THE CONTEMPORARY WORLD

The Structures of Globalization

CITY
COLLEGE
OF
ANGELES
 OBJECTIVES
At the end of the lesson, the students should be able to:

Identify
A the actors who facilitate economic globalization

Express
B opinions on global economic integration

Elaborate on
C the role of international financial institution in the creation of a global economy

Discuss
D the effects of globalization on governments
 The Global Economy
D
D

MODULE 2 | WEEK 3 AND 4

 Not everything about globalization is
beneficial. Any change has winners
and losers, and the people living in
communities that had been dependent
on jobs outsourced elsewhere often
suffer. Effectively, this means that
workers in the developed world must
compete with lower-cost markets for
jobs; unions and workers may be
unable to defend against the threat of
corporations that offer the alternative
between lower pay or losing jobs to a
Bangladesh Garment Workers
The garment industry in Bangladesh makes clothes that
supplier in a less-expensive labor
are then shipped out across the world. It employs as many as four million people,
but the average worker earns less in a month than a U.S.
market.
worker earns in a day.

https://www.nationalgeographic.org/article/effects-economic-globalization/9th-grade/
The situation is more complex in the develop
ing world, where economies are undergoing
rapid change. Indeed, the working conditions
of people at some points in the supply chain
are deplorable. The garment industry in
Bangladesh, for instance, employs an
estimated four million people, but the
average worker earns less in a month than a
U.S. worker earns in a day. In 2013, a
textile factory building collapsed, killing more
than 1,100 workers.

https://www.nationalgeographic.org/article/effects-economic-globalization/9th-grade/
Studies also suggest that globalization may
contribute to income disparity and inequality
between the more-educated and
less-educated members of a society.
This means that unskilled workers may be
affected by declining wages, which are
under constant pressure from globalization.

https://www.nationalgeographic.org/article/effects-economic-globalization/9th-grade/
 Economic Systems
D
D
 Economic Systems

Have you seen these symbols before? What do these symbols represent?
 Economic Systems

1. Capitalist Economies
Historically, these societies leverage
market forces, such as supply and
demand, with a strong motivation to
earn a profit, to shape their economic
models.
 Economic Systems

2. Socialist Economies
Basically, socialism is defined as an
economic model where all citizens
in a country, region or community
each own the factors of production
equally. Typically, equal economic
outcomes are generated after
the election of a democratically
chosen government.
 Economic Systems

3. Communist Economies
Communism is an economic model where the
collective, governed by a centralized
government, owns any and all properties
located in the collective. Communism is
modeled upon a classless society, where the
work of the citizenry - the fruits of their labor -
are taken by the government and distributed
throughout the populace based on need.
 Economic Systems

4. Traditional Economy
This economy relies on tradition and culture
to choose what goods and services will be
produced, how those goods and services
will be produced, and how those goods and
services will be distributed throughout the
populace.
 Economic Globalization
D

And Its Consequences

D
Economic globalization, broadly understood,
is the growing global integration not only of
markets but also of systems of finance,
commerce, communication, technology, and
law that bypass traditional national, cultural,
ethnic, and social boundaries.
Proponents of economic globalization argue
that it leads to more efficient division of labor,
greater specialization, increased productivity,
higher standards of living and wealth, and
ultimately the end of poverty. Proponents
also argue that recent economic growth has
greatly contributed to the high standard of
living enjoyed by many within the developed
world and raised living standards of many
people formerly living in abject poverty. Many
others have not made such gains.
Opponents argue that economic globalization
detaches markets from essential regulations
meant to protect national sovereignty, the
democratic process, human rights, labor rights,
and the environment. Opponents also argue
that the policies and practices of industrialized
countries and transnational corporations drive
the market forces of economic globalization.
There is no effective global regulatory system
controlling economic globalization.
The rules governing economic globalization
have been created through trade agreements,
international law, and institutions dominated
by industrialized countries. These rules favor
those with access to capital, legitimizing
measures such as dropping tariffs, eliminating
capital controls, enforcing intellectual property
rights, privatizing public services, and
weakening regulations that protect labor,
health and safety, and the environment.
Economic globalization is increasingly perceived
by the rest of the world as American economic
imperialism. Many Americans, accustomed to an
individualistic and competitive culture, are
insensitive to the realities of abject poverty,
cultural erosion, and environmental degradation.
As a result, systematic exploitation of labor and
the environment goes unnoticed as do coercive
monopolistic pricing of goods and services,
criminal evasion of local legal controls, growing
debt among developing countries, widening
economic disparities, and devastation of
traditional cultures.
 Three Phases of Globalization
The Early Voyages of
Exploration & Colonization
Phase one begins in 1492, with
the voyage of Christopher Columbus
to the new world, and continues with
later European voyages of
exploration that eventually made
possible the formation of Europe’s
colonial empires.
1492 – mid 19th
century
The Age of Transnational
Integration
Western world experienced a
dramatic intensification of inter-
national connectivity due to four
advancing technologies–trains,
steamships, the telegraph, and
the postal system.
1830’s - 1914
The Modern Age of Globalization
The third phase of globalization that began
in 1945 was made possible by the long
economic expansion that followed the end
of the Second World War. New global
economic reforms agreed upon by the
United States and its wartime allies in 1944
provided a new framework for international
commerce and finance.
1945 - present
 Integration of
Economies
D
D
 What is economic integration?

Economic integration, the process in which two or more

states in a broadly defined geographic area reduce a range
of trade barriers to advance or protect a set of economic goals.
 What are the benefits of trade?

 Trade increases competition and lowers world prices.

 Trade also breaks down domestic monopolies.
 Trade will also encourage the transfer of technology between countries.
 Trade is also likely to increase employment, given that employment is closely
related to production.
 What are the downsides of trade?

 Trade can lead to over-specialization, with workers at risk of losing their jobs
should world demand fall or when goods for domestic consumption can be
produced more cheaply abroad.
 Certain industries do not get a chance to grow because they face competition
from more established foreign firms, such as new infant industries which may
find it difficult to establish themselves.
 Local producers, who may supply a unique product tailored to meet the needs of
the domestic market, may suffer because cheaper imports may destroy their
market.
 Multinational vs Transnational
Operations Local Response Content Here
Multinational
Companies Since multinational companies Microsoft
Own a home company and its have a centralized management
operate in more than subsidiaries system, there will be some
Apple
one country and have barriers in decision making Adidas
a centralized manage-
ment system.

Operations Local Response Examples

Transnational
Companies
have many companies Nestlé
They are able to gain more
around the world but do Unilever
Do not have subsidiaries but interest in the local markets
not have a centralized
just many companies where they maintain their own Cadbury-Schweppes
management system.
systems
 Protectionism and
Trade Liberalization
D
D
 Protectionism
• Means by which trade between countries is
restricted in some way – normally through
measures to reduce the number of imports
coming into a country.
• Main means are:
– Tariffs
– Quotas
– Non-Tariff Barriers
 Protectionism

• Tariff: A tax on goods coming into a country

• Increases the price of the good and makes it
less competitive
• Quota: Physical restriction on the number of
goods coming into a country
 Non-Tariff Barriers

Any methods not covered by a tariff,

most usually:
– Rules
– Regulations
– Voluntary Export Restraints (VERs)
– Legislation
– Exacting Standards or Specifications
 Non-Tariff Barriers
• Examples include setting exacting standards on fuel
emissions from cars, the documentation required to
be able to sell drugs in different countries,
the ingredients in products – some of which may be
banned in the destination country
• NTBs are difficult to prove – when do you accuse a
country of protectionism –
could be a legal or cultural issue?
• The main method involved in NTBs is not
to prevent trade but to make the cost of doing so
prohibitive to the potential exporter
 Reasons for Protectionism
• Protect domestic industries
• Protect domestic employment
• Strategic reasons
• Political pressures
• Protect culture
• Prevent ‘Dumping’ – selling goods
in the destination country below cost
to break into that market
 Trade Liberalization

• Aims to free up world trade and break down the barriers

to international trade
• Basic philosophy rests on the principle of comparative
advantage
• Talks to achieve trade liberalization have been ongoing
for many years
 Trade Liberalization

• GATT – General Agreement on Tariffs and Trade

• First signed in 1947 –
talks on-going since then!
• Uruguay Round 1994 – set up the World Trade
Organisation (WTO) as well as agreements covering
a range of trade liberalization measures
• WTO provides the forum through which trade issues
can be negotiated and works to help implement and
police trade agreements
 Trade Liberalization
Potential benefits:
– Promotes international specialization
and increases world output
– Promotes efficient use and allocation
of world resources
– Allows developing countries access to the heavily protect
ed markets of the developed world thus helping promote
development
– Facilitates the working of the international market system
and the working of price signals to ensure efficient
allocation of resources, international competition
and the associated benefits to all
 How to make trades easier?

• Promoting free trade – the trading of goods and services between two or
more countries without tariffs
• Creating trade blocs – agreement between countries to reduce or eliminate
trade barrier
- Outsourcing is the act of subcontracting work. This includes buying
labor or parts from outside a company or business rather than using the
company’s own staff or plant.
 Institutions of
Globalization
D
D
 With 189 member countries, staff from more than 170 countries, and
offices in over 130 locations, the World Bank Group is a unique global
partnership: five institutions working for sustainable solutions that reduce
poverty and build shared prosperity in developing countries.
 The World Bank

The World Bank Group has set two goals for the world to achieve by 2030:
• End extreme poverty by decreasing the percentage of people living on less
than $1.90 a day to no more than 3%
• Promote shared prosperity by fostering the income growth of the bottom 40
% for every country
The World Bank

Established in 1944, the World Bank Group

is headquartered in Washington, D.C. They
have more than 10,000 employees in more
than 120 offices worldwide.
 The World Bank

“The World Bank is a vital source of financial and

technical assistance to developing countries around
the world. We are not a bank in the ordinary
sense but a unique partnership to reduce poverty
and support development.”
 The World Trade Organization (WTO) is the only global international organization
dealing with the rules of trade between nations. At its heart are the WTO agreements,
negotiated and signed by the bulk of the world’s trading nations and ratified in their
parliaments. The goal is to ensure that trade flows as smoothly, predictably and freely
as possible.
What is the World Trade Organization?

The WTO has many roles: it operates a global system of trade rules, it acts as
a forum for negotiating trade agreements, it settles trade disputes between its
members and it supports the needs of developing countries.
What is the World Trade Organization?

All major decisions are made by the WTO's member governments: either
by ministers (who usually meet at least every two years) or by their
ambassadors or delegates (who meet regularly in Geneva).
World Trade Organization
The International Monetary Fund, or IMF, promotes international
financial stability and monetary cooperation. It also facilitates
international trade, promotes employment and sustainable
economic growth, and helps to reduce global poverty. The IMF is
governed by and accountable to its 189 member countries.
 International Monetary Fund

Founding and mission: The IMF was conceived in July 1944 at the United
Nations Bretton Woods Conference in New Hampshire, United States. The
44 countries in attendance sought to build a framework for international
economic cooperation and avoid repeating the competitive currency
devaluations that contributed to the Great Depression of the 1930s. The
IMF's primary mission is to ensure the stability of the international monetary
system—the system of exchange rates and international payments that
enables countries and their citizens to transact with each other.
Sustainability and Sustainable Development

Sustainability refers to the degree to which the Earth

can provide resources for human needs.

Sustainable Development is specifically

developing the world in a way where the needs of the
present generation is met while preserving resources
for future generations
 “Race to the Bottom”

This phrase describes countries lowering their

labor standards, including the protection of
workers’ interests, to lure in foreign investors
seeking high profit margins at the lowest cost
possible.
 End Note

International economic integration is a central tenet of glo-

balization–but, as a reminder, economics is just one window
into the phenomenon of globalization. Nevertheless, much
of globalization is anchored on changes in the economy.
 References

National Geographic Society. (2019, Dec. 23). Effects of economic globalization.

Retrieved from: https://www.nationalgeographic.org/article/effects-economic-glob
alization/9th-grade/
O’Connell, B. (2018, Oct. 29). Traditional economy: definition, characteristics and
examples. Retrieved from: https://www.thestreet.com/markets/what-is-traditional-
economy-14759652
Amadeo, K. (2020, Apr. 06). Traditional economy with its characteristics, pros,
cons, and examples. Retrieved from: https://www.thebalance.com/traditional-eco
nomy-definition-examples-pros-cons-3305587
Economic globalization 2003 statement of conscience. (n.d.) Retrieved from:
https://www.uua.org/action/statements/economic-globalization