GE 3

WHAT IS GLOBALIZATION?
ƨ Reich (1998)
Globalization whose meaning is obscure.
ƨ Schottle (1995)
“Globalization stands for quite a large public spread across the world
as one of the defining terms of the 20 century social consciousness.” The
th

term is often distinguished more by what it is not, rather than by what it is.
ƨ Rosenau (1996)
Globalization is not the same as globalism, which points our
aspirations for an end state of affairs wherein values are shared by or
pertinent to all the world’s five billion people, their environment, their roles as
citizens, consumers and produces with an interest in collective action
designed to solve common problems. Nor it is universalism—values that
embrace all humanity.
ƨ McGrew (1990)
is described as something that is comprised of multiple sameness
and interconnectedness that go beyond the nation-states. It is a process in
which individuals and organizations in one part of the world are affected by
the activities, affairs, and convictions on another part of the globe.
ƨ Cerny (1997)
He defines it as a cluster of economic and political frameworks and
procedures deriving from the changing marks of the interest and assets that
comprise the foundation of the international political economy—specifically,
the expanding structural differences of those interest and assets.

ƨ Freeden (2003)
 Posits that Globalization denotes a range of processes nesting
under one rather unwieldy epithet. In part, its conceptual difficulty to handle
or control arises from the fact that global flows occur in different physical and
mental dimensions.
ƨ Appadurai (1996)
Appadurai proposed five(5) dimensions of global cultural flow,
namely Ethnoscapes, Technoscapes, Mediascapes, Financescapes, and
Ideoscapes.These landscapes are created due to movements of people,
technologies, information through media, money and commodities, and
political ideas.
ƨ Steger (2005 & 2014)
According to him, Globalization should be limited to a set of intricate
social processes that modify prevailing social statuses based on the modern
regime of self-dependent nation-states. He uses the term globality is mean
globalization as a condition. Globality denotes “future social condition
characterized by thick economic, political, and cultural interconnections and
global flows that make currently existing political borders and economic
barriers irrelevant.”

Globalism to mean globalization as an ideology.

Five core of Globalism:
1. Globalization is about the liberalization and global integration of markets.
2. Globalization is inevitable and irreversible.
3. Nobody is in charge of globalization.
4. Globalization benefits everyone.
5. Globalization furthers the spread of democracy in the world.

For an Economist
 Globalization means increase of free trade, speed of
trade, global economic organization, and regional
trade blocks. The expansion of free trade allows
government not to restrict the importation of products
nor impede the export of local products.
Importing and exporting are done in just a millisecond through technology
and the internet.

ECONOMIC ORGANIZATIONS

INTERNATIONAL
The IMF was orginally envisoned as a "lender of last resort" for
MONETARY FUND
countries experiencing economic crises. Now, however, the IMF
(IMF)
conditions assistance on neo-liberal reforms that exacerbate
poverty.

The World Bank's mission is to erradicate poverty by loaning poor

World Bank countries money for economic development, but these loans
often come with demands of economic liberalization.

This intergovernmental organization sets and enforces the rules

World Trade
of international trade. It has become a target of civil society's
Organizations (WTO)
criticism over its opaque, undemocratic operating procedures and
neo-liberal ideology.

EFTA is the intergovernmental organisation of Iceland,

European Free Trade Liechtenstein, Norway and Switzerland. It was set up in 1960 by
Area (EFTA) its then seven Member States for the promotion of free trade and
economic integration between its members.

The primary goals of AFTA seek to: Increase ASEAN's

ASEAN Free Trade
competitive edge as a production base in the world market
(AFTA)
through the elimination, within ASEAN, of tariffs and non-tariff
barriers; and. Attract more foreign direct investment to ASEAN.

It is a free trade agreement (FTA) designed to liberalise trade and

Trans-Pacific investment between 12 Pacific-rim countries: New Zealand,
Partnership (TPP) Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia,
Mexico, Peru, Singapore, the United States and Viet Nam.
 It stresses the need for a strong social dimension to globalization
International Labor and gives the ILO the responsibility to examine all international
Organization ( ILO) economic and financial policies in the light of the fundamental
objective of social justice.

BENEFITS OF GLOBALIZATION IN WORLD ECONOMIES

Ƨ FOREIGN DIRECT
Foreign Direct Investment (FDI) tends to increase at a much greater
rate than the growth in world trade, helping boost technology
transfer, industrial restructuring, and the growth of global companies.
Ƨ TECHNOLOGICAL INNOVATION
Increased competition from globalization helps stimulate new
technology development, particularly with the growth in FDI, which
helps improve economic output by making processes more efficient.
Ƨ ECONOMIES OF SCALE
Globalization enables large companies to realize economies of scale
that reduce costs and prices, which in turn supports further
economic growth. However, this can hurt many small businesses
attempting to compete domestically.
FOR CULTURE AND COMMUNICATIONS
Globalization refers to the concept of a global village.
Through globalization, the world has become a
borderless world. Communication technology makes the
world shrink.
According to McLuhan (1964) believes that media has connected the world
in ways that created a global village. More so, globalization is referred to as
cultural imperialism.
Cultural Imperialism- is the practice of promoting and imposing a culture,
usually that of a politically powerful nation, over a less powerful society; in
other words, the cultural hegemony of industrialized or politically and
economically influential countries which determine general cultural values
and standardize civilizations throughout the world.
Cultural Globalization- refers to the transmission of ideas, meanings, and
values around the world in such a way as to extend and intensify social
relations. Also, it is the spread of popular culture (e.g., music, art, literature,
fashion, lifestyle, etc.) flows from dominant to non-dominant cultures (e.g.,
from developed to developing nations).
Effects of Globalization on Culture and Communications
1. Increased Business Opportunities
Technology also makes it easier to connect with
suppliers and customers all over the world, and to
streamline those relationship through improves
ordering, shipment tracking and so on. With this kind
of communication technology, many businesses are able to take advantage
of opportunities in different countries or cities, improving the economic
outlook on a global level. Thanks to global communications, information
itself can be transferred as a valuable business asset from one country to
another. This has the effect of making everyone's operations more modern
and efficient, regardless where they are located.
2. Fewer Cultural Barriers
Many people perceive culture to be the root of
communication challenges. When people from two
different cultures try to exchange information, the
way they speak, their body language or their
mannerisms can be interpreted differently by the
other person. The way people approach problems and how they participate
in communities is all influenced by
culture. Globalization has made it possible, for example, for someone in
Japan to understand how someone in the U.S. goes about their day. With
television and movies, cultural barriers are becoming less prevalent. Being
able to communicate effectively and frequently with colleagues or friends
across the planet helps people understand each other’s cultures a little
better.
3. Creation of a Global Village
Affected both by globalization and global
communication, the global village is created
when distance and isolation no longer matter
because people are connected by technology.
Wide-spread telephone and internet access have
been life-changing for many people across the world, especially those in
developing countries. Many are now enrolling in universities across the world
without having to leave their desk chair. Virtual assistant jobs are becoming
commonplace, where employees from developing countries work with
companies in North America or Europe, providing administrative support and
other business services that can easily be conducted over the phone or via
the internet.

MODULE 2
THE GLOBAL ECONOMY
II. LECTURE

Economic Globalization refers to the expanding

interdependence of world economies. Shangquan (2000)
attributes this to the growing scale of cross-border trade
commodities and services, flow of international capital, and
wide and rapid spread of technology.
It involves a wide variety of processes, opportunities, and
problems related to the spread of economic activities among
countries around the world.

In the Philippines, cross-border trading can be best illustrated by the

country’s trading partnership with China, the United States, and Australia.
Moreover, the flow of international capital can be observed in Foreign Direct
Investment (FDI) , a type of investment in which a company establishes a
business in another country for production of goods or services and still
takes part in the management of that business.

EXAMPLE:
 Toyota Motor Philippines Corporation
In which is a subsidiary of Toyota Motor
Corporation based in Toyota, Japan. This flow
of international capital can also be observed
in foreign portfolio investments, trades flows,
external assistance and external commercial
borrowings, and private loan flows.

International Monetary Fund (IMF)

ƨ IMF serves to stabilize the international
monetary system and acts as a monitor of the
world’s currencies. It keeps track of the
economy globally and in member countries,
lends to countries with balance of payments
difficulties, and gives practical help to
members.
ƨ IMF defined Economic Globalization as a historical process, the result of
human innovation and technological progress.
ƨ “It refers to the increasing integration of economies around the world,
particularly through the movement of goods, services, and capital across
borders” (IMF, 2008).
Silk Road
ƨ Silk Road derives its name from the lucrative trade in
silk carried out along its length, beginning in the Han
dynasty in China.
ƨ Its primarily refers to the land routes connecting East
Asia and Southeast Asia with South Asia, Persia, the
Arabian Peninsula, East Africa and Southern Europe.
ƨ The Silk Road was important because it helped to generate trade and
commerce between a number of different kingdoms and empires. This helped
for ideas, culture, inventions, and unique products to spread across much of
the settled world.
BRIEF HISTORY Historically, these routes also led to the discovery of the Philippine
islands when Portuguese and Spanish envoys were in search of spices,
which then spawned colonization. In the contemporary period, foreign
expatriates come to the country to manage their company’s foreign
subsidiaries. Likewise, the Philippines send thousands of skilled workers
to the Middle East as construction workers, seafarers, and nurses.
FOUR (4) DIMENSIONS OF ECONOMY

Benczes, 2014)
ƨ Globalization of trade of goods and services
ƨ Globalization of financial and capital markets
ƨ Globalization of technology and communication
ƨ Globalization of production

GLOBALIZATION OF TRADE OF GOODS AND SERVICES

World Trade Organization (WTO) eases trade among
countries. It stablished in 1995, “ensures that trade
flows as smoothly, predictably, and freely as possible”
China as a major supplier and exporter of
manufactured goods that has affected the world
economy. China-made products or parts are sent to the United States. To meet this
demand, China creates more jobs for its citizens.
Business Process Outsourcing (BPO) company’s services is increasing throughout
the Philippines. So, why do American companies set up subsidiaries in the country?
Cheap labor cost, English proficiency, and customer service skills are the common
reasons.
GLOBALIZATION OF FINANCIAL AND CAPITAL MARKETS
Over recent decades, there has been a steady increase in
cross-border financial flows around the world.
First, various financial institutions including banks and
institutional investors have expanded their activities
geographically. In this process, they acted as an intermediary to channel funds from
lenders to borrowers across national borders.
Second, the more mature securities markets have gained a clear cross-border
orientation. In many instances, newly issued securities are designed and offered to
the public in such a way as to maximize their appeal to international investors.
These developments reflected the progressive dismantling of controls on cross-
border financial flows as well as the liberalization of national financial markets more
generally.
 GLOBALIZATION OF TECHNOLOGY AND COMMUNICATION
Information and communication technology (ICT) is a driving
factor in the process of globalization.
It emphasizes that various transaction and interactivities that
transpire instantly due to the internet and communication technology.
There are ICT key related factors that contribute in driving globalization, namely:
Complexity The costs, risks and complexity Involve in the
and enormity production process for many industries require a
of products minimum effective market size larger than that of
and services the domestic market.

Organizations Networks are replacing hierarchies in the basic organizational

moving from structures. The non-centralized character of networks distributes
hierarchical to the authority exercised by any discrete geographic entity. Team
network working in different countries in a network contributes to the
organizational efficient making of the final product, each using their core skills.
structures

Integration of The integration of market to cyberspace renders geographic

market and space redundant as a basis of effective economic governance.
cyberspace

Open source Open source software, developed as a result of a collective

software intellect of peers, downloadable free with source code has
further given impetus to globalization.

Transfer from the The strong growth of computing devices used

physical domain to throughout the business processes Is tilting the balance from
the digital domain the physical to the digital domain. The measure of digital
domain is the degree to which a product or service can be
digitized or stored in a Computer.
New The internet also has the potential to create new business models and
business bring about changes in the value chain. E-Commerce, all transactions
model in information, trade in goods and services including financial services
as well as government and social services over the internet
interactively and instantly have given rise to several new and
Innovative business models.

GLOBALIZATION OF PRODUCTION
 This fourth dimension is best illustrated by the existence
of multinational corporations (MNCs) and transnational
corporations (TNCs).
ƨ Multinational Corporations (MNCs)
It is usually a large corporation incorporated in one country which produces or sells
goods or services in various countries. The two main characteristics of MNCs are
their large size and the fact that their worldwide activities are centrally controlled by
the parent companies.
Transnational Corporations (TNCs)

It is a huge company that does business in several

countries. Many TNCs are much richer than entire
countries in the less developed world. Such companies
can provide work and enrich a country's economy - or
some say they can exploit the workers with low pay and destroy the environment.

There are different views on who or what the actors are that facilitate economic
globalization.

GLOBAL CORPORATIONS INTERNATIONAL MONETARY SYSTEM

NATION-STATES
ƨ NATION-STATES

The role of Nation-States as manager of the national economy is

being redefined by globalization. Although such is the case,
nation-states act as buffer to negative effects of globalization. In
support, Brodie (1996) call the government as the “midwives” of
globalization. It means that nation-states are still relevant despite
assuming a global perspective and act as mediators between the
effects of globalization and the national economy.

In addition, it is a complex one in part due to the varying definitions and shifting
concepts of globalization. While it has been defined in many ways, globalization is
generally recognized as the fading or complete disappearance of economic, social,
and cultural borders between nation-states. Some scholars have theorized that
nation-states, which are inherently divided by physical and economic boundaries,
will be less relevant in a globalized world.
In the looming trade war between China and the United States, each government
imposes high tariffs on goods and services. Thus, this trade war does not only affect
their economies but also the rest of the world.
ƨ GLOBAL CORPORATIONS
A Global Corporation, also known as a “global
company”, is coined from the base term ‘global’, which
means all around the world. It makes sense to assume
that a global company is a company that does business
all over the world.
It is any company that operates in at least a country
other than the country where it originated.
Realistically, expanding to even just one additional country is a lot of work and is
therefore a great achievement. If you are operating in one country, selling your
products around the world and shipping them to customers in countries in Europe
while you’re in the United States, that doesn’t necessarily mean you’re a global
company. It takes more than that to earn the name a global company.
BENEFITS OF GLOBAL CORPORATION
ƨ You can increase your customer base
ƨ You can reduce your operating costs
ƨ You don’t need to be bogged down by seasonality
ƨ You can boost the growth rate of your company
ƨ You can create new jobs
INTERNATIONAL MONETARY SYSTEM
An International Monetary System is a set of internationally
agreed rules, conventions and supporting institutions that
facilitate international trade, cross border investment and
generally the reallocation of capital between nation states.
It should provide means of payment acceptable to buyers
and sellers of different nationalities, including deferred payment.

Three (3) Global IMS

1. Gold Standard System

The Global Standard functions as a fixed exchange rate

regime, with gold as the only international reserve and
participating countries determine the gold content of national
currencies (Benczes, 2014).
It was a system under which nearly all countries fixed the value of their
currencies in terms of a specified amount of gold, or linked their currency to
that of a country which did so.

Types of Gold Standard System

 Gold Coin Standard

Gold coin standard or gold currency
standard or gold species standard is the
oldest form of gold standard. It is also
known as orthodox gold standard or
traditional gold standard.
This standard was prevalent in the U.K., France, Germany and
the U.S.A. before the World War I.
 Gold Bullion Standard
Gold Bullion is gold, silver, or other precious metals in
the form of bars, ingots, or specialized coins that is
said to maintain its worth better than conventional
currencies and is therefore kept as a form of
emergency currency by both governments and private
citizens alike.
 Gold Exchange Standard
Gold Exchange Standard refers to a system in which there is
neither a gold currency in circulation not gold reserves held for
external purposes. Under this system, the domestic currency of
a country (which is composed of token coins and paper notes)
is not converted into gold for meeting internal needs, but is
converted into the currency of some foreign payments.
 Gold Reserve Standard
Gold Standard is a monetary system where a country's
currency or paper money has a value directly linked to
gold. A country that uses the gold standard sets a fixed
price for gold and buys and sells gold at that price. That
fixed price is used to determine the value of the currency.
 Gold Parity Standard
Gold Parity standard is the modern version of the gold
standard. Under this standard, every member country has to
define the par value of its currency in terms of gold in order to
determine the exchange rate. The gold parity standard aims
at maintaining stable exchange rates without interfering into
the domestic monetary system of the member countries.

2. Bretton Woods System

The Bretton Woods Agreement and System created a

collective international currency exchange regime that
lasted from the mid-1940s to the early 1970s. It is
required a currency peg to the U.S. dollar which was
in turn pegged to the price of gold.

Brief History

The Bretton Woods Agreement was negotiated in July 1944 by delegates from 44
countries at the United Nations Monetary and Financial Conference held in Bretton
Woods, New Hampshire. Thus, the name “Bretton Woods Agreement.
Under the system, gold was the basis for the U.S. dollar and other currencies were
pegged to the U.S. dollar’s value. The Bretton Woods System effectively came to an
end in early 1970s when President Richard M. Nixon announced that the U.S.
would no longer exchange gold for U.S. Currency.
The Bretton Woods System collapsed in the 1970s but created a lasting influence
on international currency exchange and trade through its development of the IMF
and World Bank.
3. European Monetary System

The European Monetary System was an

arrangement between European countries to link
their currencies. The goal was to stabilize inflation
and stop large exchange rate fluctuations between
these neighboring nations, making it easy for them
to trade goods with each other.