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GEd 104 - The Contemporary World

Midterms - Reviewer

UNIT 1 - Introduction to Globalization

4. Globalization processes do not occur merely or an
objective, material level but they also involve the
Globalization
subjective plane of human consciousness. Globalization
The process in which people, ideas and goods
processes do not occur merely or an objective, material
spread throughout the world, spurring more interaction
level but they also involve the subjective plane of human
and integration between the world's cultures,
consciousness.
governments and economies.
Example:
People are engaged in buying and selling from
HISTORICAL PERIODS OF GLOBALIZATION
other places in far-away lands like the famed Silk Road
across Central Asia that connected China and Europe
1. The Prehistoric Period (10000 BCE - 3500 BCE)
during the Middle Age for thousands of years and they
In this earliest phase of globalization, contacts
also invested in enterprises in other countries for
among hunters and gatherers – who were spread
centuries.
around the world – were geographically limited. In this
period due to absence of advanced forms of technology,
According to the International Monetary Fund
globalization was severely limited.
(IMF), globalization is the growing economic
interdependence of countries worldwide through
2. The Pre-modern Period (3500 BCE - 1500 CE)
increasing volume and variety of cross border
In this period the invention of writing and the wheel
transactions in goods and services and of international
were great social and technological boosts that moved
capital flows and also through the more rapid and wide
globalization to a new level. The invention of wheel in
diffusion of technology.
addition to roads made the transportation of people and
goods more efficient. On the other hand writing
According to Steger, globalization is an
facilitated the spread of ideas and inventions.
expansion, and intensification of social relations and
consciousness across world time and world space. It is
3. The Early Modern Period (1500-1750)
about growing worldwide connectivity.
It is the period between the Enlightenment and the
Renaissance. In this period, European Enlightenment
project tried to achieve a universal form of morality and
CHARACTERISTICS OF GLOBALIZATION
law. This with the emergence of European metropolitan
centers and unlimited material accumulation which led to
1. It involves both the creation of new social networks
the capitalist world system helped to strengthen
and the multiplication of existing connections that cut
globalization.
across traditional, political, economic, cultural, and
geographical boundaries.
4. The Modern Period (1750-1970)
Innovations in transportation and communication
2. Globalization is reflected in the expansion and the
technology, population explosion, and increase in
stretching of social relations, activities, and connections.
migration led to more cultural exchanges and
transformation in traditional social patterns. Process of
3. Globalization involves the intensification and
industrialization also accelerated.
acceleration of social exchanges and activities.

GEd 104 - The Contemporary World
Midterms - Reviewer
5. The Contemporary Period (from 1970 to present)
The creation, expansion, and acceleration of
worldwide inter-dependencies occurred in a dramatic
way and it was a kind of leap in the history of
globalization.
DIMENSIONS OF GLOBALIZATION
1. Economic Dimension
This refers to the extensive development of
economic relations across the globe as a result of
technology and the enormous flow of capital that has
stimulated trade in both sources and goods.
Economic institutions have decisive influence on
investment in physical and human capital, technology,
and industrial productions. It is also important for
resource distribution.
2. Political Dimension
This refers to an enlargement and strengthening of
political interrelations across the globe.
The globalization rendered almost powerless any
political efforts to introduce restrictive policies affecting
individual states, with the results that the world in many
ways turned into a border-less world. Governments
often seek to restrict the migration of peoples, especially
those coming from the poor countries in the global
South.
In the development of supra-national structures and
associations held together by common concerns and
mutually agreed upon norm, the most obvious is political
globalization.
On the part of the involved parties, informal
structures which are considered binding, bring together
world power centers due to common interests.
3. Cultural Dimension
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This refers to the increase in the amount of cultural
flows across the globe. Cultural interconnections are at
the foundations of contemporary globalization.
Individualism and consumerism which are the
dominant cultural characteristics of our age and the
drive for economic success stimulated by the internet
and other technological devices circulate much more
easily than they did in earlier periods. In the
dissemination of popular culture, transactional media
corporations play a major role which brought a sharp
rise in homogenized popular culture that is manifested in
the dominance of fast food restaurant on more aspects
of life throughout the world.
Cultural diversity often results hybridization - a
constructive interaction process between global and
local characteristics which is often visible in food, music,
dance, film, fashion, and language. As a result there is a
scarcely any society in the world that expresses itself in
its own self-contained and authentic culture.
4. Religious Dimension
Religion is a personal or institutionalized set of
attitudes, beliefs, and practices relating to or manifesting
faithful devotion to an acknowledged ultimate reality or
deity. It is the most important defining element of any
civilization as contrasted with race, language, or way of
life. As such, it is also portrayed as a defining element in
future conflicts. Whether the root cause of a particular
conflict or merely a vehicle for the mobilization of
nationalist or ethnic passions, religion is certainly central
to much of the strife currently taking place around the
globe.
Jihadist globalism is a religious response to the
materialist assault by the ungodly West in the rest of the
world. Coming out of what they consider a pure form of
Islam, its disciples seek to destroy all those alien
influences that have been imposed on Muslim people. It
applies to those extremely violent strains of religion that
convert the global imaginary into very concrete political
agendas and terrorist tactics. It is also applied to those

GEd 104 - The Contemporary World
Midterms - Reviewer
violent fundamentalists in the West who seek to
transform the world into a Christian Empire.
There are eight (8) principles that summarize the
Roman Catholic Teachings:
1. Commitment to universal human rights
2. Commitment to the social nature of the human person
3. Commitment to the common good
4. Solidarity (The principle of Solidarity affirms that
membership in the human family means that all bear
responsibility for one another.)
5. Preferential option of the poor.
6. Subsidiary (The Catholic Church teaches that
decisions should be made at the lowest level in order to
achieve the common good.)
7. Justice
8. Integral Humanism - is concerned with whole person
Justice is divided in three (3) categories:
 Commutative Justice
This aims at fulfilling the terms of contracts and
other promises on both personal and social level.
 Distributive Justice
This ensures a basic equity in how both the burden
and the goods of society are distributed and that
ensures that every person enjoys a basically equal
moral and legal standing apart from differences in
wealth, privilege, talent and achievements.
 Social Justice
This refers to the creation of the conditions in which
the first two categories of justice can be realized and the
common good identified and defended.
5. Ideological Dimensions
Ideology is a system of widely shared ideas, beliefs,
norms and values among a group of people. It is often
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used to legitimize certain political interests or to defend
dominant power structures. Ideology connects human
actions with some generalized
claims. Globalization is a social process of intensifying
global interdependence while globalism is an ideology
that gives the concept of Neo-liberal values and
meanings to globalization.
Major Ideological Claims of Advocates of Globalism
1. Globalization is about the liberalization and global
integration of markets.
The problem with this claim is that liberalization and
integration of markets happen through political project of
engineering free markets by interference of centralized
state power, and it is in contrast to the neoliberal ideal of
limited role of governments.
2. Globalization is inevitable and irreversible.
Globalists believe that spread of market forces
driven by technological innovations is inevitable in
globalization. Neo-liberals use this claim to convince
people to adopt the natural discipline of the market if
they want to prosper, which implies the elimination of
government controls over the market.
3. Nobody is in charge of globalization.
This claim seeks to depoliticize the public debate on
globalization and neutralizing anti -globalist movements.
4. Globalization benefits everyone.
Globalists talk about the benefits of market
liberalization such as rising global living standards,
economic efficiency, individual freedom, and
technological progress. But the reality is that the
opportunities of globalization are spread unequally and
power and wealth are concentrated among a specific
group of people, regions and corporations.
5. Globalization furthers the spread of democracy in
the world.

GEd 104 - The Contemporary World
Midterms - Reviewer
For the globalists democracy and free markets are
synonymous. The neoliberal explanation of globalization
is ideological because it is politically motivated and
contributes to the construction of particular meanings of
globalization which stabilize existing power relations.
Globalism tries to create collective meaning and shape
people’s identities.
UNIT 2 - The Structures of Globalization
1.The Global Economy
2. Market Integration
3.The Global Interstate System
4. Contemporary Global Governance
THE GLOBAL ECONOMY
Economic Globalization
It refers to the increasing interdependence of world
economies as a result of the growing scale of cross-
border trade of commodities and
services, flow of international capital and wide and rapid
spread of technologies. It reflects the continuing
expansion and mutual integration of market frontiers,
and is an irreversible trend for the economic
development in the whole world at the turn of the
millennium.
According to the International Monetary Fund,
economic globalization is a historical process, the result
of human innovation and technological progress. It
refers to the increasing integration of economies around
the world, particularly through the movement of goods,
services, and capital across borders. It also refers to the
movement of people (labor) and knowledge (technology)
across international borders.
In economic terms, globalization is nothing but a
process making the world economy an organic system
by extending transnational economic processes and
economic relations to more and more countries and by
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deepening the economic inter-dependencies among
them.
TWO MAJOR DRIVING FORCES FOR ECONOMIC
GLOBALIZATION
1. The rapid growing of information in all types of
productive activities
2. Marketization (A restructuring process that enables
state enterprises to operate as market-oriented firms by
changing the legal environment in which they operate
and can be achieved through reduction of state
subsidies, organizational restructuring of management
such as corporatization, decentralization, and
privatization.)
DIMENSIONS OF ECONOMIC GLOBALIZATION
1. The globalization of trade of goods and services
2. The globalization of financial and capital markets
3. The globalization of technology and communication
4. The globalization of production
Economic globalization is a functional integration
between internationally dispersed activities which means
that it is a qualitative transformation rather than a
quantitative change while internationalization is an
extension of economic activities between internationally
dispersed activities.
ORIGIN OF ECONOMIC GLOBALIZATION
Economic globalization is a process that creates an
organic system of the world economy.
In the 16th century, world system analysts identify
the origin of modernity and globalization through long
distance trade in the 16th century. This best known
example of archaic globalization is the Silk Road, which
started in western China, reached the boundaries of the
Parthian empire, and continued onwards towards Rome.
It also connected Asia, Africa, and Europe .

GEd 104 - The Contemporary World
Midterms - Reviewer
In the 17th and 18th century, global economy
exists only in trade and exchange rather than production
as the world export to World GDP did not reached 1 to 2
percent.
In the 19th century, the advent of globalization
approaching its modern form is witnessed. A short
period before World War I is referred to as golden
age of globalization characterized by relative peace,
free trade, financial and economic stability . Growth in
international exchange of goods accelerated in the
second quarter of the 19th century. Global economy in
the 19th and 20th centuries grew by an average of
nearly 4 percent per annum, which is roughly twice as
high as growth in the national incomes of the developed
economies since the late 19th century.
International Monetary System (IMS)
It refers to a system that forms rules and standards
for facilitating international trade among the nations. It
helps in reallocating the capital and investment from one
nation to another. It is the global network of the
government and financial institutions that determine the
exchange rate of different currencies for international
trade. It is a governing body that sets rules and
regulations by which different nations exchange
currencies with each other.
EVOLUTION OF THE INTERNATIONAL MONETARY
SYSTEM
In 1870 to 1914, with the help of gold and silver,
trade was carried without any institutional support.
Monetary system during that time was decentralized
while market based and money played a minor role in
international trade in contrast to gold.
Gold was believed to guarantee a non-inflationary,
stable economic environment, a means for accelerating
international trade and the gold standard functioned as a
fixed exchange rate regime, with gold as the only
international reserve.
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Gold Standard is a system of backing a country’s
currency with its gold reserves. Such currencies are
freely convertible into gold at a fixed price, and the
country settles all its international trade transactions in
gold.
After World War I, the use of gold declined due to
increased expenditure and inflation which were caused
by war. Major economic powers were on gold standards
but could not maintain it and failed because of the Great
depression in 1931.
In 1944, 730 representatives of 44 nations met at
Bretton Woods, New Hampshire, United States to create
a new international monetary system called as the
Bretton Woods system, the aim of which is to create a
stabilized international currency system and ensure a
monetary stability for all the nations.
Since the United States held most of the world’s
gold, all the nations would determine the values of their
currencies in terms of dollar. The central banks of
nations were given the task of maintaining fixed
exchange rates with respect to dollar for each currency.
The Bretton Woods system ended in 1971 as the trade
deficit and growing inflation undermined the value of
dollar in the whole world. In 1973, the floating exchange
rate system, also known as flexible exchange rate
system was developed that was market based.
To assess whether the gold standard was
successful, the following roles of a properly designed
IMS must be considered: to lend order and stability to
foreign exchange markets, to encourage the elimination
of balance-of-payments problems, and to provide
access to international credits in the event of disruptive
shocks. The gold standard has never worked
satisfactorily in controlling inflation or maintaining
equilibrium in international transactions.
European Monetary Integration
European monetary integration refers to a 30-year
long process that began at the end of the 1960s as a
form of monetary cooperation intended to reduce the

GEd 104 - The Contemporary World
Midterms - Reviewer
excessive influence of the US dollar on domestic
exchange rates, and led, through various attempts, to
the creation of a Monetary Union and a common
currency. This Union brings many benefits to Member
States.
However, over the past decade, the build-up of
macroeconomic imbalances, and the imprudent fiscal
policies of some Member States, resulted in the
continuing double crisis in banking and sovereign. As a
result of this crisis, many individual Member States face
difficult re-adjustment processes, and Members States
collectively must reappraise the governance architecture
of Monetary Union and adopt new mechanisms to
detect,
prevent, and correct problematic economic trends.
European Monetary System (EMS)
The European Monetary System (EMS) on the
other hand is a 1979 arrangement between several
European countries which links their currencies in an
attempt to stabilize the exchange rate. This system was
succeeded by the European Economic and Monetary
Union (EMU), an institution of the European Union (EU),
which established a common currency called the euro.
The European Monetary System originated in an
attempt to stabilize inflation and stop large exchange
rate fluctuations between European countries. Then, in
June 1998, the European Central Bank was established
and, in January 1999, a unified currency, the euro, was
born and came to be used by most EU member
countries.
According to the European Commission in
2008, the first ten years of the EMU were an evident
success for participating countries in terms of increased
trade and capital transactions, more integrated
economies, restored macroeconomic stability and the
utilization of Euro as the second most widely used
reserve currency. But in 2008 to 2009 the European
Union (EU) is presented with dramatic challenges
brought by global
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financial and economic crisis.
The EU in 2010 in response to the crisis enacted
the three- pillar financial rescue program which includes:
the European Financial Stability Mechanism, the
European Financial Stability Facility, the financial
assistance of International Monetary Fund (IMF). Since
the three -pillar system is temporary EU in 2013
activated its own permanent
European Stability Mechanism. The future of EMU
depends on the willingness of member states to agree
on more fundamental changes in the governance of
Eurozone.
The European Financial Stability Mechanism (EFSM)
It is a permanent fund created by the European
Union (EU) to provide emergency assistance to member
states within the Union. It raises money through the
financial markets, and is guaranteed by the European
Commission. Fund raised through the markets, use the
budget of the European Union as collateral. The
European Financial Stability Facility (EFSF) on the other
hand, is an organization created by the European Union
to provide assistance to member states with unstable
economies. The EFSF is a special purpose vehicle
(SPV) managed by the European Investment Bank, a
lending institution. The fund raises money by issuing
debt, and distributes the funds to euro zone countries
whose lending institutions need to be recapitalized who
need help managing their sovereign debt or who need
financial stabilization.
International Trade and Trade Policies
International trade is the exchange of goods,
services and capital across national borders. It is a
multi-million dollar activity, central to the Gross Domestic
Product (GDP) of many countries, and it is the only way
for many people in many countries to acquire resources.
In acquiring products where demand is inelastic and
domestic supply is inadequate absent traders,
consumers and suppliers are forced to either develop
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Midterms - Reviewer

substitute goods or devote a large percentage of their

income.
International trade is the exchange of goods or
services along international borders. This type of trade
allows for a greater competition and more competitive
pricing in the market. The two key concepts in the
economics of international trade are specialization and
comparative advantage. Comparative advantage comes
in; so long as the two countries have different relative
efficiencies, the two countries can benefit from trade –
the country with absolute advantage will still benefit by
directing its resources to those goods where it is most
productive and trading for the others while specialization
refers to this process; countries as well as individual
businesses can maximize their welfare by specializing in
the production of those goods where they are most
efficient and enjoy the largest advantages over rivals.
Trade policies on the other hand refer to the
regulations and agreement of foreign countries. It
defines standards, goals, rules, and regulations that
pertain to
trade relation between countries. Each country has
specific policies formulated by its officials. Boosting the
nation’s international trade is the aim of each country.
Taxes imposes on import and export, inspection,
regulations, tariffs and quotas are all part of country’s
trade policy.
FOCUSES OF TRADE POLICY IN INTERNATIONAL
TRADE
Tariffs
These are taxes or duties paid for a particular class
of imports or exports. Imposing taxes on imported and
exported goods is a right of every country. Heavy tariffs
on imported goods are levied by some nations for the
protection of their local industries. The prices of
imported goods in local markets are inflated due to high
imported taxes to ensure demand of local products.
Trade barriers
These are measures that governments or public
authorities introduce to make imported goods or
services less competitive than locally produced goods
and services. They are state-imposed restrictions on
trading a particular product or with a specific nation. It
can be linked to the product, service like technical
requirement and it can also be administrative in nature
such as rules
and procedures of transactions. Tariffs, duties,
subsidies, embargoes and quotas
are the most common trade barriers.
Safety
This ensures that imported products in the country
are of high quality. Inspection regulations laid down by
public officials ensure the safety and quality standards of
imported products.
TYPES OF TRADE POLICIES
National Trade Policy
This safeguards the best interest of its trade and
citizen.
Bilateral Trade Policy
To regulate the trade and business relations
between two nations, this policy is formed. Under the
trade agreement the national trade policies of both the
nations and their negotiations are considered while
bilateral trade policy is being formulated.
International Trade Policy
This defines the international trade policy under
their charter like the International economic
organizations, such as Organization for Economic
Cooperation and Development (OECD), World Trade
Organization (WTO) and International Monetary Fund
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(IMF).The best interests of both developed and Outsourcing is a means of finding a partner with
developing nations are upheld by the policies. which a firm can establish a bilateral relationship and
having the partner undertake relationship-specific
Trade Policy and International Economy investments so that it becomes able to produce goods
In most developed countries where open market and services that fit the firm’s particular needs. Often,
economy prevails, the international economic the bilateral relationship is governed by a contract, but
organizations support free trade policies. In the case of even in those cases the legal document does not ensure
developing nations partially-shielded trade practices are that the partners will conduct the promised activities with
preferred to protect their local trade industries. The the same care that the firm would use itself if it were to
following are dependent on globalization: sound trade perform the tasks.
policies for market changes, establishment of free and One of the most rapidly growing components of
fair trade practices and expansion of possibilities for international trade is the outsourcing of intermediate
booming international trade. goods and business services.
There are three essential features of a modern
The World Trade Organization (WTO) outsourcing strategy.
The World Trade Organization (WTO) deals with
the global rules of trade between nations with the main 1. Firms must search for partners with the expertise that
function of ensuring that trade flows smoothly, allows them to perform the particular activities that are
predictably and freely. It is the only global international required.
organization dealing with the rules of trade between 2. They must convince the potential suppliers to
nations with WTO agreements, negotiated and signed customize products for their own specific needs.
by the bulk of the world’s trading nations and ratified in 3. They must induce the necessary relationship-specific
their parliaments at its heart. WTO is viewed as the investments in an environment with incomplete
means by which industrialized countries can gain access contracting.
to the markets of developing countries.
Possible Determinants of the Location of
Global Economy Outsourcing Outsourcing
Outsourcing is an activity that requires search for
a partner and relation-specific investments that are 1. Size of the country can affect the “thickness” of its
governed by incomplete contracts and the extent of markets.
international outsourcing depends on the thickness of 2. The technology for search affects the cost and
the domestic and foreign market for input suppliers, the likelihood of finding a suitable partner.
relative cost of searching in each market, the relative 3. The technology for specializing components
cost of customizing inputs and the nature of the determines the willingness of a partner to undertake the
contracting environment in each country. needed investment in a prototype.
Subcontracting is a central element of the new 4. The contracting environments can impinge on a firm’s
economy. It is the practice of assigning part of the ability to induce a partner to invest in the relationship.
obligations and tasks under a contract to another party
known as a subcontractor and especially prevalent in
areas where complex projects are the norm like
construction and information technology.
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GEd 104 - The Contemporary World
Midterms - Reviewer