and -procedures. 50 nations
international treaty. and several non-governmental organizations attended and signed
the Charter, committing to maintaining international peace and
Types of Non-governmental Organizations (NGOs) security, developing friendly relations among nations and
promoting social progress, better living standards and human
o BINGO: Business-friendly International NGO
rights. The UN officially came into existence on October 24, 1945
Example – Red Cross
after ratification of the Charter. The day is now celebrated each
o ENGO: Environmental NGO
year around the world as United Nations Day.
Example – World Wildlife Fund
o GONGO: government-organized non-governmental Founding of the United Nations – The name “United Nations,”
organization coined by United States President Franklin D. Roosevelt, was first
Example – Myanmar Women’s Affairs Federation used in the “Declaration by United Nations” of 1 January 1942,
during the Second World War, when representatives of 26 nations
3. Multinational Enterprise (MNE) – sometimes also pledged their governments to continue fighting together against the
called multinational corporation (MNC), just Axis powers. The UN was founded following the Second World
multinational or international corporation, is an War, in 1945 when the Nations were drafted at the UN Conference
enterprise producing goods or delivering services in more on International Organization in San Francisco, California.
than one country.
UN Six Official Languages: Arabic, Chinese, English, French,
Pros Cons Russian, and Spanish
❖ Economies of scale- ❖ Scope or tax avoidance
greater efficiency and and lost tax revenue The main organs of the UN are the:
lower prices. ❖ Monopoly power leads to
❖ More research and higher prices for • General Assembly
development, leading to consumers. • Security Council
improved products. ❖ Monopsony power in • Economic and Social Council
❖ Create jobs and wealth setting lower wages. • Trusteeship Council
around the world. ❖ Cultural homogenisation
• International Court of Justice
❖ Success a reflection they as local firms struggle to
meet consumer compete. • UN Secretariat (un.org)
preferences.
General Assembly – is the main deliberative organ of the United
Nations: all Member States are represented equally. In the
Assembly, each nation, large or small, has one vote.
 GE 104: THE CONTEMPORARY WORLD
Security Council – is responsible for maintaining peace and
security. Unlike the General Assembly, the Security Council does
not hold regular meetings.
Economic and Social Council (ECOSOC) – is the central body
for coordinating the economic and social work of the United
Nations and the UN System.
Trusteeship Council – was assigned to supervise the
administration of 11 Trust Territories—former colonies or
dependent territories.
International Court of Justice (ICJ) – is the UN’s main judicial
organ. The ICJ, or “World Court”, assumed its functions in 1946.
UN Secretariat – carries out the day-to-day work of the
Organization. It is made up of an international staff working at UN
Headquarters in New York, as well as UN main offices in Geneva,
Nairobi, and Vienna. The Secretariat works with UN System
offices all over the world.
THE ROLE OF THE UNITED NATIONS – The UN as an
International Organization has several roles to perform in the
international scene (un.org):
1. Maintain International Peace and Security – The United
Nations came into being in 1945, following the devastation of
the Second World War, with one central mission: the
maintenance of international peace and security. The UN does
this by working to prevent conflict; helping parties in conflict
make peace; peacekeeping; and creating the conditions to
allow peace to hold and flourish. These activities often
overlap and should reinforce one another, to be effective. The
UN Security Council has the primary responsibility for
international peace and security. The General Assembly and
the Secretary-General play major, important and
complementary roles, along with other UN offices and bodies.
2. Protect Human Rights – The term “human rights” was
mentioned seven times in the UN’s founding Charter, making
the promotion and protection of human rights a key purpose
and guiding principle of the organization. In 1948, the
Universal Declaration of Human Rights brought human rights
into the realm of international law. Since then, the
Organization has diligently protected human rights through
legal instruments and on-the-ground activities
3. Deliver Humanitarian Aid – One of the purposes of the
United Nations, as stated in its Charter, is “to achieve
international co-operation in solving international problems of
an economic, social, cultural, or humanitarian character.” The
UN first did this is the aftermath of the Second World War on
the devastated continent of Europe, which it helped to rebuild.
The Organization is now relied upon by the international
community to coordinate humanitarian relief operations due to
natural and man-made disasters in areas beyond the relief
capacity of national authorities alone.
4. Promote Sustainable Development – From the start of 1945,
one of the main priorities of the United Nations was to
“achieve international co-operation in solving international
problems of an economic, social, cultural, or humanitarian
character and in promoting and encouraging respect for
human rights and for fundamental freedoms for all w/out
distinction as to race, sex, language, or religion.” Improving
people’s well-being continues to be one of the main focuses of
the UN. The global understanding of development has
changed over the years, and countries now have agreed that
sustainable development – development that promotes
prosperity and economic opportunity, greater social well-
being, and protection of the environment – offers the best path
forward for improving the lives of people everywhere.
5. Uphold International Law – The UN Charter, in its
preamble, set an objective; “to establish conditions under
which justice and respect for the obligations arising from
treaties and other sources of an international law can be
maintained”. Ever since, the development of, and respect for
international law has been a key part of the work of the
Organization. This work is carries out in many ways – by
courts, tribunals, multilateral treaties – and by the Security
Council, which can approve peacekeeping missions, impose
sanctions, or authorize the use of force when there is a threat
to international peace and security, if it deems this necessary.
These powers are given to it by the UN Charter, which is
considered an international treaty. As such as, it is an
instrument of international law, and UN members States are
bound by it. The UN Charter codifies the major principles of
international relations, from sovereign equality of States to
prohibition of the use of force in international relations.
❖ Maintain International Peace and Security
❖ Protect Human Rights
❖ Deliver Humanitarian Aid
❖ Promote Sustainable Development
❖ Uphold International Law
GLOBAL GOVERNANCE AND THE UNITED NATIONS –
Globalizations promote development in all aspects of human life
through interdependence and integration. But it is without flaws.
Globalization also creates “governance gaps” that are evident in the
business and human right situation the world faces at present.
Weiss and Thakur (2010) discussed the five gaps in global
governance and how the United Nations aim to fill in the gaps.
1. Knowledge Gap – A phenomenon happens, more often than
not, there are little information on the origin, causes, the
gravity of the phenomenon and the solutions that may be
applied. The United Nation can provide a platform wherein
such phenomenon may be discussed, studied, and confronted
so that new knowledge can be placed in the limelight,
improved, and later on disseminated worldwide.
2. Normative Gaps – A norm can be defined statistically to
mean the pattern of behavior that is most common or usual
that is a widely prevalent pattern of behavior. Alternatively, it
can be defined ethically to mean a pattern of behavior that
should be followed in accordance with a given value system.
Collective’s norms, on the other hand, are shared patterns of
behavior. As to when and how norms became global, no one
knows. No theory, research, or any data are available to
explain, how “international norms” became international.
3. Policy Gaps – Weiss and Thakur (2010) defined policy as an
interlinked set of governing principles and goals and the
agreed programs of action to implement those principles and
achieve those goals. Analyzing policy gaps entails two
challenges:
First: Who are the actors and relevant policymakers?
Who made and implemented international policy?
Second: What are the types of actors who play an
everexpanding role in the various sectors of the nation?
Our policies are somewhat influenced by the
international organizations that we are part of. To put things in
balance, the policymakers at the UN are actually the world
body’s principal political organs, the Security Council and the
General Assembly.
The United Nations Environment Programme (UN
Environment) is the leading global environmental authority
 GE 104: THE CONTEMPORARY WORLD
that sets the global environmental agenda, promotes the
coherent implementation of the environmental dimensions of
sustainable development within the United Nations system,
and serves as an authoritative advocate for the global
environment (unenvironment org.) one of its programs is the
promotion of biodiversity.
4. Institutional Gaps – Policies created, whether international
or national, must be housed in an institution that has resources
and autonomy. One of the most obvious explanation, for
institutional gaps is that resources allocated are not
proportionate to the problem. This is applicable to the
problems of most countries all over the world. Some of these
problems are improving the welfare of women and children,
human rights protection, and the proliferation of HIV-AIDS.
International institutions are important because their
existence is to deal primarily on specific problems without
any lace of politics. Take for example the protection of
children’s welfare. This program is under the United Nations
Children’s Fund (UNICEF). Funds are allocated by the state
to support this program. The Department of Social Welfare
and Development is the one implementing the protection of
welfare of children.
5. Compliance Gaps – The fifth and final gap is the compliance
gap. Compliance measures must include mechanism to
identify defections and defectors from agreed upon norms and
commitments in the realm of international governance as well
as incentives that reward cooperation and disincentives that
punish defection, including the use of force to bring those who
have not complied back into line.
The Five Global Gaps
❖ Knowledge Gap
❖ Normative Gaps
❖ Policy Gaps
❖ Institutional Gaps
❖ Compliance Gaps
Approaching in analyzing compliance gaps has three facets:
Implementation, Monitoring, and Enforcement.
One of the most difficult and challenging in filling up global
governance gap is compliance gap. The role of international
organizations will come in very helpful. The World Trade
Organization and the General Agreement on Tariffs and Trade help
in monitoring member-states who comply in enforcing trade
agreements.
Lesson 5: Market Integration
Intended Learning Outcomes (ILOs):
Define market integration;
Explain the role of the international financial institution
in the creation of a global economy;
Narrate a short history of global corporations;
Identify the attributes of global corporations; and
Explain the role of multinational companies in market
integration.
Market Integration – It is defined as by Koester, (2000), is a state
of affairs or a process of involving attempts to combine separate
national economies into larger economies. It is a means of
stimulating trade and improving the division of labor between
participating countries. Two Types of Market Integration:
❖ Negative integration – reduces non-tariff and tariff barriers to
trade as main tool for integrating markets.
❖ Positive integration – adjust domestic policies and institutions
through the creation of supranational arrangements.
Five Forms of Market Integration (koester, 2000):
1. Preferential Agreement – It involves lower trade barriers
between those countries, which have signed the agreement.
2. Free Trade Agreement (FTA) – Reduces trade barriers
among member countries to zero, but each member still has
autonomy in deciding on the external rate of tariff for its trade
with non-member countries.
3. Custom Union – Represents a higher stage of economic
integration. In this form, countries agree to abolish tariff and
non-tariff to trade in goods flowing between them. They agree
a common external tariff.
4. Common Market – Free movement of labor and capital
within the member-countries. Hence, the intention of a
common market is to integrate both product and factor
markets member-countries.
5. Economic Union – It is the highest form of economic
integration. In addition to the conditions of a common market,
member-countries also agree to integrate monetary fiscal, and
other policies.
INTERNATIONAL FINANCIAL INSTITUTIONS – There are
currently the three major international/financial economic
institutions. The World Trade Organization, the International
Monetary Fund, and the World Bank.
WORLD TRADE ORGANIZATION (WTO) – The WTO is the
only global international organization dealing with the rules of
trade between nations. The goal is to ensure that the trade flows as
smoothly, predictably, and freely as possible.
Three Basic Kinds of Market Integration:
1. Horizontal Integration
2. Vertical Integration
3. Conglomeration
Horizontal Integration – This occurs when a firm or agency gains
control of other firms or agencies performing similar marketing
functions at the same level in the marketing sequence. In this type
of integration, some marketing agencies combine to form a union
with a view to reducing their effective number and the extent of
actual competition in the market. It is advantageous for the
members who join the group.
Vertical Integration – This occurs when a firm performs more
than one activity in the sequence of the marketing process. It is a
linking together of two or more functions in the marketing process
within a single firm or under a single ownership. This type of
integration makes it possible to exercise control over both quality
and quantity of the product from the beginning of the production
process until the product is ready for the consumer. It reduces the
number of middle men in the marketing channel.
Forward integration – If a firm assumes another
function of marketing which is closer to the consumption
function, it is a case of forward integration.
Example: wholesaler assuming the function of retailing
Backward integration – This involves ownership or a
combination of sources of supply.
Example: when a processing firm assumes the function
of assembling/purchasing the produce from the villages.
Conglomeration – A combination of agencies or activities not
directly related to each other may, when it operates under a unified
management, be termed a conglomeration.
 GE 104: THE CONTEMPORARY WORLD
Five forms of Market Integration (Koester, 2000)
1. Preferential Agreement – is a trading block that gives
preferential access to certain products from the
participating countries.
2. Free Trade Agreement – reduces trade barriers among
member countries to zero but each member still has
autonomy in deciding on the external rate of tariff for its
trade with non-member countries.
3. Custom Union – Represents a higher stage of economic
integration. In this form, countries agree to abolish tariff
and non-tariff to trade in goods flowing between them.
They agree a common external tariff.
4. Common Market – Free movement of labor and capital
within the member-countries. Hence, the intention of a
common market is to integrate both product and factor
markets member-countries.
5. Economic Union – It is the highest form of economic
integration. In addition to the conditions of a common
market, member-countries also agree to integrate
monetary fiscal, and other policies
International Financial Institutions
WORLD TRADE ORGANIZATION (WTO) – The WTO is the
only global international organization dealing with the rules of
trade between nations. The goal is to ensure that the trade flows as
smoothly, predictably, and freely as possible.
WORLD BANK (WB) – It is an international intergovernmental
organization for providing long-term loans on easy term for
specific developmental projects. The functions of the World Bank
may be grouped into five major categories:
1. Provides loan services to member governments;
2. Provides development loans on soft term to poor member
nations;
3. Provides support to private or joint sector projects;
4. Provides insurance guarantees to foreign investors;
5. Setting-investment-related disputes among member
nations through conciliation and arbitration.
INTERNATIONAL MONETARY FUND (IMF) – From an
initial strength of 31 members, it now commands a 125 strong
membership. The functions of IMF include:
1. Works as short-term credit institution;
2. Provides for the orderly adjustment of exchange rates;
3. Acts as a reserve member-countries to borrow from;
4. Provide foreign exchange loans against current
transaction, and;
5. Provides international financial consultancy service.
Global Corporations
a. Multinational Corporations (MNC) – have investment
in other countries but do not have coordinated products
offering in each country.
The Role of Multinational Corporations (MNCs)
Lapko (2005) discussed the different role of multinational
corporations:
1. MNCs act as modernizers of the world economy;
2. Promote efficiency and growth of the world economy;
3. Promote regional agreement and alliance; and
4. Increase of money circulation in the economy.
b. International Companies – are importers and exporters,
typically without investment outside of their home
country.
c. Global Companies – Have invested in and are present in
many countries.
d. Transnational Companies (TNC) – more complex
organization, which have invested in foreign operations,
have a central corporate facility but give decision-
making, research and development and marketing power
to each individual foreign market.
Power of Global Corporations
1. Economic control
2. Political influence
3. Social and cultural influence
4. Environmental impact
History of Global Market Integration
Agricultural Revolution and Industrial Revolution
Agriculture Revolution is the name given to a number
of cultural transformations that initially allowed humans to change
from a hunting and gathering subsistence to one of agriculture and
animal domestications.
Industrial Revolution – The transition to new
manufacturing processes in the period from about 1760 to
sometime between 1820 and 1840. This transition included going
from hand production methods to machines, new chemical
manufacturing and iron production processes, improved efficiency
of water power, the increasing use of steam power, the
development of machine tools, and the rise of the factory system.
Capitalism and Socialism
Capitalism is the socio-economic system where all property is
privately owned, where freely formed contracts form the basis of
economic interaction, and where the government does not engage
in regulation, supervision, or direction of market processes.
Laissez-faire capitalism means the systematic imple-
mentation of the principle underlying the separation of
economy and state—freedom.
Socialism is a system in which person in the community has an
equal share of the various elements of production, distribution, and
exchange of resources.
The Information Revolution
Information revolution is a period of change that might prove as
significant to the lives of people. Computer technology is at the
root of this change, and continuing advancements in that
technology seem to ensure that this revolution would touch the
lives of people.
- The primary labor market - includes jobs that provide many
benefits to workers, like high incomes, job security, health
insurance, and retirement packages.
- Secondary labor market - jobs provide fewer benefits and
include lower-skilled jobs and lower service sector.
MIDTERM EXAM IS ON APRIL 12, 2023 AT 8:00 TO 9:00