CHAPTER 2

THE GLOBAL
ECONOMY
Prepared by: Ms. Melry Joy Cabahug
INTRODUCTION
 The United Nations (UN) tried to
address the different problems in the
world.
 Their efforts were guided by the Eight
Millennium Development Goals , which
they created in the 1990s.
 The UN tried to achieve them by the
year 2015.
The Eight Millennium Development Goals
1. Eradication of poverty and hunger
2. Achieving universal primary education
3. Promoting gender equality and women
empowerment
4. Reducing child mortality
5. Improving maternal health
6. Combating diseases like HIV/AIDS and
malaria
7. Ensuring environmental sustainability
8. Having a global partnership for development
 Since there are different standards of
living around the world, we can expect
different meanings attached to it.
 In the Philippines, a person is officially
living in poverty if he makes less than
100,534 pesos a year, around 275
pesos a day. It is called a poverty line or
poverty threshold.
 Extreme poverty- is a condition
characterized by severe deprivation of
basic human needs including food, safe
drinking water, sanitation facilities,
health, shelter, education, and
information. (UN 2015)
 Extreme or absolute poverty is living on
less than $1.25 a day.
 UN aims to eliminate extreme poverty
for all people by 2030.
 It was three years ago and the results
were in.
 The UN (2015) reported that 836 million
people still live in extreme poverty but
that is down from 1.9 billion, so there is
success or at least a lot of progress.
 The World Bank predicted that by 2030 ,
the number of people living in extreme
poverty could drop to less than 400
million.
 It assumes that everything will keep
improving as it has been. However,
climate change has to be considered,
since it is a threat to these
improvements in global poverty.
 Most people have been lifted out from
extreme poverty are still poor and being
poor comes with serious problems, from
disease to lack of water.
 Income inequality is rampant and one in
seven people still live without electricity.
So why is extreme
poverty falling?
 Factors to be considered:
- access to education
- humanitarian aid
- policies of international organizations
like UN made a difference
 Economic globalization is the greatest
contributor.
 The world’s economies have become
more interconnected and free trade has
driven the growth of many developing
economies.
ECONOMIC GLOBALIZATION
AND GLOBAL TRADE
 According to the United Nations,
“ Economic globalization 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.

 Two different types of economies

associated with economic globalization-
protectionism and trade liberalization.
 Protectionism- is a policy of systematic
government intervention in foreign trade
with the objective of encouraging
domestic production.
 It involves giving preferential treatment
to domestic producers and
discriminating against foreign
competitors.
 Trade protectionism usually comes in
the form of quotas and tariffs.
 Tariffs - are required fees on imports or
exports.
 For instance, a pen that costs $ 1.00 in
Country A would be given $ 5.00 tariff in
Country B. Thus, it will become $ 6.00 in
Country B.
 This policy was practiced during the
mercantilist era, from 16th to 17th
centuries until the early years of the
Industrial Revolution.
 The Great Depression of 1929- marked
the peak to protectionism.
 Today, protectionism exists in the world
economy. China, Japan, and US are
being accused of practicing
protectionism.
 World War II, heavily influenced the
shifting of the dominant economic policy
from protectionism to trade liberalization
or free trade.
 Free trade agreements and
technological advances in transportation
and communication mean goods and
services move around the world more
easily than ever.
 Ex. Mobile phones
 Mobile phones seem to have good
consequences for everything including
reducing poverty.
 According to economist Jeffrey Sachs,
mobile phones are the “ single most
transformative technology” when it
comes to the developing world.
 Phones give people access to banking
and payment system and better access
to education and information.
 This helps farmers get info. and get the
best price for the crops they are
producing, installing cellphone towers is
a lot cheaper than running thousands of
kilometers of telephone lines.
 Leapfrogging - the idea that countries
can skip straight to more efficient and
cost-effective technologies that were not
available in the past.
 Globalization made some countries,
especially the developing ones, to gain
more in the global economy at the
expense of other nations.
 One of the various ways that a country
can make trade easier with other
countries while lessening the
inequalities in the global world is fair
trade.
 Fair trade, as defined by the International Fair
Trade Association, is the “ concern for the
social, economic, and environmental well-
being of marginalized small producers.”
 Aims for a more moral and equitable global
economic system.
 Concerned with protection of workers and
producers, establishment of more just prices,
engagement in environmentally sound
practices and sustainable production, creation
of relationships between producers in the
South and consumers in the North, and
promotion of safe working environment.
 Products like coffee, bananas, cotton,
wine, tea, and chocolate have been
exchanged in light of fair trade.
 A concrete example of the growth of fair
trade is the case of American coffee
chains such as Starbucks and Dunkin’
Donuts.
Processing Questions:
1. Do you think that Philippines is harmed
as other countries transfer their
activities to us thru outsourcing?
2. In what ways do international
organizations help our country’s
economy?
3. Does the position of rich countries as
giants in the economic chain threaten
the status of less developed countries
in the global market?