Republic of the Philippines

PARTIDO STATE UNIVERSITY

Camarines Sur
PSY-SYL-___-___
Module 4
GE3-CONTEMPORARY WORLD
Name: ____________________________________Course/Se.:________________
Week & Date: _____________Teacher: MARIA FE C. MELITON

INTRODUCTION:
This module will be focused on the global economy, which includes global trade,
international agreements, and organizations that influence economic globalization, and
the pandemic that greatly affects our economy.

OBJECTIVES:
1. Define economic globalization.
2. Identify the actors/organizations that facilitate economic globalization.
3. Analyze the economic effects brought by COVID-19.

LESSON CONTENT:

GLOBAL ECONOMY
It refers to the interconnected worldwide economic activities that take place
between multiple countries. These economic activities can have either a positive or
negative impact on the countries involved and are
considered as the international exchange of goods
and services that is expressed in monetary units of
account. The term sometimes also refers to the
movement of people [labor] and knowledge
[technology] across international borders.
The global economy is the world
economy or the worldwide economy. It is all
the economies of the world that we consider
together as one economic system.

The global economy comprises several characteristics such as:

1. Globalization. Globalization describes a process by which national and regional
economies, societies, and cultures have become integrated through the global
network of trade, communication, immigration, and transportation. These
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PARTIDO STATE UNIVERSITY
Camarines Sur
PSY-SYL-___-___

developments led to the advent of the global economy. Due to the global
economy and globalization, domestic economies have become cohesive, leading
to an improvement in their performances.
2. International Trade. International trade is considered to be an impact of
globalization. It refers to the exchange of goods and services between different
countries and it has also helped countries to specialize in products in which they
have a comparative advantage.
3. International Finance. Money can be transferred at a faster rate between
countries compared to goods, services, and people, making international finance
one of the primary features of a global economy. International finance consists of
topics like currency exchange rates and monetary policy.
4. Global Investment. This refers to an investment strategy that is not constrained
by geographical boundaries. Global investment mainly takes place via foreign
direct investment (FDI)

Global Trade
Global trade, also known as international trade, is simply the import and export
of goods and services across international boundaries. Goods and services that enter a
country for sale are called imports. Goods and services that leave a country for sale in
another country are called exports.
International trade allows us to expand our markets for both goods and services
that otherwise may not have been available to us.
It is the reason why you can pick between a Japanese, German or American
car. As a result of international trade, the market contains greater competition and
therefore more competitive prices, which brings a cheaper product home to the
consumer.
Example: If you walk into a supermarket and can buy South American bananas,
Brazilian coffee, and a bottle of South African wine, you are experiencing the effects of
international trade.
Types of Trade
1. Domestic trade – production, purchase, and sale of goods and services within a
country
2. World Trade – exchange of goods and services across international boundaries.
Most countries can’t produce a desired good because they don’t have the raw
materials so they buy from other countries.
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PARTIDO STATE UNIVERSITY
Camarines Sur
PSY-SYL-___-___

How economic globalization can help millions of people get out of extreme
poverty?
One of the best ways to help them is to enable them to participate in the economy. A
perfect example is micro-credit. It was Bangladeshi professor Muhammad Yunus
who implemented this idea. He gave small loans to low-income people in rural areas.
The borrowers were mostly women, who started small businesses to be able to raise
their income. This spread to developing countries throughout the world. But it says that
microcredit is not going to solve the problem of extreme poverty at least they were able
to make their lives better.

Who controls the global economy?

Many people think that the global economy is controlled by governments of the
largest economies in the world, but this is a common misconception. Although
governments do hold power over countries’ economies, it is the big banks and large
corporations that control and essentially fund these governments. This means that the
global economy is dominated by large financial institutions.
Technology
Advances in transportation technology allow people and goods to be quickly
transported almost anywhere in the world. But this access to technology also
contributed to worldwide income inequality. Why? It complemented skilled workers but
replaced many unskilled workers. In modernized economies, jobs are more technology-
based, generally requiring new skills. This is referred to as SKILL-BASED
TECHNOLOGICAL CHANGE
As a result, workers who are more educated and more skilled would thrive in
those jobs by receiving higher wages. On the other hand, the unskilled workers will fall
behind, they will be left or overtaken by machines or more skilled workers. In addition,
manufacturing jobs that require low skills are moved overseas. The result is a widening
gap between the rich and the poor as well as between high-skilled and low-skilled
workers.

The international agreements and organizations influenced/facilitated economic

globalization
A. The World Trade Organization
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Works to improve trade relations among the countries of the world. It is the
only organization that deals with the global rules of trade among countries. An
organization based in Geneva, Switzerland, that monitors international
agreements on trade, investment, government procurement, intellectual property

and the like. Currently, more than 164 countries are members of the WTO.
Technically, it operates by consensus of the members, but wealthy members
such as the United States and European countries (also called the G-8) have the
majority of political clout in negotiations.

B. Group of Eight G8
The Group of Eight (G8) is
an informal group of the eight
major industrial democracies. It
was previously known as the G7
until Russia became a full
participant in 1998. G8 leaders
and representatives from the
European Union meet at annual
summits to discuss economic and
foreign policies. The G8 is
composed of
Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and
the United States.
The G8 is not an institution like the WTO or the United Nations, but it does
play an important role in global governance because it can influence official
global institutions.
The Group of Eight (G8) refers to the group of eight highly industrialized
nations, that holds an annual meeting to foster consensus on global issues like
economic growth and crisis management, global security, energy, and terrorism.
Some experts say that the G8 countries represent the interests of an elite
group of more developed countries and fail to consider the needs of the rest of
the world. They point to the fact that countries with fast-growing economies and
large populations, such as China or India, are not included in the G8, nor or
African or Latin American countries.
During annual summits, the G8’s promotion of economic globalization has
often resulted in anti-globalization protests. Others maintain that the G8 has been
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instrumental in aiding less-developed countries. They point to the G8’s
campaigns to combat disease (HIV/AIDS) as well as development programs and
debt-relief plans.

C. International Financial Institutions (IFI’s)

The generic name was given to all financial institutions operating on an
international level, ranging from development banks, such as the World Bank and
the European Bank for Reconstruction and Development (EDB), and monetary
authorities, such as the International Monetary Fund. These organizations give
loans to governments for large-scale projects, restructuring, and balance of
payments on condition that they make specific changes that IFIs believe will
boost economic growth.

D. World Bank (International Bank for Reconstruction and Development)

The World Bank provides loans and development assistance to middle-
income and lower-income countries with the stated aim of reducing poverty.
Loans generally have a 5-year grace period and must be repaid over a period of
15-20 years. The Bank obtains most of its funds through the sale of bonds in
international capital markets. Though not a profit-making organization, it has
earned a net income from its loans every year since 1948

E. International Monetary Fund (IMF)

The IMF is an international organization of 183 member countries to
promote international monetary cooperation and exchange stability; foster
economic growth and high employment, and divide short-term financial
assistance to countries to help ease balance of payments adjustments.

F. International Finance Corporation (IFC)

An arm of the World Bank Group that assists with private sector
investments, primarily through mobilizing capital on international financial
markets, and by providing technical assistance and advice to governments and
businesses
in developing countries. The IFC has 174 members investing in 78 countries,
with 40 percent of its investments in the financial sector.
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PARTIDO STATE UNIVERSITY
Camarines Sur
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GLOBAL ECONOMIC EFFECTS OF COVID-19
Since the COVID-19 outbreak was first diagnosed, it has spread to over 200
countries and all U.S. states. The pandemic is negatively affecting global economic
growth beyond anything experienced in nearly a century. Estimates so far indicate the
virus could trim global economic growth by 3.0% to 6.0% in 2020, with a partial recovery
in 2021.

The World Bank Forecast

On June 8, the World Bank released its forecast for global economic growth that
estimated the economic recession in 2020 would be the deepest since World War II. It
also estimated that the global economic recession would affect 90% of the world’s
economies, a percentage that is greater than what was experienced during the Great
Depression. World Bank argues that the economic impact of the global recession will
fall most heavily on developing and emerging economies that rely on global trade,
tourism, or remittances from abroad, and those that depend on commodity exports.
According to the Bank’s baseline scenario, the projected economic recovery is expected
to be slow, reflecting shifts in consumption and work patterns as consumers attempt to
rebuild savings and businesses strengthen balance sheets.

Global Trade
According to April 8, 2020, forecast by the World Trade Organization (WTO),
global trade volumes are projected to decline between 13% and 32% in 2020 as a result
of the economic impact of COVID-19
In some cases, businesses are reassessing their exposure to the risks posed by
extensive supply chains that potentially are vulnerable to numerous points of disruption.
Also, some governments are assessing the risks supply chains pose to national
supplies of items considered to be important to national security as a result of firms
shifting production offshore. For multinational businesses, changing suppliers and
shifting production locations can be especially costly for some firms and can introduce
additional risks. In addition, businesses may be reluctant to relocate from production
locations, such as China, that not only serve as production platforms but are also
important markets for their output