Chapter 2 Lesson 1 – The Global

Economy
Origin of Economic Globalization general term of globalization. It refers to the
widespread international movement of
It can be traced from history the time when
goods, capital, services, technology and
there was an economic movement in Asia,
information. It is the increasing economic
Africa and Europe called the Silk Road, a
integration and interdependence of national,
trade route which connects the East,
regional, and local economies across the
particularly China, and the West. This route
world through an intensification of cross-
brings us to the history of how Philippines
border movement of goods, services,
was discovered by the Portuguese and Spain
technologies and capital. Economic
envoys in search of spices and eventually led
to colonization. There are numerous benefits of a global
economy, which include the Free trade, an
At this present-day time, foreign expatriates
excellent method for countries to exchange
come to the country to manage their
goods and services. It also allows countries
company's foreign subsidiaries. Likewise, the
to specialize in the production of those goods
Philippines send thousands of skilled workers
in which they have a comparative
to the Middle East as construction workers,
advantage. International forces are reshaping
seafarers, nurses,etc.
the world of business, but also creating new
Economic globalization refers to the opportunities and a more level playing field
expanding interdependence of world for small firms. Economy is considered very
economies. important because it is the thing that allows
us to survive and thrive. A system where no
The term global economy also refers to the money is involved and trade is done as direct
interconnected worldwide economic exchange of goods is an economy too.
activities that take place between Having enough is extremely important for
multiple countries. These economic stability, low crime levels and cultural,
activities can have either a positive or scientific and technological progress. So, to
negative impact on the countries involved. improve the economy, some
The International Monetary Fund (IMF) Specific factors that facilitate economic
also defined Economic Globalization as a globalization are highlighted as follows:
historical process, the result of human
innovation and technological progress 1. The International Economic and Financial
(IMF, 2008) Organization
2. The International Governmental
How does global economy work? Organization (IGOs)
A global economy is one in which goods and 3. The Media
services are traded across national 4. The Multilateral Development Banks
borders. Because the trade is among 5. The Nation-States
sovereign nations, those nations may enact 6. The Non-Governmental Organizations
trade restrictions that alter free market out (NGOs)
comes. 7. The Trans-National Corporations (TNCS)
8. The United Nations (UN) System
The New World Economy is
characterized by: These are the agents that bring about the
interdependencies of global economies.
1. More options for production. No matter
Some experts believe that these actors are
what your production process, the chances
the global corporations and that it is still the
are that the same capabilities exist
nation-states but of different levels. Brodie
elsewhere.
2006) calls the government as the
2. The chance to create new markets
"midwives of globalization" which means
3. Small firms can think big
that the role of nation-states is being
4. A more level playing field
redefined by globalization and are relevant
5. Networks are important
despite assuming a global perspective. It
6. Culture is no constraint
acts as mediators between the effects of
globalization and the national economy.
Economic globalization is one of the three
main dimensions of globalization commonly Chapter 2 lesson 2 GLOBAL MARKET
found in countries, academic literature, with INTEGRATION
the two others being political globalization
and cultural globalization, as well as the Market integration occurs when prices
among different locations or related
goods follow similar patterns over a long perfectly integrated if investors can pass
period of time. from one market to another without paying
any extra costs and if there are possibilities
Groups of goods often move proportionally
of arbitration which ensures the equivalence
to each other and when this relation is very
of stock prices on both markets.
clear among different markets it is said that
the markets are integrated. Financial Market Integration
Integrated marketing allows you to spread It is an open market economy between
your marketing messages across countries facilitated by a common currency
multiple channels and increases the and the elimination of technical, regulatory
chances of it being heard. Best of all and tax differences to encourage free flow of
customers engaged through multiple capital and investment across borders. It
channels tend to spend more than other occurs when lending rates in several
customers. Therefore spreading your different markets begin to move in tandem
marketing message can increase your with one another. Emergence of similar
return on investment. patterns within the capital, stock, and
financial markets with those trends coming
Global market integration did not happen
together to exert a profound influence on the
overnight. It was the result of the
economy of that nation is involved in the
establishment of a global economy that
integration within a nation.
involved the homogenization of trade
and commerce. Prior to the trends in Global Corporation
globalization in the 20th century,
A global corporation is a business that
international trade of goods and services
operates in two or more countries. It also
were already practiced.
goes by the name "multinational company"
The integration of the global market started (58). Several advantages are offered by
when big American corporations began to global expansion of business over running a
emerge after the Second World War with the strictly domestic company. Success in
rise of new conglomerates. International different types of economies is achieved by
Telephone and Telegraph bought Avis Rent-a- means of multiple countries operation while
Car, Continental Banking, Sheraton Hotels, it causes also logistic and cultural
and Hartford Fire Insurance (American challenges. Expanding revenue opportunities
History, 2018). Later, Japan and Europe and diversifying business risk are the
followed suit. Japanese global automobile purposes of becoming global corporation.
corporations like Toyota, Nissan, and Isuzu Access to more customers and capital is
took off after the giant American economies obtained through a model that works
flourished. These companies prospered as domestically well and translates foreign
the primary and global makers of trucks for markets well.
the Japanese military (Dower 1992).
The Finance Function in a Global
Renault automobiles, a French multi-national
Corporation
automobile manufacturer was also used to
help in the military post-war operations. The As corporations go global, capital markets
rise of American, Japanese, and European open up within them, giving companies a
global corporations paved the way for the powerful mechanism for arbitrage across
further national financial markets (62). Chief
financial officers (CFOs) must balance the
Colonization and imperialism rose as the
opportunities with the challenges of
new ways of putting order to the economic
operating in multiple environments in
interrelationships among countries.
managing their internal markets in building
Through colonialism, equity, corporate an advantage. These three functions can be
ownership, management subsidiaries, and created by CFOs through exploiting their
central headquarters which supply goods and internal capital markets.
services were establish through colonialism.
1. Financing
Types of Related Markets where Market
A group's tax bill can be reduced by the CFO
Integration Occurs
like borrowing in countries with high tax
Stock Market Integration rates and lending to operations in countries
with lower rates.
This is a condition in which stock
markets in different countries trend 2. Risk Management
together and depict same expected risk
adjusted returns. Two markets are
Global firms can offset natural currency wars and changes in relative power of states
exposures through worldwide operations upsets any temporary set of alliances,
instead of managing currency exposures leading to restructuring of balance of power
through financial markets.
States are independent political
3. Capital budgeting communities each of which possesses a
government and assert sovereignty in
Getting smarter on valuing investment
relation to a particular portion of the earth’s
opportunities CFOs can add value.
surface and particular segment of human
Foreign Direct Investment population (Hedley Bull)”

Foreign Direct Investment (FDI) was of Nation - The concept of nation emphasizes
corporate origin. It is a major driver of the organic ties that hold groups of people
extended global corporate development. It is together and inspire a sense of loyalty and
an investment made by a company or belonging – i.e., ethnicity, language, religion,
individual in one country in business and others (Schattle, 2014)
interests in another country, in the form of
STATE
either establishing business operations or
acquiring business assets in the other • A legal and political entity
country, such as ownership or controlling • Linked to a territory
interest in a foreign company and the key • Exist with sovereignty
feature of foreign direct investment is that it • Established consciously
is an investment made that establishes • United by law
either effective control of, or at least NATION
substantial influence over, the decision
making of a foreign business. • A socio-cultural entity
• Linked to a group people
BRICS Economies • May exist even w/o sovereignty
• Can be created unconsciously
Brazil, Russia, India, China and South Africa
• United by bond and shared history
(BRICS) is an acronym for the combined
economies of Brazil, Russia, India, China and
NATION-STATE
South Africa. BRIC, without South Africa, was
originally coined in 2003 by Goldman Sachs,  This refers to modern countries and
which speculates that by 2050 these four their political apparatuses rules over a
economies will be the most dominant. South single nation.
Africa was added to the list on April 13, 2011
creating "BRICS"  It is a political community that
emanates from civic society to
The General Agreement on Trade in legitimately execute peace.
Services (GATS)
The State and the Economic
is the first multilateral agreement covering Interdependence
trade in services which was negotiated
during the last round of multilateral trade • The belief that globalization imposes a
negotiations, called the Uruguay Round, and forced choice upon states either to
came into force in 1995. conform to free market principles or
run the risk of being left behind is
General Agreement on Tariffs and Trade termed into a phrase called “Golden
(GATT) Straitjacket”
deals with trade in goods. The two primary • There are two things that will happen
objectives of GATTS are to ensure that all if a country is in Golden Straitjacket:
signatories are treated equitably when the economy grows and politics
accessing foreign markets; and second, to shrinks. It is a straitjacket because it
promote progressive liberalization of trade narrows the political and economic
policy choices of those in power to
relatively tight parameters
CHAPTER 2 LESSON 3 – THE GLOBAL
Neoliberalism
INTERSTATE SYSTEM
 the intensification of the influence and
INTERSTATE A system of unequally powerful
dominance of capital.
and competing states in which no single
 It values market exchange capable of
state is capable of imposing control on all
acting as a guide to all human action.
others. These states are in interaction with
one another in a set of shifting alliance and
  It emphasizes the significance of barriers, and the coordination of
contractual relations in the monetary and fiscal policies.
marketplace. Seven Stages of Economic Integration
 the social good will be maximized by
1. Preferential trading area (PTA
maximizing the reach and frequency
2. Free trade area
of market transactions
3. Customs union
Economic Sovereignty
4. Common market
The power or national governments to make
5. Economic union
decisions independently of those made by
6. Economic and monetary union
other governments. There are four diff.
7. Complete economic integration
concepts of sovereignty.
1. International legal Sovereignty, Preferential Trade Areas (PTAs)
2. Westphalian Sovereignty,
Happens when there’s an agreement on
3. Interdependence Sovereignty and
reducing or eliminating tariff (tax or duty to
4. Domestic Sovereignty.
be paid on a particular class of imports or
World’s Three Leading Financial
exports) barriers on selected goods imported
Institutions
from other members of countries within the
1. World Bank (WB)- The international geographical region or areas.
financial institution that provides loans
Free Trade Agreements (FTAs)
to countries of the world for capital
projects. It was established by the Eliminate import tariffs as well as import
United Nations Monetary and Financial quotas between signatory countries. These
Conference or the Bretton Woods agreements can be limited to a few sectors
conference. or can encompass all aspects of international
2. International Monetary Fund (IMF)- It trade.
does so in three ways: keeping track of
the global economy and the Custom Union
economies of member countries; Removal of tariff barriers between members,
lending to countries with balance of together with the acceptance of a common
payments difficulties; and giving or unified external tariff against non-
practical help to member members
3. World Trade Organization (WTO)-
regulates international trades deals Common Market (CM)
with the rule of trade between
All barriers to the mobility of people, capital
nations, ensure the trade will flows
and other resources within the area in
smoothly, predictably and freely as
question, as well as eliminating non-tariff
possible. Act as forum in negotiation
barriers to trade, such as the regulatory
trade agreements
treatment of product standards are removed
by CM aside from containing the provisions
European integration
of a customs union.
Is the process of industrial, political, legal,
Economic Union
economic, social and cultural integration of
states wholly or partially in Europe. European The trading bloc that has both a common
integration has primarily come about through market between members, and a common
the European Union and its policies trade policy towards non-members, although
members are free to pursue independent
European Union (EU)
macro-economic policies
Is an international organization comprising
Economic and Monetary Union (EMU)
28 European countries and governing
common economic, social, and security Involves a single economic market, a
policies common trade policy, a single currency and
a common monetary policy.
Economic Integration
Complete Economic Integration
 can be described as a process and a
means by which a group of countries The final stage of economic integration in
strives to increase their level of which member states completely forego
welfare. independence of both monetary and fiscal
 It is an arrangement between different policies.
regions that often includes the
reduction or elimination of trade Theories of European Integration
Neo-functionalism of global economics such as the World Trade
Organization
 This theory focuses on the
supranational institutions of the EU of New Transnational Activism
which the main driving forces of
Is as multifaceted as the internationalism.
integration are interest group activity
Although globalization and global neo-
at the European and national levels,
liberalism are frames around which many
political party activity, and the role of
activists mobilize, the protests and
governments and supranational
organizations are not the product of a global
institutions.
imaginary but of domestically rooted
 It is a theory of regional integration, activists who are the connective tissue of the
building on the work of Ernst B. Haas, global and the local, working as activators,
an American political scientist and brokers and advocates for claims both
Leon Lindberg, also an American domestic and international
political scientist.
Social Media and the State
Intergovernmentalism
Social media is a computer-based
This theory provides a conceptual technology that facilitates the sharing of
explanation of the European integration ideas and information and the building of
process. The main concept of the virtual networks and communities.
Intergovernmentalism is emphasizing on the
role of national states in the European
integration; in another words it argues that CHAPTER 2 LESSON 4 - CONTEMPORARY
"European integration is driven by the GLOBAL GOVERNANCE
interest and actions of nation states" . This
theory was suggested by Stanley Hoffmann Global Governance or World Governance

Liberal Intergovernmentalism Is a product of neo-liberal paradigm

shifts in international political and economic
Application of rational institutionalism to the relations . It is a movement towards political
field of European integration is the aim of integration of transnational actors aimed at
this theory. negotiating responses to problems that affect
more than one state or region. It tends to
Multi-level Governance (MLG)
involve institutionalization. These institutions
Writers defined MLG as dispersion of of global governance – the United Nations,
authority across multiple levels of political the International Criminal Court, the World
governance. (Liesbet Hooghe and Gary Marks Bank, etc. – tend to have limited or
) demarcated power to enforce compliance.
Transnational Activism in States The capacity of within the
international system, at any given moment
Transnational Activism
to provide government-like services and
Defined as the mobilization of collective public goods in the absence of a world
claims by actors located in more than one government. It is a combination of informal
country and/or addressing more than one and formal ideas, values, rules, norms,
national government and/or international procedures, practices, policies, and
governmental organization or another organizations that help all actors-state,
international actor. international organization, non-government
organizations identify ,understand, and
Social Movement address transboundary problems.
Is a type of group action. It refers to the International Organization (IOs)
organizational structures and strategies that
may empower oppressed populations to Commonly used to refer international
mount effective challenges and resist the intergovernmental organizations on groups
more powerful and advantaged elites". that are primarily made up of member-
states.
Global Justice Movement
Powers of International Organization
Describes the loose collection of individuals
and groups often referred to as a “movement 1. Power of classification
of movements”, who advocate fair trade 2. Power to fix meanings
rules and are negative to current institutions 3. Power to diffuse norms
 4. Because of these immense powers, well as a new generation of global
IOs can be sources of great good and challenges including climate change,
great harm. energy security, food and water
scarcity, international migration flows
Roles and Functions of the United and new technologies.
Nations
 Within states the first trajectory or
As an intergovernmental organization, the path is the depoliticization which can
United Nation is tasked to promote be observed in the form of delegating
international co-operation and to create and decisions to independent regulators
maintain international order. and experts, central banks, or
judiciaries.
The United Nations (UN) in the world
of politics has the roles of preventing and  A second trajectory is the rescaling of
managing conflicts, regulating armaments, economic and social relations well
championing human rights and international beyond the territorial boundaries of
humanitarian law, liberating the colonized, nation states, facilitated by
providing economic and technical aid in transnational legal arrangements that
newly liberated countries, organizing have their roots in national law
elections, empowering women, educating
The Role of the Nation -State in
children, feeding the hungry, sheltering the
Globalization
disposed and displaced, housing the
refugees, tending the sick and coordinating Basic Elements of a State
disaster relief and assistance.
1. Territory
Four Main Purposes of the UN Charter 2. People
3. Sovereign Power ( the authority of a state
1. Maintaining worldwide peace and security
to govern itself)
2. Developing relations among nations
3. Fostering cooperation between nations in
Nation- state role in globalization is
order to solve economic, social, cultural, or
complex. Since nation-states are divided by
humanitarian international problems
physical and economic boundaries, reduced
4. Providing a forum for bringing countries
barriers in international commerce and
together to meet the UN's purposes and
communication are considered their potential
goals
threat. Sovereignty of individual nations is
not abolished by expanded trade among
The UN aims to save succeeding countries, instead globalization is a force that
generations from the scourge of war; to changed the way nation-states deal with one
reaffirm faith in fundamental human rights; another, particularly in the area of
to establish conditions under which justice international commerce.
and respect for the obligations arising from
treaties and other sources of international In setting international commerce
law can be maintained; and to promote policies, isolated states are forced to engage
social progress and better standards of life in to one another, while nation-state’s domestic
larger freedom role unchanged. Roles of some states were
diminished while others have exalted role is
Challenges of Global Governance in the
due to interactions of various economic
Twenty-first Century
imbalances.
It is a process which allows
interconnectivity across different borders and Globalization’s Impact on the State
sovereign territories. Global governance is 1. Poverty
governing, without sovereign authority, 2. Environmental pollution
relationships that transcend national 3. Economic crisis
frontiers. Global governance has evolved as 4. Organized crime and terrorism
one of the most influencing tools for
globalization which has led to the foundation Decision making processes in
of sustainable development projects around globalization is complex as it takes place in
the globe. various levels such as sub-national, national,
and global which lead to the growth of a
 Issues that involve interwoven multi-layered system of governance.
domestic and foreign challenges
include threats at the beginning of the
century which include ethnic conflicts,
infectious diseases, and terrorism as