The Contemporary World
GLOBAL ECONOMY
Instr. Morell B. Caña, RPm
The Beginning of Globalization
3 MAIN STRUCTURES/DRIVERS OF
GLOBALIZATION
ECONOMIC
POLITICAL SOCIAL
GLOBALIZATION
GLOBALIZATION GLOBALIZATION
Interconnectedness of
economies through trade Amount of political co- Sharing of ideas and
and the exchange of operation that exists between information between and
resources. different countries. through different countries.
ECONO GLOBAL
MY
An economy is an area of relating to the whole world;
the production, worldwide.
distribution and trade, as
well as consumption of
goods and services by
different agents.
GLOBAL ECONOMY
According to the United Nations (as cited in Shangquan,
2000), it refers to 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.
It reflects the continuing expansion and mutual integration of
market frontiers, and is an irreversible trend for the economic
development in the whole world at the turn of the
millennium. (UN, Shanquan, 2000)
One of the three main dimensions of globalization commonly
found in countries.
The global economy refers to the interconnected worldwide
economic activities that take place between multiple
countries. These economic activities can have either a positive
or negative impact on the countries involved.
The term has two meanings:
1. The economy of the whole planet, i.e., global GDP. GDP stands for
Gross Domestic Product.
2. The way the world is today, with countries’ economies so
intertwined and interdependent that they all seem like parts of one
whole. That ‘whole’ we call the ‘global economy.’
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%20refers%20to,impact%20on%20the%20countries%20involved.
The global economy has changed significantly over the past few
decades, in the way that it is organized and governed by collaborating
nations. These changes have repercussions that not only affect the flow
of goods and services between countries, but also the movement of
people. As we’ve seen on occasions over the last century, too great a
fluctuation in this international economic system can lead to a global
economic crisis.
THE IMPACT OF COVID 19
TO THE GLOBAL ECONOMY
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GLOBAL
TRADE
also known as international trade, is simply the import
and export of goods and services across international
boundaries.
good or service produced in one country
that is sold into another country.
Goods and services that enter
into a country for sale
Five “Scapes” of Globalization | Arjun Appadurai
1. ETHNOSCAPE – Flow of people across boundaries
2. TECHNOSCAPE – Global flow of technology
3. IDEOSCAPE – global flow of ideas
4. FINANCESCAPE – Flow of money across political borders
5. MEDIASCAPE – Flow of media across borders
What is the GLOBAL ECONOMY for?
Growing economic linkages at the Global
level.
TRANSPORTATION
TRADE
International
=
Commerce
allows countries to take advantage of competitive advantages in certain
COMUNICATION areas, while diminishing disadvantages in other areas.
SYSTEM
RECAP- W2 Discussion
2 TYPES OF ECONOMIES associated with
Economic Globalization.
PROTECTIONISM TRADE
LIBERALIZATION
- Protecting one’s economy from
foreign competition by creating trade - Reducing trade barriers to
barriers make international trade easier
between countries
PROTECTIONISM - Usually comes in the form of
Quotas and tariffs.
- Protecting one’s economy from
- Required Fees to Imports and
foreign competition by creating
trade barriers. Exports
- Policy of systematic government
intervention in foreign trade with the
objective of encouraging domestic
production - the production of goods
for use in the home country. TARIFF or QOUTA
- Giving preferential treatment to
domestic producers and discriminating
against foreign competitors
COUNTRY A 50.00 PHP COUNTRY B
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EXAMPLES of PROTECTIONISM
Common Agricultural Policy (CAP)
of the European Union. 1962
The European Union imposes significant
tariff rates on a range of agricultural
markets, seeking to: NORTH KOREA | Kim Il Sung
1. protect the European farmers from
North Korea is the most isolated and least
imported agricultural goods.
globalized country in the world, also famous for
2. improve agricultural productivity,
its absolute rejection of foreign investment and
ensuring a stable supply of affordable
discouragement of foreigner visits.
food.
3. help tackle climate change and the
sustainable management of natural
resources;
4. maintain rural areas and landscapes
across the EU; Countries such as China, Japan, and the United
5. keep the rural economy alive by
States are being accused of practicing
promoting jobs in farming, agri-foods
industries and associated sectors. protectionism (Ritzer, 2015)
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%20policy,-Launched%20in%201962&text=It%20aims%20to%3A,to%20make%20a%20reasonable%20living%3B&text=keep%20the%20rural%20economy
%20alive,foods%20industries%20and%20associated%20sectors.
TRADE LIBERALIZATION
- Reducing trade barriers to make international
trade easier between countries.
- Trade liberalization is the removal or reduction of
restrictions or barriers on the free exchange of
goods between nations. - FREE TRADE POLICY
Trade liberalization is a controversial topic. Critics of trade - TRADE BLOC
liberalization claims:
- OUTSOURCING
1. that the policy can cost jobs because cheaper goods will flood
the nation's domestic market.
2. Goods can be of inferior quality and less safe than competing
domestic products that may have undergone more rigorous
safety and quality checks.
3. Can benefit stronger economies but put weaker ones at a
greater disadvantage.
VARIOUS WAYS A COUNTRY TO MAKE TRADE EASIER WITH OTHER
COUNTRY
1. FREE TRADE
Trading of goods and services between two or more countries
without tariffs or taxes.
Canada - Korea Free Trade Agreement (CKFTA)
Canada | South Korea | March 11, 2014
Implementations:
Canada will eliminate 97.8% of its tariff lines for goods imported from south
Korea, and South Korea will eliminate 98.2% of its tariff lines for goods
imported from Canada.
VARIOUS WAYS A COUNTRY TO MAKE TRADE EASIER WITH OTHER
COUNTRY
2. TRADE BLOC
Intergovernmental agreement, often part of a regional
intergovernmental organization, where barriers to trade (tariffs and
others) are reduced or eliminated among the participating states.
NAFTA
NAFTA_logo.svg
The North American Free Trade Agreement (NAFTA) | January 1, 1994
Was a treaty between Canada, Mexico, and the United States that eliminated most tariffs between the
counties. It was replaced by the United States-Mexico-Canada Agreement (USMCA) on July 1, 2020.
VARIOUS WAYS A COUNTRY TO MAKE TRADE EASIER WITH OTHER
COUNTRY
3. OUTSOURCING
Manufacturing jobs transfer from developed nations to developing
nation reduce the cost of products
COUNTRY A 50.00 PHP COUNTRY B
25.00 PHP
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3. OUTSOURCING
Manufacturing jobs transfer from developed nations to developing
nation reduce the cost of products
OUTSOURCING
COUNTRY A
COUNTRY B
25.00 PHP
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INTERNATIONAL TRADING SYSTEMS
INTERNATIONAL TRADING
SYSTEM
INTERNATIONAL TRADING SYSTEM are not
new.
SILK ROAD l 130 BCE – 1453 BCE
Network of pathways in the ancient world that spanned from
china what it is now the Middle East and to Europe. SILK – was
the most profitable products traded in this network.
1453 BCE Ottoman Empire Closed it.
International, but not Global. Because it had no ocean routes
that could reach the American continent.
INTERNATIONAL TRADING
SYSTEM
GALLEON TRADE 1571 l Dennis O. Flynn & Arturo Giraldez
Age of Globalization began when “all important populated
continents started to exchange products continuously both with
each other directly and indirectly via other continents and in
values sufficient to generate crucial impacts on all trading
partners”.
It was the first time that the Americas were directly connected to
Asian trading routes.
Galleon Trade connected Manila in the Philippines and Acapulco
in Mexico.
AGE of MERCANTILISM l 16th to 18th Century.
• A system with multiple restrictions.
• Europe competed with one another to sell goods to boost their
economy.
• In this age countries who engage with the said competition
started to imposed high tariffs to defend their products from
competitors.
INTERNATIONAL TRADING
SYSTEM
GREAT DEPRESSION l GLOBAL ECONOMIC
GOLD STANDARD 1867 CRISIS in the Western World. 1920s – 1930s
UNITED KINGDOM, UNITED STATES and other EUROPEAN NATIONS
Some economist argued that it was largely
• Adopted the gold standard at an international monetary caused by the gold standard – that limited
conference in Paris. the amount of circulating money and reduced
the demand & consumption.
• Goal was to create a common system that would allow for more
efficient trade and prevent isolationism of the Mercantilist era.
• Countries established a common basis for currency prices and a
fixed exchange rate system. (Value of Gold)
• It was still a very restrictive system thus it compelled countries
to back their currencies with fixed gold reserves.
• After WW1, countries depleted their gold reserves to fund their
armies and was forced to abandoned the Gold standards since
the European countries had low gold reserves.
INTERNATIONAL TRADING
SYSTEM
THE RECOVERY OF UNTIED
STATES l Economist Barry
Eichengreen
- Argues that the recovery of the United States really
began when, having abandoned the gold standard.
- US government was able to free up money to spend on
reviving the economy.
At the height of
World War II
Other major industrialized
countries followed the suit. Allows governments to freely and actively manage their
economies by increasing or decreasing the amount of
money in circulation as they see fit.
BRETTON WOOD
SYTEM
Created after the two World Wars.
• Inaugurated in 1944 during the United Nations
Monetary and Financial Conference to prevent the re-
occurring and affecting international ties.
• World leaders sought to create a global economic
system that would ensure a longer-lasting global
peace.
GLOBAL KEYNISM • Set up a network of Global financial institutions that
would promote economic Interdependence and
prosperity.
“Economic crisis occur not when a country does not have
enough money, but when money is not being spent and,
thereby not moving.”
“When economies slow down, governments have to
reinvigorate markets with infusions of capital.”
- John Maynard Keynes
International Bank for Reconstruction
and Development IBRD or World Bank.
Responsible for funding postwar reconstruction projects. It
was a critical institution at a time when many of the world’s
cities had been destroyed by the war.
INTERNATIONAL MONETARY
FUND (IMF)
Global lender of last resort to prevent individual countries from
spiraling into crisis. If economic growth in a country slowed
down because there was not enough money to stimulate the
economy, the IMF would step in.
GENERAL
AGREEMENT ON
TARIFFS AND TRADE |
1947
Main purpose was to reduce tariffs
and other hindrances to free trade.
GLOBAL KEYNESIANISM | 1940s
to the early 1970s
During this period:
• Governments poured money into their economies, allowing people to
purchase more goods and , in the process, increase demand for these
products.
• As demand increased, so did the prices of these goods.
• Western and some Asian economies like japan accepted this rise in
prices because it was accompanied by general economic growth and
reduced unemployment.
• The theory went that, as prices increased, companies would earn
more and would have more money to hire workers.
• Keynesian economists believed that all this was a necessary trade-off
economic development.
END OF BRETTON WOOD
SYTEM
In the early 1970s,however, the prices oil rose sharply as a result
of the Organizations of Arab member-countries of the
Organization of Petroleum Exporting Countries (OAPEC) imposition
of an embargo in response to the decision of the US and other
countries to resupply the Israeli military with the needed arms
during the Yom Kippur War.
Arab countries also used the embargo to stabilize their economies
and growth.
OIL EMBARGO
CONSEQUENCES
• The Oil embargo affected the
Western economies that were
reliant on oil.
• To make matters worse, the stick
markets crashed in 1973-1974 after
the United States stopped linking
the dollar to Gold, effectively ending
the Bretton Woods system.
The government's practice of pouring money
into their economies had caused inflation by
increasing demands goods without necessarily
increasing the supply.
More profoundly, they argued that
MILTON government intervention in economies distort
FRIEDMAN the proper functioning of the market.
They used the economic turmoil to challenge
the consensus around Keynes’s ideas. What
emerged was a new form of economic
thinking that critics labeled NEOLIBERALISM.
NEO - LIBERALISM
willingness to respect or accept behavior or
Prefix meaning new. From the Greek "neos", opinions different from one's own; openness to
new, young, fresh, recent. new ideas.
1980s onward, Neoliberalism became the codified strategy
of the following:
A new organization founded in 1995 to
continue the tariff reduction under the
GATT.
The Washington Consensus dominated global economic policies from the 1980s
until the early 2000s. It advocates:
• Pushed form minimal spending to reduce government debt.
• Also called for privatization of government-controlled services like water,
power, communications, and transport, believing that the free market can
produce the best result.
• Pressured governments, particularly in the developing world, to reduce tariffs
and open up their economies, arguing that it is the quickest way to progress.
• Conceded that, along the way. Certain industries would be affected and die,
but the considered this “shock therapy” necessary for long-term economic
growth.
ECONOMIC
GLOBALIZATION
TODAY
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The Philippines Economy
in 2 Minutes
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v=bWkn2nzB8HA&ab_channel=GlobalEconomics
