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Study Guide in GE 5: Contemporary World Module No.2

STUDY GUIDE FOR MODULE NO. 2

THE GLOBAL ECONOMY
MODULE OVERVIEW

Countries trade with each other due to the lack of resources and cannot satisfy their own needs and
wants. As the countries developed their resources and they trade it for the resources they need. Many
years ago, when the other countries travelled a distance to trade, as it is very evident that international
trade plays significant role in the development of industrialized world. Imports of goods and services happen
maybe for better or cheaper quality, appealing goods or no alternatives exist. In this lesson, we will begin
with economic globalization and global actors that facilitate the economic globalization

MODULE LEARNING OBJECTIVES

 Discuss economic globalization.

 Identify the global actors/international financial institutions and explain their
roles in the creation of a global economy.
 Identify the actors that facilitate economic globalization.
 define the modern world system.
 articulate a stance on global economic integration.

MODULE CONTENT

The Global Economy

United Nations defines Economic globalization as “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. The rapid growing significance of information in all types of productive activities and marketization
are the two major driving forces for economic globalization”

According to Dennis O. Flynn and Arturo Giráldez ,”Global trade emerged when 1) all heavily populated
continents began to exchange products continuously – both with each other directly and indirectly via other
continents – and 2) did so in values sufficient to generate lasting impacts on all trading partners” (“Globalization
Began in 1571.p2 ) In economic globalization, companies seek the greatest possibility of efficient and maximized
profits that will involve many regions and localities to “global production”. Many believe that the new technology
will allow the intense movement of information, goods, services and people can create an environment of “new
economy”- increasing the networks in global production, free trade and capital. The interconnections of various
components of production, where the stages in production takes place in different location depends on the
favorable conditions such as cheap labor, raw material, skilled labor and market consumer.

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Global Actors

A global actor refers to any social structure which is able to act and influence and engage in
the global or international system. These specific actors include:

 International Economic and Financial Organizations. International economic and financial

organizations provide the structure and funding for many unilateral and multilateral
development projects. Such organizations deal with the major economic and political issues
facing domestic societies and the international community as a whole. Their activities promote
sustainable private and public sector development primarily by: financing private sector
projects located in the developing world; helping private companies in the developing world
mobilize financing in international financial markets; and providing advice and technical
assistance to businesses and governments. (Lund University Libraries, 2018)

 International Governmental Organizations (IGOs). IGOs have international membership,

scope and presence. Their primary members consist of sovereign states. These organizations
bring member states together to cooperate on a particular theme or issues that have global
impacts and implications such as human rights, trade, development, poverty, gender or
migration.

 Media. Media are the communication outlets or tools used to store and deliver information or
data. The termrefers to components of the mass media communications industry, such as print
media, publishing, the newsmedia, photography, cinema, broadcasting (radio and television),
and advertising. (Wikipedia “Media,” 2019)

 Multilateral Development Banks. Multilateral development banks are international financial

institutions owned by countries. In addition to the World Bank Group, there are four regional
multilateral development banks: the Inter-American Development Bank, the African
Development Bank, the Asian Development Bank, and the European Bank for Reconstruction
and Development. These institutions provide loans, grants, guarantee, private equity and
technical assistance to public and private sector projects in developing countries. (Lund
University Libraries, 2018)

 Nation-States. Nation-states refer to a certain form of state that derives its political legitimacy
from serving asa sovereign entity for a nation within its sovereign territorial space. The state is
a political and geopolitical entity while the nation is a cultural and/or ethnic entity. The term
"nation-state" implies that the two geographically coincide, and this distinguishes the nation
state from the other types of state, which historically preceded it. (Lund University Libraries,
2018)

 Non-Governmental Organizations (NGOs). Non-governmental organization (NGO) refers

to a legally constituted organization created with no participation or representation of any
government and driven. These organizations are task-oriented perform a variety of service and
humanitarian functions. Some are organized around specific issues such as human rights,
environment, gender, or health. In many jurisdictions these types of organization are defined
as "civil society organizations." (Lund University Libraries, 2018)

 Trans-National Corporations (TNCs). "Transnational Corporations exert a great deal of

power in the globalized world economy. Many corporations are richer and more powerful than
the states that seek to regulate them. Through mergers and acquisitions corporations have been

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growing very rapidly and some of the largest TNCs now have annual profits exceeding the
GDPs of many low- and medium-income countries. Itis important to explore how TNCs
dominate the global economy and exert their influence over global policy making." (Global
Policy Forum, 2005)

 United Nations (UN) System. The United Nations System consists of the United Nations, and
the six principal organs of the United Nations: the General Assembly, Security Council,
Economic and Social Council ,(ECOSOC), Trusteeship Council, International Court of Justice
(ICJ), and the UN Secretariat, specialized agencies, and affiliated organizations. The executive
heads of some of the United Nations System organizations and the World Trade Organization,
which is not formally part of the United Nations System, have seats on the United Nations
System Chief Executives' Board for Coordination (CEB). This body, chaired by the Secretary-
General of the United Nations, meets twice a year to co-ordinate the work of the organizations
of the United Nations System. (Wikipedia “United Nations System,” 2019)

Multinational Corporation
The multinational corporation is a business organization whose activities are located in more than two
countries and is the organizational form that defines foreign direct investment. This form consists of a country
location where the firm is incorporated and of the establishment of branches or subsidiaries in foreign countries
(A.A Lazarus, 2001 p. 10197)

The International Monetary Fund

The International Monetary Fund (IMF), founded at the Bretton Woods Conference in 1944, is the
official organization for securing international monetary cooperation. It has done useful work in various fields,
such as research and the publication of statistics and the tendering of monetary advice to less-developed
countries. It has also conducted valuable consultations with the more developed countries.

North Atlantic Treaty

NATO is based on the North Atlantic Treaty, which provides the organization a framework. The treaty
provides that an armed attack against one or more of NATO`s member nations shall be considered an attack
against them all.* NATO is headquartered in Brussels, Belgium. The organization was formed in 1949. Many
nations joined NATO — even Iceland, the only member without a military force. The organization was originally
formed out of the fear that the Soviet Union would ally militarily with Eastern European nations, i.e. the Warsaw
Pact, and thus become a threat to Western Europe and the United States

World Trade Organization (WTO), International Monetary Fund (IMF), and the World Bank
The World Trade Organization (WTO), the International Monetary Fund (IMF), and the World Bank are
the three institutions that underwrite the basic rules and regulations of economic, monetary, and trade relations
between countries. Many developing nations have loosened trade rules under pressure from the IMF and the
World Bank.

The domestic financial markets in these countries have not been developed and do not have appropriate
laws in place to enable domestic financial institutions to stand up to foreign competition. The administrative setup,

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judicial systems, and law-enforcing agencies generally cannot guarantee the social discipline and political stability
that are necessary in order to support a growth-friendly atmosphere.

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Activity 1

Global Products Market Survey

Go to SM or any shopping center online and then take a global product survey of imported items or
goods sold in the shopping mall. Use and fill in the chart provided below. After filling in the chart,
take a picture/selfie while browsing using your smartphone and then paste it on the space provided on
the next page.

Item Price Country Company

Paste your Pictures here.

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Activity 2

Direction: Organize the different global actors and their activities

GLOBAL ACTORS

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SUMMARY

The framers of the new Bretton Woods monetary regime hoped to promote world trade, investment,
and economic growth by maintaining convertible currencies at stable exchange rates. Countries with temporary,
moderate balance-of-payments deficits were expected to finance their deficits by borrowing foreign currencies
from the IMF rather than by imposing exchange controls, devaluations, or deflationary economic policies that
could spread their economic problems to other countries. After ratification by 29 countries, the Articles of
Agreement entered into force on December 27, 1945. The fund’s board of governors convened the following year
in Savannah, Georgia, U.S., to adopt bylaws and to elect the IMF’s first executive directors. The governors
decided to locate the organization’s permanent headquarters in Washington, D.C., where its 12 original executive
directors first met in May 1946. The IMF’s financial operations began the following year, In other words, the fast
globalization of the world’s economies in recent years is largely based on the rapid development of science and
technologies, has resulted from the environment in which market economic system has been fast spreading
throughout the world, and has developed on the basis of increasing cross-border division of labor that has been
penetrating down to the level of production chains within enterprises of different countries.

REFERENCES

Aldama, Prince Kennex R. The Contemporary World First Edition.Rex Bookstore, Inc. 2018.
Steger, Manfred B., Paul Battersby, and Joseph M. Siracusa, eds. 2014.The SAGE
Handbook of Globalization. Two volumes. Thousand Oaks: SAGE Publications.

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