THE GLOBAL ECONOMY

The contemporary global economy provides a lively overview of recent turbulence in the world
economy, focusing on the dynamics of globalization since the 1980s. it explains the main drivers
of economic change and how we are able to discern their effects in the world today. This section
introduces the concepts of economic globalization and the important actors that facilitate
interdependence of world economies.

At the end of this module, instructors will enable the students to:

Define modern world system

Define economic globalization
Identify the actors that facilitate economic globalization and illustrate the
value chain of Mindanao products
Articulate a stance on global economic integration

The Modern World System

In our working concept of globalization in the previous section, we learned that "intensifying global
social relationships that connect distant localities in such a way that local events are formed by event
s that occur many miles away and vice versa" imply that it has different types of connectivity. It may
be of economic , political , cultural or technical significance.

Modern World System Theory seeks to understand why change has had such a wide and varied imp
act on the world. Immanuel Wallerstein argues that a study of the capitalist world system 's past reve
als that it has contributed to a distorted development in which economic and social inequalities betw
een parts of the global economy have increased rather than given stability.

Economic globalization refers to the growing interdependence of the world economies as a result of
the rising scale of cross border trade in goods and services, the influx of foreign capital and the
pervasive and radical dissemination of technology. This can be traced from the time of economic
movement through the Silk Road in Asia, Africa and Europe, an ancient trade routes that linked
China and the Far East to the Middle East and Eutope. While the Silk Road has been used for
international trade for nearly 600 years, it still has a profound effect on commerce, culture and
history that resonates even today.

The Actors that Facilitate Economic Globalization

After defining economic globalization, it is significant to identify the different views on who and
what the actors are the facilitated economic globalization. Firstly, the nation-state still is the effective
manager of the national economy despite increased threats of globalization. Boyer and Drache
(1996). Secondly, some authors assert that the actors of economic globalization is the global
corporations, however, Ohmae 1996 claim that nation-states are dinosaurs waiting to die because
they already have forfeited their role as critical participants in the global economy due to their
inability to control exchange rates and protect their currencies. Nowadays, Filipino consumers have
become Xenocentric, it is the preference for the products, styles or ideas of someone else’s culture
rather than of one’s own. Thirdly, the creation of an international Monetary System is one of the
actors that facilitate economic globalization. This international structure for money, power and
interest is created to have an important role to play in making globalization work better and that is
to restore and sustain the benefits of global integration by promoting international economic
cooperation. Further, it believes that economic growth is the only way to improve living standards
in developing countries like Philippines.
Economic Globalization Today

Economic globalization remains an uneven process, with some countries, corporations and
individuals benefiting a lot more than others. The series of trade talks under the World Trade
Organization (WTO) have led to unprecedented reductions in tariffs and other trade barriers, but
these processes have often been unfair.

Firstly, developed countries are often protectionists, as they repeatedly refuse to lift policies that
safeguard their primary products that could otherwise be overwhelmed by imports from the
developing world. The best example of this double standard is Japan's determined refusal to allow
rice imports into the country to protect its farming sector. Japan's justification is that rice, is "sacred",
Ultimately, it is its economic muscle as the third largest economy that allows its to resist pressures to
open its agricultural sector.

The United States likewise fiercely protects its sugar industry, forcing consumers and sugar-
dependent businesses to pay higher prices instead of getting cheaper sugar from plantations of
Central America. Faced with blatantly protectionist measures from powerful countries and blocs,
poorer countries can do very little to make economic globalization more just. Trade imbalances,
therefore, characterize economic relations between developed and developing countries.

The beneficiaries of global commerce have been mainly transnational corporations (TNCs) and not
governments. And like any other business, these TNCs are concerned more with profits than with
assisting the social programs of the governments hosting them. Host countries, in turn, loosen tax
laws, which prevents wages from rising, while sacrificing social and environmental programs that
protect the underprivileged members of their societies. The term "race to bottom" refers to
countries' lowering their labor standards, including the protection of worker's interest, to lure in
foreign investors seeking high profit margins at the lowest cost possible. Governments weaken
environmental laws to attract investors, creating fatal consequences on their ecological balance and
depleting them of their finite resources (like oil, coal and minerals).

Mindanao Context
GLOBALIZATION OF TRADE AND INDUSTRIES IN MINDANAO

Mindanao has been a magnet for international trade since even before the colonial period because of
its geographical location and rich natural resources. before the colonialists arrived in the islands now
called the Philippines, a brisk trade was going on between Moro traders, particularly from Sulu, and
the Indo-Malay peninsula and China. Sulu even became known as a famous pearl marker (Munap
2002). This lively and profitable trade was soon cut off by the arrival of the Spaniards, who began to
identify these traders as pirates and enemies of the colonial state. Soon colonial policies began to levy
crippling taxes and duties, such as the tariffs and customs duties introduced by the successor Americal
colonial government, further decimating the commercial and trading advantages of the Moros.
During the Spanish period the pirates became smugglers. Turning Moro’s economic activities into a
criminalized act, a policy that was continued by the Philippine government, caused the maritime
trading activities actually destroyed the competitive advantage enjoyed by the Moros, accompanied
as it was by changes in their political status, from sovereign sultanates to marginalized minorities.
This status was strongly resented and resisted. Before the imposition of martial law in 1972, Sulu
traders defied the government’s sanctions, and trading (now called smuggling) went on between
Sulu and Sabah. Cigaretttes and other trade goods were sold openly in the market; but police raids
and naval chases soon tool a toll and this activity also began to decline. One might wonder why
traders refused to pay the tariffs and avoid the consequences. Perhaps their defiance had to do with
the fact that trading global trade is minimal and concentrated only in selected areas. One is the pearl
business, notably at the Greenhills Shopping Center (GSC) located in the city of San Juan in Metro
Manila.
Table 1. Effects of poor connectivity on farmers, agribusiness and consumers

Customs procedures are a major bottleneck to trade facilitation, especially for agricultural products.
On the Doing Business indicator for Trading Across Borders the Philippines tanked at 95 in 2016 (
World Bank 2016a), 1 rank lower than to 2015. The World Bank Logistics Performance Index
ranks the country at 71, down from 85 in 2014, with Customs and Border Management ranking at
78 – 31 points lower.

Lowering logistics costs would benefit Mindanao’s agriculture value chains significantly. An
efficient logistics system is essential if Mindanao’s potential to become a global supplier of basic and
value added produce is to be unleashed. Ensuring a seamless logistics network from farm to markets
will entail (1) connecting farms to towns by investing in village records; (2) connecting towns to
ports by investing in major roads; (3) promoting competition in the domestic shipping industry;
(4) liberalizing cabotage; (5) modernizing the major ports; and (6) streamlining export and import
procedures.

Because the logistics chain is only as good as its weakest link, partial reforms will not lead to lower
prices and better service. For instance, reforming domestic shipping and cabotage without
modernizing ports and improving the roads will not lower shipping cost; shipping lines will not
upgrade to larger ships to increase scale if cargos movement will still be delayed on the road and at
the port.

Improving connectivity from farm to market would have numerous positive effects on
development. Without that farmers must deal with higher input costs and lower prices for their
produce. Because they few marketing options, their lack of bargaining power further reduces
prices. Poor roads may also limit access to extension services, and lower the quality of the produce
that does reach markets due to multiple handling required by the need to use for a single shipment
a variety of transport modes, from animal-drawn carts to truck. Thus, poor connectivity reduces
both the scope of farmers to diversify into higher-value perishable crops and their ability to invest
in productivity or quality improvements. Without good roads, much produce is wasted because
transporting it would lead to a loss. 42 improved connectivity also benefits rural societies more
generally by facilitating the entry of social services to villages and encouraging higher school
attendance.
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Guide Questions for discussion:

1. How do economic factors facilitate the deepening
of globalization?
2. How is the Philippines central to the history of
economic globalization? Cite evidences
3. How did COVID-19 pandemic affect the Mindanao
Trade and Industries?
 Enabling Activity #1

Conduct a research on a famous international economic organization or an international company (e.g., McDonald's).
Gather as much information as you can and accomplish the following:
1. Research the origins and history of the institution you have chosen
2. Map the international connections it has created
3. Identify the major country leaders of this institution
4. Locate the Philippines in this map of interconnections.

Then answer this question: How does the institution influence economic activity? How does it affect economics in the
Philippines?

Suggested Readings :
(1) The Contemporary World (2018) by Lisandro Claudio & Patricio N. Abinales
(2) Congressional Research Service. Global Economic Effects of Covid 19