employment opportunities.

TCW - Introduction and Defining Companies are moving towards

Globalization developing countries to acquire a
labor force.
The Study of Globalization
Ø Encourages Free Trade
Ø Avoid parochialism
- Free trade is a policy in which a
Ø Globalization - is the country does not levy taxes, duties,
interconnectedness and interdependence subsidies, or quotas on the
established among countries around the import/export of goods and
world. services from other countries.
There are countries that resolved to
- It is a process of interaction and free trade in specific regions. This
integration among the people, companies, allows consumers to buy goods and
and governments of different nations. services, comparatively at a lower
cost.
The Four Perspectives on Globalization
Theories of Globalization
● Economic Globalization
● Cultural Globalization NEOLIBERALISM – it is an economic
● Political Globalization and political theory that focuses on the
● Social Globalization importance of free markets, limited
government intervention, private
A Multinational Corporation (MNC) - is
ownership, and free trade.
any business that has productive activities
in two or more countries PROTECTIONISM - It is a policy that
allows the government to promote
Multi-national or Transnational
domestic or local producers by imposing
corporations (MNCs or TNCs) -
tariffs and quotas.
businesses with headquarters in one
country but with business operations in Ø Cheaper Prices
several others.
- Globalization has brought fierce
Advantages and Disadvantages of competition in the markets.
Globalization
Ø Make the World a Smaller Place
ADVANTAGES
- Every single piece of information
Ø Peaceful Relations is easily accessible from almost
every corner of the world.
- Most of the countries have resorted
Circulation of information is no
to trade relations with each other to
longer a tedious task and can
boost their economy, leaving
happen in seconds. The internet has
behind any bitter past experiences
significantly affected the global
if any.
economy, thereby providing direct
Ø Create more employment opportunities access to information and products.
- “Global village”
- Considered one of the most crucial - Communications technology is
advantages, globalization has led to “shrinking” our world
the generation of numerous
 - The Internet did not exist in We associate ourselves with global
1982, but in 2006 it comprised 439 trends
million servers connecting people
from around the world through ● FOODS
e-mail, file transfers, and websites ● MUSIC
● ENGLISH LANGUAGE
Ø Improves Travel and Tourism ● CARTOON CHARACTER,
● KPOP, INT’L SINGER
- Globalization has promoted ● PLAYING ONLINE GAMES
tourism to great heights.
International trade among different Ø Environmental Degradation
countries also helps to increase the
number of tourists that visit - The industrial revolution has
different places around the world. changed the outlook of the
economy. Industries are using
Ø Cultural Diversity natural resources by means of
mining, drilling, etc. which puts a
- Increased movement of labor leads burden on the environment.
to an increase in the spread of
different cultural ideas. Ø Uneven Wealth Distribution

- It is said that the rich are getting

richer while the poor are getting
DISADVANTAGES poorer.
Ø Health Issues Theory of Globalization
- Globalization has given rise to WORLD SYSTEM THEORY - The
more health risks and presents new expansion of the capitalist system around
threats and challenges for the world.
epidemics.
- The dawn of HIV/AIDS. Having It is characterized by 3 independent
its origin in the wilderness of regions:
Africa, the virus has spread like
wildfire throughout the globe in no 1. Core countries – highly developed
time. countries
- Food items are also transported to
various countries, and this is a 2. Semi-periphery – middle-income
matter of concern, especially in the countries
case of perishable items.
3. Periphery – developing countries –
Ø Loss of Culture economically dependent on core countries

- With a large number of people

moving into and out of a country, History of Globalization: When did
the culture takes a backseat. People Globalization start?
may adapt to the culture of the
resident country. They tend to (Grills and Thompson) - globalization
follow the foreign culture more, began when Homo sapiens began
forgetting their own culture. This migrating from the African continent to
can give rise to cultural conflicts. populate the rest of the world.
(Frank and Grills) innovation. (International
Monetary Fund, 2008)
- Silk Road (Asia, Europe, Africa) is - Stiglitz (2008) – Economic
the best example of Archaic globalization can improve the
Globalization 5,000 years ago. living standards all over the world.
(Archaic means OLD)
ELEMENTS OF ECONOMIC
- Globalization has historical roots GLOBALIZATION
as old as mankind. ( Age of
Exploration - Colonial Period) 1.) Diffusion of Technology
2.) Foreign Direct Investment
Industrial Revolution (Great Britain) 3.) Migration (movement of labor)
- mid-18th century to 19th century 4.) International Trade
- The introduction of machinery
- Division of Labor
1. Diffusion of Technology
● Technology plays a vital role in
Golden Age of Globalization expediting the process of
- 20th century globalization.
- The introduction of a Multinational ● Technology is associated with the
Company (MNC). words “ progress and innovation”.
- Free Trade/s ● Digital Devices
- Transportation revolution ● Health Facilities
- Financial and Economic Stability ● Financial Sector
● Online Shopping Sites
History of Economic Globalization ● Universal Bar Code

Adam Smith considered the discovery of Advantages of Technology

America by Christopher Columbus in
1492 and the discovery of the direct sea - Creation of new services,
route to India by Vasco da Gama in 1498 industries, and business innovation.
as the two(2) greatest achievements of
human history. - Increases the efficiency of the
factors of production.

THE GLOBAL ECONOMY - Increase in GDP growth.

GLOBALIZATION - Reduction of poverty rate.

Multidimensional phenomenon Disadvantages of Technology

Approaching globalization purely through - Replacement of Workers by

the lens of economics is a mistake Machines.
(Benczes, 2014)
- Rise of Fake News.
ECONOMIC GLOBALIZATION
- Forgetting our own culture and
- It is a historical process traditions.
demonstrating the result of
technological progress and human
2. Foreign Direct Investment 4. International Trade
It is the economic transactions made
- FDI takes place when an investor between countries.
establishes foreign business
operations or acquires foreign
business assets in a foreign
company. MARKET INTEGRATION

- A foreign direct investment (FDI) International Economic and Financial

is an investment in the form of a Institutions
controlling ownership in a business
in one country by an entity based in Institution of Globalization
another country. ● World Bank (WB)
● International Monetary Fund
- United Nations Conference on (IMF)
Trade And Development ● World Trade Organization (WTO)
(UNCTAD) reports concluded that
FDI has become an important They were established after World War II
engine of economic growth. by the United States and the United
Kingdom (Bretton Woods Conference,
1944).
SOME AMENDMENTS ON THE
FOREIGN INVESTMENTS ACT (FIA) History of World Bank
OF 1991 In 1947 - the World Bank's first loan was
to France.
- One hundred percent (100%)
foreign capital investment in In the 1950s and 1960s - The funding of
domestic enterprises is allowed large infrastructure projects.

- The amendment now allows In the 1970s - The agriculture sector

foreign nationals to invest a became the World Bank’s major focus.
minimum paid-in capital of One
Hundred Thousand US Dollars Missions of the World Bank
(US$100,000). – MINIMUM
SHARE CAPITAL 1. To end extreme poverty. Considering
the more than 1 billion people that still
living today in deep poverty, the Bank's
3. Migration (movement of labor) first goal is to end extreme poverty by
decreasing the percentage of people living
- Migration is the movement of with less than $1.90 a day to no more than
people from one country to 3 percent by 2030.
another.
- Unfortunately, migration can also 2. Promote shared prosperity. World
hurt the economy in the process in Bank see that rising inequality and social
which a country loses its most exclusion seems to accompany rising
educated and talented workers to prosperity in many countries. Thus, the
other countries. The flight of this Bank‘s second goal is to promote shared
human capital is essential for prosperity by improving the income of the
countries‘ economic growth. bottom 40 percent of the population in
each country (World Bank, 2013).
 According to the Corporate Finance
Institute (2015), there are various reasons
why companies want to become
multinational corporations:

1.) Access to lower production costs

– installing a production warehouse
and manufacturing plants in
developing countries usually leads
to a lower production cost.
2.) Proximity to target international
markets – it is beneficial to set up
business in countries where the
target consumer market of a
company is located.
3.) Access to a larger talent pool
- When you become multinational,
you can access the broad and deep
talent pool that the globe has to
offer and reap the rewards.
4.) Avoidance of tariffs - when a
company produces or manufactures
its products in another country
where it also sells its products, they
are exempt from import quotas and
tariffs.

TRANSNATIONAL CORPORATIONS
are constantly evolving as a result of
outsourcing activity.

The major players in the global economy

are the Multinational Corporations or
MNCs and Transnational Corporations or
TNCs.

Multinational Corporations
- It is defined as enterprises that own Outsourcing helps to reduce costs.
or control production or service
facilities outside the country in Impact of Economic Globalization
which they are based.
- Any enterprise that undertakes World Bank (WB) claims that
foreign direct investment, owns or globalization can indeed reduce poverty
controls income-gathering assets in but it definitely does not benefit all
more than one country, produces nations.
goods or services outside its The World System Analysis
country of origin, or engages in Capitalism under economic globalization
international production" creates INEQUALITY.
(Biersteker 1978).
 INTERNATIONAL TRADE INPUT: No. of hours to produced 1 unit of
Car Truck
International Trade- it is the exchange of
goods and services between countries. Japan 12hrs 18hrs

Scarcity – Limited Resources but U.S.A 15hrs 24hrs

Unlimited Human needs and wants
Individual – exists when a person can
3 Basic Economic Problems
produce more of a certain good/service
1. What to produce?
than someone else in the same amount of
2. How to produce?
time (or can produce a good using the least
3. For whom to produce?
amount of resources.)
Two (2) Theories behind
National – exists when a country can
International Trade
produce more of a good/service than
another country can in the same time
1.) Theory of Absolute Advantage
period.
Adam Smith, 1776

Absolute Advantage is the ability to excel

David Ricardo
at producing goods more efficiently than
- Classical Economist who
another country.
promoted the theory of
comparative advantage as the
Distinguishing input
basis for trade.
from output problems
Comparative Advantage
An OUTPUT problem presents the data as
products produced given a set of resources.
A person or a nation has a comparative
(ex. Number of pens produced)
advantage in the production of a product
when it can produce the product at a lower
An INPUT problem presents the data as
opportunity cost than another person or
amount of resources needed to produce a
nation.
fixed amount of output. (ex. Number of
Trade as mutually beneficial even if one
labor hours to produce 1 bushel, hours to
country is more efficient than another
do a job)
TRADE-OFFS
When identifying absolute advantage,
input problems change the scenario from
- is an exchange where you give up
who can produce the most to who can
one thing in order to get something
produce a given product with the least
else that you also desire.
amount of resources.
Opportunity Cost
Example of two methods: Input & Output
- A benefit or value of something
OUTPUT: No. goods produced
that must be given up to acquire or
Coconuts Chocolates achieve something else.

Philippines 500,000 200,000

U.S 150,000 700,000

Example:

Shirts Wheats

American 50 200

China 25 50

Shirts Wheats

Absolute

Comparative

1.) What is the opportunity cost of

shirts in America?

2.) What is the opportunity cost of

shirts in China?

3.) What is the opportunity cost of

producing wheat in America?

4.) What is the opportunity cost of

producing wheat in China?

By: Kyru:D