Global Economy & Bretton Woods System

The Global Economy

• Economy is the basis of society, influencing its condition and politics
• A country's economic status reflects its economic mobility, crucial for global competition
• Historically, economic relationships include the Philippines bartering with China for porcelains and silk
• Spain implemented the Galleon Trade in the Philippines
• China introduced the Silk Road as the central Eurasian trade route

Bretton Woods System (1944-1971)

• It was created post-World War II to avert another Great Depression
• Established international cooperation and facilitated free capital flow globally
• The US dollar became the standard global currency for stable exchange rates
• This system led to global structures, including the General Agreement on Tariffs and Trade (GATT)
• GATT sought to lower trade barriers
• The World Trade Organization (WTO) then replaced GATT
• The WTO focused on reducing non-tariff barriers and ensuring free trade
• The International Monetary Fund (IMF) was also founded
• The IMF stabilizes global monetary systems

Economic Globalization & Trade

• Economic globalization involves trading and investing between countries
• Trade is a driving force in international relations, affecting nearly every aspect of society
• The global economy decentralizes production while centralizing command and control in global cities
• Global trade uses networks, including supply chains and international production networks
• Global trade also occurs through global commodity chains
• As well as global value chains that track value creation through various stages

Global Commodity Demand & Economic Disparity

• Demand for commodities is rapidly increasing, especially in developing countries like China
• Scarcity, exemplified by oil, leads to increased prices and geopolitical tensions
• Some countries lower prices and wages to attract investment, causing a "race to the bottom"
• Some countries like China and Mexico initially used low-cost production
• Followed by a shift to higher-value production at higher wages, known as "industrial upgrading"

Actors in Globalization: Categories of Organizations

• Intergovernmental Organizations (IGOs) primarily consist of sovereign states which have international personality due to treaties
• World Trade Organization (WTO)
• World Health Organization (WHO)
• Asian Development Bank (ADB)
• Supranational Organizations promote economic, political, or cultural unity beyond multiple states' borders
• United Nations (UN)
• International Labor Organization (ILO)
• European Union (EU)
• Non-Governmental Organizations (NGOs) operate independently of governments
• Advocacy NGOs influence governments on specific issues
• Operational NGOs provide services
• Amnesty International
• International Red Cross
• International Chamber of Commerce
• Multinational Corporations (MNCs) operate and control goods/services production in multiple countries
• Transnational Corporations (TNCs) maintain facilities with business in multiple countries
• Common activities include importing/exporting, investing, licensing, contract manufacturing, and opening manufacturing/assembly operations abroad

Market Integration

• Market integration occurs when related markets show similar price trends, intentionally or unintentionally
• Market Development expands market coverage
• Also, reduces failures, and equalizes prices

International Financial Institutions

• The International Monetary Fund (IMF) ensures monetary stability and manages exchange rates
• World Bank provides funds for government-sponsored projects
• The World Trade Organization (WTO) facilitates trade agreements
• Also, it oversees trade-related intellectual property and investment measures

TRIPS & TRIMS in Global Trade

• Trade-Related Aspects of Intellectual Property Rights (TRIPS) is a WTO agreement protecting intellectual property
• It also ensures intangible ideas are protected worldwide
• Trade-Related Investment Measures (TRIMS) are rules preventing unfair trade practices for foreign businesses
• They ensure foreign investments do not distort trade and require local materials

Global Economic Integration Factors

• Privatization involves transferring state-owned businesses
• Deregulation removes government restrictions
• Foreign Direct Investment (FDI) is investment by a foreign company
• Trade Liberalization lowers trade barriers

Attributes of Global Corporations

• They operate globally with huge assets and centralized management
• They also have influence, use technology, and employ top executives

Advantages & Disadvantages of Global Corporations

• Advantages include foreign capital investment, job creation, and technological advancement
• Advantages include increased exports and healthy competition
• Disadvantages include exploitation, adverse effects on local businesses, and cultural homogenization
• Disadvantages include influence on government policies and environmental concerns

Key Takeaways

• The global economy is shaped by trade systems, post-WWII frameworks, and financial institutions
• Organizations and corporations drive globalization
• Market integration influences price stability, trade liberalization, and investment flows
• Global corporations have both positive and negative impacts locally and globally

The Global Interstate System

• The modern nation-state traces back to the Treaty of Westphalia (1648)
• This treaty established autonomous nation-states with control over domestic affairs
• Globalization has challenged the nation-state, leading to loss of control
• The nation-state remains an important political structure despite declining power

Key Concepts

• Nation-state porosity increases with globalization
• Meaning that borders open to trade, migration, and information
• Benedict Anderson's "Imagined Community" involves nations constructed through print capitalism
• People identify with shared culture
• Nation-states transcend adapting to changing technology and immigration

The Nation-State

• The nation-state has state and nation concepts
• A state is a country with territory, sovereignty, and government
• A nation, defined as an "imagined community," shares boundaries and a common language, traditions, and ethnicity

The Interstate System

• The interstate system consists of competing and allying states shaped by the Treaty of Westphalia (1648)
• The Treaty of Westphalia concluded the Thirty Years' War
• It established sovereignty by not permitting countries to interfere with each other's affairs

Principles of the Interstate System

• Nationalism promotes national unity and interests
• Internationalism involves greater cooperation through various partnerships

Effects of Globalization on Governments

• Political globalization involves international organizations
• United Nations (UN)
• Non-Governmental Organizations (NGOs)
• These organizations help manage:
• Relief efforts
• Environmental protection
• As well as immigration
• International Organizations (IGOs) are created by nation-states
• IGOs operate on intergovernmental principles with unanimous consent
• IGOs include the European Union (EU) and the World Trade Organization (WTO)

The Decline of the Nation-State

• The power of the nation-state decreases while globalization increases
• Sovereign states privatize responsibilities and lose influence to TNCs and NGOs
• International organizations (IGOs) are growing stronger

Contemporary Global Governance

• Governance establishes policies and monitoring implementation
• Global governance involves activities that deals with:
• Armed conflicts
• Technology risks
• Economic stability
• Climate change

Functions of the United Nations (UN)

• The UN promotes international peace and order as an intergovernmental organization
• Replaced the League of Nations
• Founded on October 24, 1945

Goals of the UN

• It is designed to maintain international peace and security
• It also fosters relations between countries
• The UN is intended to assist countries in solving problems and promoting rights worldwide

Main Organs of the UN

• General Assembly – Main decision-making body
• Security Council – Maintains international peace and security
• Secretariat – Administrative body led by the Secretary-General
• Trusteeship Council – Oversaw trust territories
• Economic and Social Council (ECOSOC) – Handles development and human rights
• International Court of Justice – Resolves legal disputes between countries

Achievements of the UN

• The UN has helped countries become peaceful
• The UN has addressed environmental issues (Earth Summit 1992)
• IAEA (International Atomic Energy Agency) monitors weapons
• The UN has fights with poverty, trafficking, and hunger

Challenges of Global Governance

• Weis (2015) identified knowledge
• Weis (2015) identified normative
• Weis (2015) identified policy
• Weis (2015) identified institutional
• Weis (2015) identified compliance gap as challenges

Major Global Issues

• Global issues that require addressing include:
• Terrorism
• Nuclear proliferation
• Humanitarian crises
• Climate change
• Human rights violations
• Global pandemics

Future of Global Governance

• Future governance requires:
• Reforming global institutions
• Stronger enforcement
• Ensuring benefits reach all

Key Takeaways

• The nation-state system is now challenged by globalization
• IGOs and NGOs are taking on responsibilities held by nation-states
• The UN governance faces challenges in policy
• Global governance must evolve to address modern issues, terrorism, and change