STRUCTURES OF GLOBALIZATION

What is Economic Globalization?

 The process of making the world economy an ‘organic  Refers to the expanding interdependence of world
system’ by extending transnational economic process and economies.
relations to more and more countries and by deepening  worldwide interconnectedness in all of contemporary
the economic interdependence among them (Szentes, social aspects
2003)  the economic dimension is one of the major driving
forces of globalization

What did economic globalization start?

Pre-Historic 1942
Grills and Thompson, globalization began since Homo Adam Smith considered the discovery of America by
sapiens began from migrating from the African continents to Christopher Columbos
populate the rest of the world.
16th – 18th century
14 BCE – 1450s CE Mercantilism trade
Frank and Grills considered the Silk Road or Sil Route (Asia,
Europe, African) the best example from archaic globalization, 17th – 19th century
this route also led the discovery of the Philippines islands Economic nationalism and monopolized trade such as the
when Portuguese and Spaniards were in search of spices, and British (1600) and the Dutch (1602) East India Companies
then laid colonization. 20th century
Transport revolution is considered the “golden age of
globalization” because it promoted relative peace, free-trade,
and financial and economic stability

Forms of Economy
Proctectionism VS Trade Liberation

 PROTECTIONISM : Protecting one’s economy from What are trade barriers?

foreign competition by creating trade barrier
Tariffs
High custom duty
Limit import products A tax imposed by one country on the goods and services
Ban import product imported from another country.
 TRADE LIBERATION (FREE TRADE) – reducing trade
barriers for easy global trade

International Trading System

International trade is economic transactions that are made between countries. Among the items commonly traded are
consumer goods, such as television sets and clothing; capital goods, such as machinery; and raw materials and food.

Other transactions involve services, such as travel services and payments for foreign patents. International trade transactions
are facilitated by international financial payments, in which the private banking system and the central banks of the trading nations
play important roles.

Four interconnected dimensions of economy Benczes (2014)

 Globalization of trade of goods and services

 Globalization of financial and capital
 Globalization of technology and communication
 Globalization of production
 Market integration
It shows the contributions of the different financial and economic institutions that facilitated the growth of the global economy. There
are different views on the actors that facilitate economic globalization:

1. Nation-state - account for about a tenth of the world's GDP

 the role of nation-states as manager of the national - activity is measured by foreign direct investment,
economy is being redefined by the globalization, but still portfolio investment, greenfield investment
act as buffer to globalization’s negative effects (Boyer & TRANSNATIONAL CAPITALISM (TNC)
Drache, 1996)
 the government acts as ‘midwives’ of globalization - a firm that operates in one or more countries
(Brodie, 1996), meaning that nation states are still
- Economic transnational practices able to transcend
relevant despite assuming a global perspective and act as
geographical boundaries, great importance is
mediators between the effects of globalization and the
political and focused on culture-ideology
national economy
- more complex organizations which have invested in
2. Global corporations
foreign operations, which a central corporate facility
 existed as the primary economic organization unit in the but give decision making, research and development,
global market, meanwhile, nation-state has ceased marketing powers to each individual foreign market
 have vast influence under globalization as their economic
INTERNATIONAL CORPORATIONS
power can make or break a country’s economy
 some have bigger valuation than the GDP of several - are importers and exporters, typically without
develop countries  These global corporations include the investment outside of their home country
MNCs, TNCs, and ICs
3. International monetary system (IMS)
MULTIPLE CORPORATIONS
 refers to internationally agreed rules, conventions, and
- a firm that has the power to coordinate and control institutions for facilitating international trade,
operations in more than two countries investments and flow of capital among nation-states
- grown more powerful than the nation-state.  Historically, there are three global IMS – the gold
standard, the Bretton Woods System, and the European
- there are about 61,000 MNCs in the world today Monetary System (EMS)

What do you think, did globalization unites or divides the world?

Globalization can have both unifying and dividing effects on the world, depending on how
it is managed and the policies in place to mitigate its negative consequences. It’s crucial for
governments, organizations, and societies to address the challenges associated with
globalization while maximizing its potential benefits to create a more inclusive and
interconnected world affects all nations and
Economic globalization counteract post war policies that favored the working class
citizens through the increasing integration of economies and strengthened the welfare state.
around the borderless world. With its important players, re:
nation-states, global corporations, and the international Neoliberal policies supporter market forces and
monetary systems, though some people believe that economic commercial activity as the most efficient methods for
globalization brings unity of all economic movements, others producing and supplying goods and services. At the same
believe that globalization furthers the separation among time, they ignore the role of the state and discourage
nation-states around the world. government intervention into economic, financial and even
social affairs.
After the Second World War, almost all countries
around the world faced the great challenge of bringing their The process of economic globalization is driven by
feet back on the ground. Corporate enterprises helped to this ideology; removing borders and barriers between nations
create a wealthy class in society which enjoyed excessive so that market forces can drive the global economy. The
political influence on their government in the US and Europe. policies were readily taken up by governments and still
Neoliberalism surfaced as a reaction by these wealthy elites to continue to pervade classical economic thought, allowing
corporations and affluent countries to secure their financial
advantage within the world economy.
 Neoliberalism and is Discontents
 The high point of global Keynesianism came in the argued that government intervention in economies alter
mid-1940s and early 1970s the proper function of the market
 There is an increase in the prices of oil as a result of  Then emerged the neoliberalism, a new form of
OAPEC in the early 70s economic thinking. Economists used the economic
 stagflation phenomenon occurs turmoil to challenge the consensus around Keynes’s
 Friedrich Hayek and Milton Friedman argued that ideas.
pouring money into economy had caused inflation, and  Neoliberalism became the codified strategy called the
Washington Consensus
 Washington Consensus

The Global Financial Crisis and the Challenge to Neoliberalism

 Neoliberalism came under significant strain during the individuals. The loss of their money spread like wildfire
global financial crisis when the world experienced the back to their countries
greatest economic downturn since the Great  Iceland's banks heavily depended on foreign capital, so
Depression. This global financial crisis traced back they failed to refinance their loans. Three of Iceland’s
when the United States removed banking and top commercial banks defaulted and resulted their debt
investment restrictions to increase more than seven-fold
 Russia's case was just one example of how the “shock  Countries like Spain and Greece are heavily indebted,
therapy” of neoliberalism did not lead to the ideal and debt relief has come at a high price. Greece has
outcomes predicted by economists in perfectly free been forced by Germany and IMF to cut back on its
markets social and public spending, slowed down growth and
 American government authorities failed to regulate bad high unemployment
investments occurring in the US housing market, taking  US recovered because of the Keynesian-style stimulus
advantage of “cheap housing loans” and sold them as package that President Obama pushed
“mortgage backed securities” to mitigate them  In Europe, economic crisis sparked a political upheaval,
 The crisis spread beyond the US since many investors unfairly blamed immigrants, resentment with utter
were foreign governments, corporations and hatred and racism.

In conclusion, economic integration is a central tenet of globalization. Economics is just one window into the phenomenon of
globalization. Nevertheless, much of globalization is anchored on changes in the economy. Global culture and globalization
on politics are largely contingent on trade relations. Nowadays, many events of foreign affairs are conducted to cement
trading relations between and among states. Although global free trade can be scaled back, policies cannot do away with it
as a whole. Governments must continue to devise ways of cushioning the mist damaging effects of economic globalization,
while ensuring that its benefits accrue for everyone.