The Structure of Globalization
Define economic
globalization
Identify the actors that facilitate
economic globalization
OBJECTIVES Define the modern world
system
Articulate the stance on global
economy integration
What is economic
globalization?
❖ Economic globalization is a
historical process, the result of
human innovation and
technological progress. It refers
to the increasing integration of
economies around the world.
Particularly through the
movement of goods, services, and
capital across borders.
The term sometimes also refers
to the movement of people (labor)
and knowledge (technology)
across international borders.
INCREASE
TRADE
- According to IMF, the value of trade
(goods & services)as a percentage of the
world GDP increased from 42.1 percent
in 1980 to62.1 percent 2007.
- Increased trade also means that
investment are moving all over the world
at faster speed. According to the United
Nation Conference on Trade and
Development (UNCTAD), the amount of
foreign direct investments flowing
across the world was US$ 57 billion in
1982. by 2015, that number was $1.76
trillion. These figures represent a
dramatic increase in global trade in the
span of just one human lifespan.
❖ These days, super computers
can execute millions of stock
purchases and sales between
different cities in a matter of
second through a process
called high-frequency
trading.
❖ Supercomputer can execute
even the items being sold and
traded are changing
drastically.
WHEN DID ECONOMIC
GLOBALIZATION BEGIN?
INTERNATIONAL TRADING SYSTEM
• SILK ROAD
The oldest known international
trade route was the silk road. A
new network of pathways in
the ancient world that spanned
from China to what is now the
Middle East as well as the West
(today’s Europe). Traders used
the silk road regularly from
130 BCE when the Ottoman
Empire closed it.
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INTERNATIONAL
TRADING SYSTEM
• According to historian Dennis Flynn
and Arturo Giraldez, the age of
globalization begin when all important
populated continents began to
exchange products continuously both
with each other directly and indirectly
via other continents-and in values
sufficient to generate crucial impacts
in all trading partners.
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GALLEON TRADE
1571 The establishment of
the galleon trade that
connected to Manila in the
Philippines and Acapulco in
Mexico was the first time
that the American were
directly connected to
Asian trading route. For
Filipinos, it is crucial to
note that economic
globalization began on the
Country’s shores.
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MERCANTILISM
❖ The galleon trade was part of the
age of mercantilism. From the 16th
century, countries, primarily in
Europe, competed with one another
to sell more goods as a means to
boost their country’s income (called
monetary reserves later on)
❖ To defend their products from
competitors who sold goods more
cheaply, these regimes (mainly
monarchies) imposed high tariffs,
forbade colonies to trade with other
nations, restricted trade routes, and
subsidized its exports. Mercantilism
was thus also a system of global
trade with multiple restrictions.
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GOLD STANDARD
❖ A more open trade system emerged
in 1867 when, following the lead of
the United Kingdom, United States
and other European nations adopted
the gold standard at an international
monetary conference in Paris.
❖ Broadly, its goal was to create a
common system that would allow
for efficient trade and present the
isolation of the mercantilism era.
The countries thus established a
common basis for currency prices
and a fixed exchange rate system- all
based on the value of gold.
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GREAT DEPRESSION
1920’S
GREAT DEPRESSION
1920’S
❖The gold standard became difficult
❖The worst and longest crisis ever experienced
by the Western World.
❖Some economists argued that it was largely
caused by the gold standard, since it limited the
amount of circulating money and, therefore,
reduced demand and consumption.
❖Its governments could only spend money that
was equivalent to gold, its capacity to print
money and increase the money supply severely
curtailed.
INTERNATIONAL
TRADING
SYSTEM
FLAT CURRENCIES
❖Today, the world economy operates based on
what are called flat currencies that are not
backed by precious metals and whose value is
determined by their cost relative to other
currencies.
❖Flat money gives central banks greater control
over the economy because they can control
how much money is printed.
❖This system allows government to freely and
actively manage their economies by increasing
and decreasing the amount of money in
circulation as they see it.
BRETTON WOOD
SYSTEM (1944)
❖After the two world wars,
world leaders sought to create
a global economic system that
would ensure a longest-lasting
global peace
BRETTON WOOD
SYSTEM (1944)
❖The chief features of the Bretton Woods system
were an obligation for each country to adopt a
monetary policy.
❖The Bretton Woods system was largely influenced
by the ideas of British economist John Maynard
Keynes who believed that economic crises occur
when a country does not have enough money, but
when money is not being spent and, thereby not
moving.
❖Government have to reinvigorate markets with
infusions of capital.
BRETTON WOOD
SYSTEM (1944)
❖Delegates at the Bretton Woods agreed to create
two financial institutions.
❖International Bank for Reconstruction and
Development (IBRD, or World Bank)
❖International Monetary Fund (IMF)
INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT (IBRD
or WORLD BANK)
❖Responding for funding postwar reconstruction
projects. It was a crucial institution at a time when
many of the world’s cities had been destroyed by
the war.
❖Today, World Bank is an international organization
that helps emerging market countries to reduce
poverty. Its first goal is to end extreme poverty.
Since 1947, the World Bank has funded more than
12, 000 projects.
❖One of its organization is the International
Development Association, which provides low-or
no-interest loans and grants to low-income
countries.
AFTER BRETTON WOOD SYSTEM
❖ Various countries also
committed themselves further
global economic integration.
❖ General Agreement of Tariffs
and Trade (GATT) in 1947.
GATT’s main purpose was to
reduce tariffs and other
hindrances to free trade.
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ECONOMIC GLOBALIZATION TODAY
❖When more countries opened up their
economies to take advantage of increased free
trade, the shares of the percentage began to
change.
❖By 2011, developing countries like the
Philippines, India, China, Argentina, and Brazil
accounted nations-including the United States-
had gone down to 45 percent. The WTO-led
reduction of trade barriers, known as trade
liberation, has profoundly altered the dunamics
of global economy
ECONOMIC GLOBALIZATION TODAY
❖In the recent decades, partly as a result of these
increased exports, economic globalization has
ushered in an unprecedented spike in global
rates.
❖According to the IMF, the global per capita
GDP rose over five-fold in the second half of
the 2oth century.
❖It was this growth that created the large Asian
economies like Japan, China, Korea, Hong Kong
and Singapore.
ECONOMIC GLOBALIZATION TODAY
❖And yet, economic globalization remain uneven
process with some countries, corporations, and
individuals benefitting a lot more than others.
❖The series of trade talks under the WTO have
led to unprecedented reductions in tariffs and
other trade barriers, but these processes have
often been unfair.
ECONOMIC GLOBALIZATION TODAY
❖First developed countries are often
protectionists, as they repeatedly refuse to lift
policies that safeguard their primary products
that could otherwise be overwhelmed by
imports from the developing world.
❖The best example example of this double
standard is Japan’s determined refusal to allow
rice import into the country to protect its
farming sector.
❖Japan’s justification is that rice is “sacred’.
Ultimately it is its economic muscle as the third
largest economy that allows it to resist
ECONOMIC GLOBALIZATION TODAY
❖The term ‘race to the bottom” refers to
countries lowering their labor standards,
including the protection of their workers,
interest, to lure in foreign investors seeking high
profit margins at the lowest cost possible.
❖Governments weaken environmental laws to
attract foreign investors, creating fatal
consequences and depleting them of their finite
resources like (oil, coal, and minerals).
thank you
