The Global Economy and Bretton Woods System

The Global Economy

• Economy is the foundation that influences society and politics
• A country's economic status indicates economic mobility
• Economic mobility is a key factor in global competitiveness
• Historically, economic connections include the Philippines trading with China for porcelains and silk
• The Galleon Trade was implemented by Spain in the Philippines
• The Silk Road was introduced by China as the central Eurasian world trade route

Bretton Woods System (1944-1971)

• This System was created after WWII to avoid another Great Depression
• International economic cooperation was established to facilitate free capital flow
• The U.S. dollar became the standard for stable exchange rates

Effects of Bretton Woods System

• Led to create of General Agreement on Tariffs and Trade (GATT)
  • GATT sought to liberalize trade by lowering tariffs
• The World Trade Organization (WTO) replaced GATT
  • The WTO aims to cut non-tariff barriers and ensure free trade
• The International Monetary Fund (IMF) was created to stabilize monetary systems

Economic Globalization & Trade

• According to Hamilton (2008), economic globalization involves trading and investing between countries
• Trade is a driving force in global relations, affecting almost every facet of society
• The global economy decentralizes production, centralizing command and control in global cities
• Global trade functions through networks like supply chains and international production networks
• Other networks of global include commodity chains and global value chains
  • Global value chains track value creation at all stages

Global Commodity Demand & Economic Disparity

• The demand for commodities is rapidly increasing, especially from developing countries like China
• Oil exemplifies scarcity that drives up prices and creates geopolitical tensions
• Some nations reduce prices and wages to attract investments, prompting "race to the bottom" competition
• China and Mexico entered the market with low-cost production
  • This has since shifted to higher-value production with better wages which is called "industrial upgrading"

Actors in Globalization: Organizations Categories

• Intergovernmental Organizations (IGOs) consist mainly of sovereign states or other IGOs
  • The IGO's are established by treaties, gaining international recognition
  • IGO Examples: World Trade Organization (WTO), World Health Organization (WHO), and Asian Development Bank (ADB)
• Supranational Organizations extend beyond state borders
  • These organizations promote economic, political, or cultural unity.
  • Examples include the United Nations (UN), International Labor Organization (ILO), and European Union (EU)
• Non-Governmental Organizations (NGOs) operate independently of governments
  • NGOs fall into two categories: Advocacy NGOs and Operational NGOs
    • Advocacy NGOs influence governments on specific issues
      • Operational NGOs provide services
  • Examples: Amnesty International, International Red Cross, and International Chamber of Commerce
• Multinational Corporations (MNCs) operate in different countries and control production
• Transnational Corporations (TNCs) possess substantial facilities and conduct business across multiple countries

Common activities of (MNCs) & (TNCs)

• Importing/exporting goods and services
• Making significant investments in foreign countries
• Buying and selling licenses in international markets
• Engaging in contract manufacturing with local producers
• Opening manufacturing/assembly operations abroad

Market Integration

• Occurs when related markets show similar movements in price
• It can be the effect of intentional (government) or unintentional (supply-demand) shifts
• This leads to market development
  • Market coverage expands
  • Market failures are reduced
  • Prices are equalized across integrated markets.

International Financial Institutions

• The IMF ensures monetary stability and handles exchange rates
• The World Bank provides funds for government projects
• The WTO facilitates free trade agreements, and Trade-Related aspects of Intellectual Property Rights (TRIPS) and investment measures(TRIMs)

TRIPS & TRIMS in Global Trade

• Trade-Related Aspects of Intellectual Property Rights (TRIPS)
  • A WTO agreement for protecting intellectual property like patents, copyrights, and trademarks
  • TRIPS ensures intangible ideas like movies, books, music, and software are protected worldwide
  • It helps prevent unauthorized use of Intellectual Property
• Trade-Related Investment Measures (TRIMS) consists of rules to prevent unfair trading practices by foreign businesses
  • TRIMs ensure foreign investments do not distort trade
  • Some countries require materials or hire local workers to encourage domestic growth

Global Economic Integration Factors

• Factors include privatization, deregulation, foreign direct investment (FDI), and trade liberalization
• Privatization is the transfer of state-owned businesses to private sector
• Deregulation is the removal of government restrictions on economic activity
• Foreign Direct Investment (FDI) refers to investment by a foreign company in another country
• Trade liberalization refers to the reduction or elimination of trade barriers

Attributes of Global Corporations

• Operate on a global scale with assets and turnovers in multiple countries
• Have centralized management with headquarters in a single country
• They exert economic influence over global markets
• Use advanced technology for production and marketing
• Employ high-level executives and managers for efficient operations

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

• The global economy is shaped by trade systems, post-WWII frameworks, and financial institutions
• Globalization is led by organizations, corporations, and financial institutions
• Market integration impacts price stability, trade liberalization, and investment flows
• Global corporations have both a positive and negative impact on local and global economies

Global Interstate System

• The modern nations are derived from the Treaty of Westphalia (1648)
• This treaty established the concept that nations should be autonomous with complete control over domestic affairs
• Over time, the nation has been challenged by globalization which caused a loss of regulation over money and transnational organizations.
• There has been debate arguing "nations are dead", but yet remains an important political structure

Key Concepts: Porosity

• The Nation-State has become porous with globalization which is making borders more open for trade, migration, and information.
• Benedict Anderson’s "Imagined Community"
  • The nation is socially and politically constructed through print capitalism
  • People identify with a shared cultures even when never meeting others within the nation
  • The Nation is beyond any geography by adapting technology and immigration flow

The Nation-State

• Nation and State
  • A State is a country with a government that has defined territory, sovereignty and freedom from external control, and an organized government
  • A Nation is an imagined community where each communities share traditions, ethnicity, and language even unacquainted to each other

Interstate System

• The interstate system involves competing and allying states
  • Shaped by the Treaty of Westphalia (1648)
    • Ended the Thirty Years' War in Europe
    • Established the principle of sovereignty
    • Provided stability for European

Principles of the Interstate System: Nationalism

• Doctrine & political movement that sees nations as the basis of political structures and promoting national unity above all
• Internationalism
  • A desire nations share to cooperate whether that be political, economic, or social.

The effect of Globalization on governments

• Political Globalization is the practice of governments working with IGOs and NGOs
  • These Organizations address such issues as immigration or environmental protection
• International Organizations address beyond its borders, operating by unanimous vote, some have supranational votes, such as the EU or WTO

Decline of The Nation

• The power of a nation declines through globalization as wealth is privatized which allows companies to gain more influence making IGO's more powerful

Global Governance Definition

• Governance means establishment policies and monitoring their implementation
• Global Governance involves governance-related activities, rules, and mechanisms
• Global Governance deals with global issues such as Armed conflicts Technology risk, Economic stability, and Climate change

Roles and Functions of the United Nations (UN)

• The UN is an intergovernmental organization that promotes international peace and order
  • The UN replaced the League of Nations ( which failed during WW2) and founded after the second World War in 1945

United Nations Goals

• Maintaining peace and security
• Fostering friendly relations between countries
• Helping countries solve problems together
• Promoting human rights worldwide

Main Organs of The United Nations

• UN organs include the General Assembly, Security Council, Secretariat, Trusteeship Council, ECOSOC, and International Court of Justice
  • The General Assembly is the main decision-making body
  • The Security Council maintains peace and security
  • The Secretariat is led by the Secretary-General and handles administrative duties
  • The Trusteeship Council oversaws territories under the UN
  • The ECOSOC handles development and human rights
  • The International Court of Justice resolves legal disputes

Achievement of The UN

• Achieved: Helping countries become democratic and peaceful, addressed environmental issues (Summit 1992), monitored nuclear weapons, and fought issues such as fighting poverty, drug trafficking, and hunger

Challenges of Global Governance

• Weis (2015) identified five gaps such as Knowledge, Normative, Policy, Instituional, and Compliance for global governance
  • Includes a lack of access to critical information
  • There are not universal rules and ethical standards
  • A lack of effective international policies
  • Some Institutions lack power to enforce rules
  • Agreements are not always followed

Major Global Issues

• Major global issues include terrorism, nuclear proliferation, humanitarian crises, and climate change
• Issues also include human rights violations and global pandemics

Future of Global Governance

• Governance has to make reforms, add institutions, and improve upon globalization to ensure all nations benefit
• Takeaways: System now faces challenges due to globalization
• Takeaways: IGOs, NGOs, evolving UN now plays a critical role though must keep evolving