THE GLOBALIZATION

OF WORLD
ECONOMICS
By: Aguirre, E.P.M.
Amponin, G.A.E.
Arellano, J.R.M.
Atienza, Z.M.S.
Bacsa, R.P.
Economic Globalization
“Economic globalization is a historical process
representing the result of human innovation and
technological progress” - International Monetary
Fund (IMF)
“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”
(Shangquan 2000)
 • “Economic globalization is the increasing
integration of economies around the world, and
the movement of people and knowledge across
international borders” – Benezes (2014)
Internationalization VS Economic globalization

Extension of Functional
economic activities of integration between
nation states between internationally
borders dispersed activities
Quantitative change Qualitative
transformation
Economic Globalization
• 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.
• Increased trade means investments are moving all over
the world at faster speeds
• describe trends perceived to be dramatically and
relentlessly increasing connections and
communications among people regardless of nationality
and geography.
Effect to Market
1. Commodities
2. Labor
3. Assets and Debts
International Trading System
• International trade - exchange of goods and
services between countries.
-gives rise to a world economy, in
which supply and demand, and therefore prices, both
affect and are affected by global events.
• Trading - gives consumers and countries the
opportunity to be exposed to goods and services not
available in their own countries, or which would be
more expensive domestically.
• EXPORT -A product that is sold to the
global market
• IMPORT -A product that is bought from
the global market
Monetary Regime

• Classical Gold Standard Regime

• Gold Exchange Standard Regime
• Bretton Woods System Regime
• Flexible exchange Rates Regime
Silk Road
• Oldest known international trade route
• From China to Middle East and to
Europe
• Most profitable product traded was
SILK
• 130 BCE – 1453 BCE
Galleon Trade

• Established: 1571
• Connected Manila and Mexico
• First time that America was directly
connected to Asian trade
Gold Standard

• Goal: create a common system to

allow more efficient trade and
prevent isolationism
Bretton Woods System (1944)
• replaced the gold standard with the U.S. dollar as the global
currency
• The agreement created the World Bank and the International
Monetary Fund
• created in a conference of all of the World War II Allied
nations. It took place in Bretton Woods, New Hampshire.
• countries promised that their central banks would maintain
fixed exchange rates between their currencies and the dollar
• Members of the Bretton Woods system agreed to avoid trade
wars.
Role of the IMF and World Bank
to Bretton woods system
• IMF (International monetary fund) –
global lender of last resort to prevent
countries from spiraling to credit crisis and
was responsible for enforcing the Bretton
Woods agreement.
• World Bank (IBRD) - purpose of the World
Bank is to loan money to economic
development projects in emerging
market countries
Neoliberalism and its Discontents
NEOLIBERALISM
• philosophy that economic freedom is the primary
freedom, economic growth is the primary goal of society
and the for-profit corporation is the ideal form of
organization
• well-known adherents include Friedrich Hayek, Ludwig
von Mises and Milton Friedman.
• to a system of economic and political thought that
prioritizes the deregulation of national economies, the
private ownership of infrastructure
Neoliberalism and its Discontents
• Theory: as prices increased, companies
would earn more and could hire more
workers
• Stagflation – a decline in economic growth
and employment takes place along side a
sharp increase of prices
The Global Financial Crisis and the
challenge to Neoliberalism
• Global Financial Crisis - a financial crisis that
affects many countries at the same time. It is a
period of severe difficulties which financial
institutions, markets, companies, and consumers
experience simultaneously.
• primarily caused by deregulation in the financial
industry.
• Shock Therapy – death of industries due
to the changes from stagflation and
neoliberalism that was said to be necessary
for long term economic growth
1. Excessive risk-taking in a favourable
macroeconomic environment
• Loans seems to be profitable at the moment
• MBS packages were thought as assets with low
risks, that even if the mortgage will not be
repaid, the loans will continue to get paid.
• No thorough assessment on borrower as they
don’t expect losses.

Main Causes of GFC

2. Increased borrowing by banks and investors
• Banks and other investors across United States
and other countries borrowed money to expand
their lending and promoting their MBS products.
They borrowed money to purchase assets as
potential profits but also magnifies potential
losses.

Main Causes of GFC

3. Regulation and policy errors

• As the crisis unfolded, many central banks and

governments did not fully recognize the extent
to which bad loans had been extended during
the boom and the many ways in which
mortgage losses were spreading through the
financial system.

Main Causes of GFC

• As neoliberal policies were implemented
around the world disparities in wealth and
income increased and poverty increased,
contradicting neoliberal theories that by
increasing the wealth at the top everyone
would be better off.

GFC’s CHALLENGE TO
NEOLIBERALISM
1. Financial Market Coercion
2. Inequality and Debt
3. More Consequences of Financial
Deregulation

GFC’s CHALLENGE TO
NEOLIBERALISM
Economic Globalization Today
• Economic globalization refers to the mobility
of people, capital, technology, goods and
services internationally. It is also about how
integrated countries are in the global economy.
• In this century, people do not cross borders
easily, but technologies, capital and goods do.
THANK YOU!