THE STRUCTURE OF

GLOBALIZATION
LEARNING OUTCOMES:

At the end of the course, the students will

be able to:

• define and explain the underlying

principles of each structure of
globalization.
• identify the role of each actor that
facilitates globalization.
• Explain the role of various institutions
in the creation of the structures of
globalization.
• articulate a personal stance on global
integration.
REVIEW
THE STRUCTURE OF GLOBALIZATION

• The Global Economy

• Market Integration
• The Global Interstate
System
• Contemporary Global
Governance
 Increase job
IMPACT ON JOBS & opportunities and
PRICING lowers the prices

Pressure firms to Upgrade education

correct labor Effect of system and leads to
abuses more training
Globalization
on Labor
Conditions

Increase labor Increase labor

productivity standard
POLITICAL
IMPACT

GROWTH OF
DEMOCRACY
 THE PROS OF BEING GLOBAL

• GLOBAL REPUTATION
• CHEAPER LABOR COSTS
• HIRING LOCAL EMPLOYEES
• FRESH IDEAS
• CHEAPER OPERATING COSTS
• CHEAPER SUPPLY COSTS
• GLOBAL PARTNERSHIPS
• BACK-UP INCOME SOURCE
 THE CONS OF BEING GLOBAL

• LOCAL POLITICS
• CRIME RATE AND WAR
• CULTURAL DIFFERENCES
• FINANCIAL INSTABILITY
WHAT IS GLOBAL ECONOMY?
WHAT IS ECONOMIC INTEGRATION

Economic integration
✔ involves agreements between countries
to permit, to varying degrees, the flow
of capital, labor, goods, and services
across their respective international
borders (Tovias, 1994).
TYPES OF ECONOMIC INTEGRATION

• FREE TRADE AGREEMENTS

• FREE TRADE AREAS
• CUSTOMS UNION
• COMMON MARKET
• ECONOMIC UNION
TYPES OF ECONOMIC INTEGRATION
•
1. FREE TRADE AGREEMENTS
Agreements entered into between
countries regarding specific trade
issues, such as reduction of tariffs (a
type of tax on imported or exported
goods and services) and quotas (non-
tariff barriers between countries) that
limit imports.
TYPES OF ECONOMIC INTEGRATION

FREE TRADE AGREEMENTS con’t…

Trade agreements can be bilateral

(between two countries) or multilateral
(between several countries). Countries
that are not a party to the agreement
will be subject to higher tariffs and
other trade barriers
TYPES OF ECONOMIC INTEGRATION

2. FREE TRADE AREAS

A free trade area eliminates barriers to
trade among the members such as
tariffs and quotas.
Members of a free trade area make
their own policies concerning trade with
other countries outside of the free trade
area.
TYPES OF ECONOMIC INTEGRATION

REE TRADE AREAS con’t

✔ May be limited to specific types of goods
and services.
✔ The best example of a free trade area is
NAFTA, the North American Free Trade
Agreement
TYPES OF ECONOMIC INTEGRATION

3. CUSTOMS UNION
✔ A customs union is formed by countries
that not only eliminate trade barriers
between the members but also have a
unified trade policy with countries
outside of the union.
✔ For example, a customs union will
establish a common tariff that is applied to
all imports coming into each member
country.
TYPES OF ECONOMIC INTEGRATION

3. CUSTOMS UNION con’t..

✔ The tariff revenues may be split among the
members, according to a formula agreed to by
the members.
Customs unions are groups of countries that apply one
common system of procedures, rules and tariffs for all
or almost all their imports, exports and transiting goods.
Usually, countries participating in customs unions share
common trade and competition policies.
TYPES OF ECONOMIC INTEGRATION

4. COMMON MARKET
✔ A common market has all of the
characteristics of a customs union but also
eliminates barriers to the movement of
capital, labor, and technology.
✔ Restrictions on immigration, emigration,
and foreign investment between members
are lifted
TYPES OF ECONOMIC INTEGRATION

4. COMMON MARKET con’t.

✔ Mercosur (short for Mercado Común del
Sur (or Common Market of the South) is a
South American group of nations that is an
example of a common market.
TYPES OF ECONOMIC INTEGRATION

5. ECONOMIC UNION
✔ The highest level of economic integration
occurs in economic unions.
✔ In addition to all of the economic
integration features found in common
markets, members of an economic union
must be able to maintain consistency
with monetary policy, fiscal policy, and
tax policy.
TYPES OF ECONOMIC INTEGRATION

5. ECONOMIC UNION
✔ An economic union also uses a common
currency.
✔ It requires that member states give up a
significant amount of their independent
sovereignty.
✔ The European Union is an example of an
economic union.
THE ADVANTAGES OF ECONOMIC INTEGRATION

) trade benefits,
) employment,
) political cooperation.
THE DISADVANTAGES OF ECONOMIC
INTEGRATION

) creation of trading blocs -since economic

integration can also increase trade barriers
against non-member
) trade diversion
) erosion of national sovereignty
Members of economic unions are typically required
o adhere to rules on trade, monetary policy and
iscal policy, which are established by an unelected
external policymaking body.
MARKET INTEGRATION
WHAT IS MARKET INTEGRATION?
MONEY
 BENEFITS OF
MONEY
✔ money offers consumers and
businesses some very basic and
practical benefits.
✔ Money was invented as an alternative
to bartering.
 BENEFITS OF
✔
MONEY
The major benefit of money is that it
increases the efficiency of an economy
by reducing transactions costs.
✔ When people can use money instead
of bartering, this leads to more
specialization and better division of
labor within the economy (Mishkin,
2007)
TYPES OF
MONEY
 1. COMMODITY MONEY
✔ Money that is in the form of a
commodity with intrinsic value.
✔ Intrinsic value' means it has value
outside of its use as money.
✔ Example, gold has been used as
commodity money for thousands of
years.
 2. REPRESENTATIVE
MONEY
✔ is not money itself, but something
that represents money.
✔ It is exchangeable for a commodity.
During colonial days in America,
tobacco was a valuable commodity.
 2. REPRESENTATIVE ……
✔ During colonial days in America,
tobacco was a valuable commodity.
Somebody could pay for the goods
and services that they needed
using tobacco, and it would be
accepted just like money was
(Mankiw, 2007).
 2. REPRESENTATIVE …….
✔ Representative money is treated
just as if it was real money, even
though it is not.
✔ In today's economy, a check from a
check book is an example of
representative money because it
represents money but it is not the
money itself.
 3. FIAT MONEY
✔ Money with absolutely no intrinsic
value that is just used as money.
✔ Fiat money only has value because
the government says it is valuable.
✔ A fiat is simply an order or decree
given by a government.
 3. FIAT MONEY….
✔ Paper currency - including the Bank
Notes issued by the Central Bank of
the Philippines is not worth the
paper it is printed on, in spite of the
fact that it is used and accepted
virtually everywhere in the world.
 WHAT IS MARKET INTEGRATION

MARKET INTEGRATION
✔ occurs when prices among different
locations or related goods follow similar
patterns over a long period of time.
✔ Groups of goods often move
proportionally to each other and when
this relation is very clear among
different markets it is said that the
markets are integrated .
Market integration occurs when prices among different
locations or related goods follow similar patterns over a
long period of time. While economic integration is the
unification of economic policies between different states
through the partial or full abolition of tariff and non tariff

Market Integration is the coordination among the firms in

the market whereas Economic Integration is an
arrangement among nations.
 WHAT ARE FINANCIAL INSTITUTIONS?

FINANCIAL INSTITUTIONS
✔ They are key to the financial intermediation
process, whereby financial institutions
transfer funds from those who save money
to those who borrow money.
✔ A financial institution is an organization that
manages different financial transactions
such as investments, loans, and deposits.
 THREE TYPES OF FINANCIAL INSTITUTIONS

• DEPOSITORY
• NON-DEPOSITORY
• INVESTMENTS INSTITUTIONS
 THREE TYPES OF FINANCIAL INSTITUTIONS

DEPOSITORY
✔ allow customers to deposit money in an account.
✔ Examples of depository institutions include commercial
banks and credit unions.
.
 THREE TYPES OF FINANCIAL INSTITUTIONS

NON-DEPOSITORY
✔ do not allow customers to deposit money. However,
they are considered financial institutions because they
transfer funds from savers to borrowers by investing
the funds they receive.
✔ Insurance companies are non-depository institutions.
THREE TYPES OF FINANCIAL INSTITUTIONS

INVESTMENTS INSTITUTIONS-
are also financial institutions in that they
play a role in the financial intermediation
process by channeling funds from savers to
borrowers.
Unlike commercial banks, they usually do
not provide services to the public.
QUESTIONS?
 THE GLOBAL
INTERSTATE
SYSTEM &
CONTEMPORARY
GLOBAL
GOVERNANCE
The state has four essential attributes
namely: (1) it exercises authority over
a specific population, called its
citizens, (2) it governs a specific
territory; (3) it has a structure of
government that constructs rules for
the society to follow, and (4) it has
sovereignty over its territory.
● Global governance is defined as the “formal and
informal arrangements that produce a degree of order and
collective action above the state in the absence of a global
government” that involve coordination among state and
non-state actors (Thakur & Weiss, 2015).
Then again, the nation is the
people. The nation is created by a
shared belief that the people inside
a country are connected to each
other. Whether you live in Cebu,
Davao or Manila, you still share a
connection with other Filipinos. The
idea that people of a nation are
connected to each other is called
nationalism.
•A sovereign state is a state with its own
institutions and populations that has a
permanent population, territory, and
government. It must also have the right
and capacity to make treaties and other
agreements with other states.
•A nation is a large group of people who
inhabit a specific territory and are
connected by history, culture, or another
commonality.
•A nation-state is a cultural group (a
nation) that is also a state (and may, in
addition, be a sovereign state).