The Contemporary World Reviewer

1. Introduction to Globalization
2. The Structures of Globalization
2.1 The Global Economy
2.2 Market Integration

Globalization - the process in which people, ideas and goods spread

throughout the world, spurring more interaction and integration between the world's
cultures, governments and economies

Globalization - a process of interaction and integration among the people, companies, and
governments of different nations, a process driven by international
trade and investment and aided by information technology.

Globalization - about the growing worldwide connectivity.

Globalization - the process of integration of economies across the world through cross-border
flow of factors product and information

Globalization - an expansion, and intensification of social relations and

consciousness across world time and world space. It is about growing worldwide
connectivity according to Steger.

Globalization - considered a multi-dimensional process involving economic, political,

technological, cultural, religious and ecological dimensions.

Attributes, Qualities, or Characteristics of Globalization

1. It involves both the creation of new social networks and the multiplication of existing
connections that cut across traditional, political, economic, cultural, and geographical
boundaries.

2. Globalization is reflected in the expansion and the stretching of social relations, activities, and
connections
Social Strengthening - Emergence of gigantic and virtually identical shopping malls in
all continents to cater to consumers who can afford commodities all over the
world-including products whose various components were manufactured in different
countries.
3. Globalization involves the intensification and acceleration of social exchanges and activities.

4. Globalization processes do not occur merely or an objective, material level but they
also involve the subjective plane of human consciousness. Without erasing local and
national attachments, the compression of the world into a single place has increasingly
made global the frame of reference for human thought and action.

Historical Periods of Globalization

1. The Prehistoric Period (10000 BCE-3500 BCE)
In this earliest phase of globalization, contacts among hunters and gatherers – who were spread
around the world – were geographically limited. Absence of advanced forms of technology,
globalization was severely limited.

2. The Pre-modern Period (3500 BCE- 1500 CE)

Tthe invention of writing and the wheel were great social and
technological boosts that moved globalization to a new level. The invention of wheel in
addition to roads made the transportation of people and goods more efficient. On the
other hand writing facilitated the spread of ideas and inventions.

3. The Early Modern Period (1500-1750)

Period between the Enlightenment and the Renaissance. In this period, European Enlightenment
project tried to achieve a universal form of morality and law. This with the emergence of
European metropolitan centers and unlimited material accumulation which led to the capitalist
world system helped to strengthen globalization.

4. The Modern Period (1750-1970)

Innovations in transportation and communication technology, population explosion,
and increase in migration led to more cultural exchanges and transformation in
traditional social patterns. Process of industrialization also accelerated.

5. The Contemporary Period (from 1970 to present)

The creation, expansion, and acceleration of worldwide interdependencies occurred in a
dramatic way and it was a kind of leap in the history of globalization. Dimensions of
Globalization

Dimensions of Globalization
1. Economic Dimension - the extensive development of economic relations across the
globe as a result of technology and the enormous flow of capital that has stimulated trade in
both sources and goods.
 Major players in the current century’s global economic order
- Huge international corporations (General Motors, Walmart, Mitsubishi)
- International Economic Institutions (IMF, World Bank, The World Trade
Organization) - Trading Systems
Major Sources of Economic Growth across Countries:
1. Property Rights
2. Regulatory institutions
3. Institutions for marco-economics
4. Stabilization
5. Institutions for social influence
7. Institutions for conflict management

2. Political Dimension - an enlargement and strengthening of political interrelations across

the globe
3. Cultural Dimension - the increase in the amount of cultural flows across the globe.
Cultural interconnections are at the foundations of contemporary globalization.
4. Religious Dimension - Religion is a personal or institutionalized set of attitudes, beliefs, and
practices relating to or manifesting faithful devotion to an acknowledged ultimate reality or deity.
It is the most important defining element of any civilization as contrasted with race, language, or
way of life.
Roman Catholic Teaching of Globalization
1. Commitment to universal human rights
2. Commitment to the social nature of the human person
3. Commitment to the common good
4. Solidarity
5. Preferential option of the poor
6. Subsidiary
7. Justice
8. Integral Humanism - concerned with the whole person
1. Commutative justice - aims at fulfilling the terms of contracts and other
promises on both personal and social level.
2. Distributive justice - ensures a basic equity in how both the burden and the
goods of society are distributed and that ensures that every person enjoys a basically
equal moral and legal standing apart from differences in wealth, privilege, talent and
achievements.
3. Social justice - to the creation of the conditions in which the first two
categories of justice can be realized and the common good identified and defended.
5. Ideological Dimensions - Ideology is a system of widely shared ideas, beliefs, norms and
values among a group of people. It is often used to legitimize certain political interests or to
defend dominant power structures.
Major Ideological Claims of Advocates of Globalism
1. Globalization is about the liberalization and global integration of
markets. 2. Globalization is inevitable and irreversible.
3. Nobody is in charge of globalization
4. Globalization benefits everyone
5. Globalization furthers the spread of democracy in the world

The Global Economy

Economic globalization - the increasing interdependence of world economies as a result of the
growing scale of cross-border trade of commodities and services, flow of international capital
and wide and rapid spread of technologies.

Economic globalization - a functional integration between internationally dispersed activities

which means that it is a qualitative transformation rather than a quantitative change while
internationalization is an extension of economic activities between internationally dispersed
activities

Two major driving forces for economic globalization

1. The rapid growing of information in all types of productive activities
2. Marketization

Dimensions of Economic Globalization

1. The globalization of trade of goods and services
2. The globalization of financial and capital markets
3. The globalization of technology and communication
4. The globalization of production

International monetary system (IMS) - a system that forms rules and standards for facilitating
international trade among the nations. IMS as rules, customs, instruments, facilities, and
organizations for affecting international payments with the main task of facilitating cross-border
transactions, especially trade and investment.

European monetary integration - refers to a 30-year long process that began at the end of the
1960s as a form of monetary cooperation intended to reduce the excessive influence of the US
dollar on domestic exchange rates, and led, through various attempts, to the creation of a
Monetary Union and a common currency. This Union brings many benefits to Member States.
The European Monetary System (EMS) - a 1979 arrangement between several European
countries which links their currencies in an attempt to stabilize the exchange rate.This
system
was succeeded by theEuropean Economic and Monetary Union (EMU), an institution of the
European Union (EU), which established a common currency called the euro.

The European Financial Stability Mechanism (EFSM) - a permanent fund created by the
European Union (EU) to provide emergency assistance to member states within the Union. It
raises money through the financial markets, and is guaranteed by the European Commission.

International trade - the exchange of goods, services and capital across national borders.

Trade policies - the regulations and agreement of foreign countries. It defines standards,
goals, rules, and regulations that pertain to trade relation between countries.

Focuses of Trade Policy in International Trade

Tariffs - These are taxes or duties paid for a particular class of imports or exports. Imposing
taxes on imported and exported goods is a right of every country.

Trade Barriers - Theses are measures that governments or public authorities introduce to make
imported goods or services less competitive than locally produced goods and services.

Safety - This ensures that imported products in the country are of high quality. Inspection
regulations laid down by public officials ensure the safety and quality standards of imported
products. Types of Trade Policies

Trade Policy and International Economy - in most developed countries where open market
economy prevails, the international economic organizations support free trade policies.

The World Trade Organization (WTO) - deals with the global rules of trade
between nations with

Global Economy Outsourcing - an activity that requires search for a partner and
relation-specific investments that are governed by incomplete contracts and the extent of
international outsourcing depends on the thickness of the domestic and foreign market for input
suppliers, the relative cost of searching in each market, the relative cost of customizing inputs
and the nature of the contracting environment in each country
There are three essential features of a modern outsourcing strategy.
1. Firms must search for partners with the expertise that allows them to perform
the particular activities that are required.
2. They must convince the potential suppliers to customize products for their
own specific needs.
3. They must induce the necessary relationship-specific investments in an
environment with incomplete contracting.

Possible Determinants of the Location of Outsourcing

1. Size of the country can affect the “thickness” of its markets.
2. The technology for search affects the cost and likelihood of finding a suitable partner.
3. The technology for specializing components determines the willingness of a partner to
undertake the needed investment in a prototype.
4. The contracting environments can impinge on a firm’s ability to induce a partner to invest in
the relationship.

Market integration - refers to how easily two or more markets can trade with each other. It
occurs when prices among different locations or related goods follow similar patterns over a long
period of time. It exists when there are exerted effects that prompt similar changes or shifts in
other markets that focus on related goods on events occurring within two or more markets.

Types of Related Markets where Market Integration Occurs

Stock Market Integration - a condition in which stock markets in different countries trend
together and depict same expected risk adjusted returns. Two markets are perfectly integrated if
investors can pass from one market to another without paying any extra costs and if there are
possibilities of arbitration which ensures the equivalence of stock prices on both markets.

Financial Market Integration - an open market economy between countries facilitated by a

common currency and the elimination of technical, regulatory and tax differences to encourage
free flow of capital and investment across borders

Global corporation - a business that operates in two or more countries. It also goes by the name
"multinational company." Several advantages are offered by global expansion of business over
running a strictly domestic company.

The Finance Function in a Global Corporation

1. Financing - group’s tax bill can be reduced by the CFO like borrowing in countries with high
tax rates and lending to operations in countries with lower rates. 2. Risk Management - global
firms can offset natural currency exposures through worldwide operations instead of managing
currency exposures through financial markets. 3. Capital budgeting - getting smarter on
valuing investment opportunities CFOs can add value.
Foreign Direct Investment (FDI) - a major driver of extended global corporate development. It
is an investment made by a company or individual in one country in business interests in another
country, in the form of either establishing business operations or acquiring business assets in the
other country, such as ownership or controlling interest in a foreign company and the key feature
of foreign direct investment is that it is an investment made that establishes either effective
control of, or at least substantial influence over, the decision making of a foreign business

BRICS Economies
Brazil, Russia, India, China and South Africa (BRICS) - BRIC, without South
Africa, was originally coined in 2003 by Goldman Sachs, which speculates that by 2050
these four economies will be the most dominant. South Africa was added to the list on
April 13, 2011 creating "BRICS." These five countries were among the fastest growing
emerging markets as of 2011.

Brazil, Russia, India and China (BRIC) - refer to the idea that China and India will, by 2050,
become the world's dominant suppliers of manufactured goods and services, respectively, while
Brazil and Russia will become similarly dominant as suppliers of raw materials. Due to lower
labor and production costs in these countries now including a fifth nation, South Africa, many
companies have also cited BRIC as a source of foreign expansion opportunity i.e. promising
economies in which to invest

The General Agreement on Trade in Services (GATS) - the first multilateral agreement
covering trade in services. It provides a framework of rules governing services trade,
establishes a mechanism for countries to make commitments to liberalize trade in services and
provides a mechanism for resolving disputes between countries.