Role of Globalization

in Economic
Development
First phase of globalization
• Early 19th century-1914
• Facilitated by technological
advancement
• Completion of Suez Canal
accelerated the travel time
• Steel replaced iron in shipbuilding
First phase of globalization
• Produced a divide in the world
economy
• Industrial core vs. Raw material-
producing periphery
 Silk Road
International • Oldest known, but
not global
Trading
Systems Galleon Trade in
1571
• Manila-Acapulco
International • Part of mercantilism
monetary
conference in Paris
in 1867
• Based on gold

Presently – the world

uses fiat currency
 Threats of
Economic
Globalization

Spread of invasive
species
 Threats of
Economic
Globalization
State’s revenue collection,
earners may hold their
money in foreign financial
institution and hide data on
taxable income
 Threats of
Economic
Globalization

Heightened income
inequality
 Impact of
Globalization on
Economic
Growth
A. Foreign Direct Investment (FDI)
• Investment made by a firm or
individual in one country into
business interests located in another
B. Technological Innovation
• Globalization resulted into:
• International exploitation of nationally
generated innovations
• Global generation of innovations by
global multinational enterprises
(MNE)
• Global techno-specific collaborations
C. Economies of Scale
• Refers to a reduced costs per unit
that arise from the increased total
output of a product
D. Interdependence
• Leads to regional and global
inequalities
E. National Security
• MNCs can influence nation-state’s
economic and political agenda
F. Equity Distribution
• Refers to value of shares issued by a
company
Decline of
the Old
Economic
Order
• International economic
order (IEO) changes
from time to time
• After WWII, dominant
states set up the IEO
• BRICS today are
asserting their interests
and vying for influence
on the global stage
The New International Economic Order
• Refers to the means where new states
that emerged as a result of
decolonization from European
colonial rule get an opportunity to
participate effectively in
international political, social, cultural
and economic arena
Factors that contributed to the rise of NIEO
• Development goals set by UN in
1972/73 results in great
dissatisfaction among UN members
Factors that contributed to the rise of NIEO
• Sudden and unanticipated rise of
developing countries’ economic and
political power with visible
bargaining capacity
Factors that contributed to the rise of NIEO
• The socio-economic and political
situation of oil-importing countries
was not improved