Global Economy & Bretton Woods System

The Global Economy

• The economy serves as society's foundation, influencing societal and political conditions.
• A country's global economic standing reflects its economic mobility which is crucial for global competitiveness.
• Historically, economic relationships included the Philippines bartering with China and the Spanish Galleon Trade in the Philippines.
• The Silk Road, initiated by China, facilitated global goods transportation as a central Eurasian trade route.

The Bretton Woods System (1944-1971)

• Established post-World War II to avert another Great Depression.
• It fostered worldwide international economic cooperation and facilitated the flow of free capital.
• The U.S. dollar became the "global currency" for stable international exchange rates.
• This led to these global economic structures:
  • The General Agreement on Tariffs and Trade (GATT) aimed to reduce tariff barriers and liberalize trade.
  • The World Trade Organization (WTO) replaced GATT, emphasizing the reduction of non-tariff barriers and ensuring free trade.
  • The International Monetary Fund (IMF) was created to stabilize global monetary systems.

Economic Globalization & Trade

• Economic globalization, as Hamilton (2008) noted, involves trading and investing across countries and is a dimension of globalization.
• Trade is a major factor in global relations, affecting almost all aspects of society.
• The global economy involves decentralizing production and centralizing command and control in global cities.
• Global trade functions through networks like supply chains, international production networks, global commodity chains, and global value chains, where value creation is tracked.

Global Commodity Demand & Economic Disparity

• Skyrocketing commodity demand is driven by increased consumption in developing nations like China.
• Scarcity, using oil as an example, can lead to higher prices and geopolitical tensions.
• Some countries reduce prices and wages to attract investments, resulting in "race to the bottom" competition.
• China and Mexico, which started with low-cost production, transitioned to higher-value production with higher wages, known as "industrial upgrading".

Actors in Globalization: Categories of Organizations

• Intergovernmental Organizations (IGOs)
  • They primarily comprise sovereign states or IGOs.
  • They are established by treaties, possessing international personality.
  • World Trade Organization (WTO), World Health Organization (WHO), and Asian Development Bank (ADB) are examples of IGOs.
• Supranational Organizations
  • They extend beyond national borders to encourage economic, political, or cultural unity.
  • United Nations (UN), International Labor Organization (ILO), and European Union (EU) are examples of supranational organizations.
• Non-Governmental Organizations (NGOs)
  • They operate independently of governments.
  • Advocacy NGOs influence governments on specific issues and Operational NGOs provide services.
  • Amnesty International, International Red Cross, and International Chamber of Commerce are examples of NGOs.
• Multinational Corporations (MNCs) & Transnational Corporations (TNCs)
  • MNCs operate in many countries, managing goods and services production.
  • TNCs possess significant facilities and conduct business operations in multiple countries.
  • Common activities include importing/exporting, investing significantly, buying/selling licenses, contract manufacturing, and opening manufacturing/assembly operations abroad.

Market Integration

• Market integration occurs when related markets show similar price patterns, whether intended or unintended.
• Market integration's effects on market development include expanded market coverage, reduced market failures, and equalized prices.

International Financial Institutions

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

TRIPS & TRIMS in Global Trade

• Trade-Related Aspects of Intellectual Property Rights (TRIPS)
  • This WTO agreement protects intellectual property rights, such as patents, copyrights, and trademarks.
  • Intangible ideas like movies, books, music, and software are safeguarded globally.
  • It prevents unauthorized intellectual property use.
• Trade-Related Investment Measures (TRIMS) 
  • These are the rules for foreign businesses to prevent unfair trade practices.
  • Foreign investments are ensured not to distort trade.
  • Examples include some countries requiring foreign entities to use local resources or workers to boost domestic growth.

Global Economic Integration Factors

• Transferring state-owned enterprises into private ownership is privatization.
• Deregulation is the removal of government restrictions on economic activity.
• Foreign Direct Investment (FDI) involves a company from one country investing in another.
• Trade liberalization reduces or eliminates trade barriers like tariffs and quotas.
• Regional integration involves countries working together for economic, political, and social benefits.

Attributes of Global Corporations

• Global corporations:
  • Operate on a global scale.
  • They Have huge assets and turnovers in multiple countries.
  • Have centralized management with headquarters in a single country.
  • Have high economic influence over global markets.
  • Use advanced technology for production and marketing.
  • Employ top executives and managers for efficiency.

Advantages & Disadvantages of Global Corporations

• Advantages
  • Foreign Capital Investment
  • Job Creation
  • Technological advancement
  • Increased exports
  • Healthy competitions
• Disadvantages
  • Exploit local industries
  • Adverse effects on local business
  • Cultural homogenization
  • Influence on government policies
  • Environmental concerns

Key Takeaways

• Several things shape the global economy
  • Historical trade systems
  • Post-WWII economic frameworks
  • Modern financial institutions
• Globalization is propelled by organizations, corporations, and financial institutions.
• Market integration influences price stability, trade liberalization, and investment flows.
• Global corporations have both beneficial and detrimental effects on local and global economies.

The Global Interstate System

• The modern nation-state traces back to the Treaty of Westphalia (1648).
• This treaty established the concept of autonomous nation-states with full control over domestic matters.
• Over time, globalization challenged the nation-state, causing a loss of control of economic flows and transnational organizations.
• A debate exists on whether the "nation-state is dead", but it remains a vital political structure, despite its declining influence.

Key Concepts

• Porosity of the Nation-State
  • Globalization has led to borders becoming more open to trade, migration, and information.
• Benedict Anderson’s "Imagined Community"
  • Nations are socially and politically manufactured through print capitalism using, newspapers, and books.
  • People relate to a shared culture without meeting all of their nation's members.
  • The nation-state transcends geography, adapting to technology and immigration flows.

The Nation-State

• The nation-state has two concepts:
  • State:
    • A country and its government with a defined territory, sovereignty (freedom from external control), and an organized government.
  • Nation:
    • Defined by Benedict Anderson as an "imagined community" which has boundaries that determine citizens.
    • A nation shares a language, traditions, and ethnicity.

The Interstate System

• The interstate system is a system where states compete and form alliances.
• It was shaped by the Treaty of Westphalia (1648), which ended the Thirty Years' War in Europe, established the principle of sovereignty (non-interference from other countries), and provided stability for European nations.

Principles of the Interstate System

• Nationalism
  • It is a doctrine and political movement viewing nations as the core of political structures.
  • Nationalism Promotes national unity and interests above all.
• Internationalism
  • It Is the desire for greater cooperation between nations, involving political, economic, and social partnerships.

Effects of Globalization on Governments

• Political Globalization
  • Governments work with international organizations like the United Nations (UN) and Non-Governmental Organizations (NGOs) which address relief efforts, environmental protection, and immigration.
• International Organizations (IGOs)
  • IGOs are created by nation-states, operate on intergovernmental principles, and may have supranational power.
  • Examples include the European Union (EU) regionally and the World Trade Organization (WTO) globally.

The Decline of the Nation-State

• Globalization weakens the power of the nation-state.
• While still sovereign, states are privatizing responsibilities and losing influence to transnational corporations (TNCs) and NGOs.
• International organizations (IGOs) are becoming stronger, possibly evolving into global governance.

What is Global Governance?

• Governance is establishing policies and monitoring their implementation.
• Global Governance is a collection of governance-related activities, rules, and mechanisms that deal with global issues, such as armed conflicts, technology risks, economic stability, and climate change.

Roles and Functions of the United Nations (UN)

• The United Nations (UN) is an intergovernmental body promoting international peace and order.
• It replaced the League of Nations, which failed to prevent World War II, and was established on October 24, 1945.

Goals of the UN

• The UN's goals are to:
  • Maintain peace and security.
  • Foster friendly relations between countries.
  • Help countries solve problems together.
  • Promote human rights worldwide.

Main Organs of the UN

• The main organs are:
  • General Assembly which is the main decision-making body.
  • Security Council which maintains international peace and security.
  • Secretariat which is an administrative body.
  • Trusteeship Council which oversaw trust territories.
  • Economic and Social Council (ECOSOC) which handles development and human rights.
  • International Court of Justice resolves legal disputes between countries.

Achievements of the UN

• The UN:
  • Helped countries become democratic and peaceful.
  • Addressed environmental issues through events like the Earth Summit 1992 on climate change.
  • The International Atomic Energy Agency (IAEA) monitors nuclear weapons.
  • Fights poverty, drug trafficking, and hunger.

Challenges of Global Governance

• Weis (2015) identified five gaps in global governance:
  • Knowledge gap which is lacking access to critical information.
  • Normative gap which is the lack of universal rules and ethical standards.
  • Policy gap which is the lack of effective international policies.
  • Institutional gap which is the lack of power to enforce rules
  • Compliance gap which is countries that don't follow agreements

Major Global Issues

• Major global issues include:
• Terrorism
• Nuclear proliferation
• Humanitarian crises
• Climate change
• Human rights violations
• Global pandemics

Future of Global Governance

• The future of global governance includes:
  • Reforming global institutions (e.g., UN Security Council).
  • Stronger enforcement of global rules.
  • Ensuring benefits of globalization reach all nations.

Key Takeaways

• The nation-state system emerged from the Treaty of Westphalia which is now challenged by globalization.
• IGOs and NGOs now take on the responsibilities once held by nation-states.
• The UN plays an important role in global governance but faces challenges in policy enforcement and international cooperation.
• Global governance must evolve to address modern issues like terrorism, climate change, and pandemics.