Understanding the Global Economy

• The global economy operates as a complex system where goods, services, money, and ideas circulate across countries.
• Understanding the global economy requires exploring its structure, key players, and effects on individuals.

Global Economy

• The global economy represents the worldwide network of economic activities.
• Countries engage in trade, exchange money, and share resources within this system.
• It functions as an international marketplace where countries interact with one another.
• Countries with resources sell them to those in need.
• Companies are expanding their operations internationally to reach more customers.
• Freely flowing technology and information connect everyone in real time.
• The screen of a smartphone may be manufactured in South Korea, the processor in the US, and the battery in China.
• A movie may be produced in one country, and is available worldwide.

Modern World System

• The modern world system organizes the global economy, dividing countries into categories based on their development level, resources, and roles in the economy.
• Immanuel Wallerstein's World-Systems Theory (1970s) introduced the concept of core, semi-periphery, and periphery countries.
• This classification mirrors the global economic structure and the role of countries in the international division of labor.

Core Countries

• Core countries are developed, economically powerful, and influential, as well as control trade, production, and possess advanced technologies.
• Examples include:
  • North America: United States, Canada.
  • Europe: United Kingdom, Germany, France, Italy, Netherlands, Sweden, Norway, Finland, Switzerland.
  • Asia: Japan, South Korea, Singapore.
  • Oceania: Australia, New Zealand.

Semi-Periphery Countries

• Semi-periphery countries serve as a buffer between core and periphery states.
• They possess moderate manufacturing and economic influence, meaning that these states are in transition towards core status or declining toward the periphery.
• These countries are neither as wealthy and powerful as core countries, nor as poor or dependent as periphery countries.
• Often, industries are a mix of high-tech and traditional while economies are still being improved.
• These countries exert an influence in the global economy, but are not as dominant as core countries.
• Examples include:
  • Latin America: Brazil, Mexico, Argentina, Chile.
  • Europe: Poland, Portugal, Greece, Hungary.
  • Asia: China, India, Malaysia, Thailand, Turkey.
  • Africa: South Africa.
  • Middle East: Saudi Arabia, United Arab Emirates.

Periphery Countries

• Periphery countries are the least developed, with weak economic structures and heavy dependence on core countries.
• Periphery countries mainly export raw materials while importing manufactured goods.
• Examples include:
  • Africa: Chad, Niger, Mali, Ethiopia, Somalia, Mozambique, Sudan.
  • Asia: Afghanistan, Nepal, Bangladesh, Laos, Cambodia.
  • Latin America: Honduras, Guatemala, El Salvador, Haiti.
  • Oceania: Papua New Guinea, Solomon Islands.

Philippines in the Global World

• The Philippines is generally classified as a semi-periphery country within World-Systems Theory.
• This classification determines that the Philippines are in transition between the core and periphery categories.
• The Philippines has made economic progress, especially in service sectors like BPO, remittances, and manufacturing, but still struggles with poverty, economic inequality, and reliance on foreign markets.
• The Philippines relies on core countries for technology, capital, and high-end manufacturing despite economic growth.
• The Philippines is moderately industrialized, concentrating on agriculture, labor-intensive manufacturing, and services.
• The Philippines has limited political and economic power compared to core countries.

Key Actors in the Global Economy

• Multinational Corporations, International Organizations, Governments, Labor, and Consumers each influence how the global economy works.

Multinational Corporations (MNCs)

• MNCs operate in multiple countries (e.g., McDonald’s, Apple, Toyota).
• MNC's produce and sell goods globally.
• MNC's create jobs in different countries.
• Apple designs iPhones in the US, assembles them in China, and markets them worldwide.
• MNC's innovation and job creation can dominate local markets, making it hard for local businesses to compete.

International Organizations

• International organizations promote fair trade and financial stability, as well as help countries grow, but richer countries are sometimes favored.
• The World Trade Organization (WTO) promotes free trade between countries.
• The International Monetary Fund (IMF) helps countries during financial crises.
• The World Bank funds development projects in poorer nations.

Governments

• Governments regulate trade, negotiate deals, and protect their economies.
• The Philippine government sets rules for foreign businesses to prioritize local industries.

Labor and Consumers

• Workers produce goods, and consumers create demand which the global economy needs to function.
• Farmers in Brazil grow coffee beans, which are then exported to cafes worldwide.

Economic Globalization

• Economic globalization signifies the increasing interconnectedness of countries through trade, technology, and finance.
• The world has transformed into a "global village" where business and communication borders are less important.
• People can purchase items from anywhere in the world, like ordering goods from an online international store.
• Online courses, foreign scholarships, and global firms are available for international opportunities.
• Individuals are afforded the chance to experience different traditions, foods, music, and movies.

Challenges of Economic Globalization

• Wealth is concentrated in core countries, and periphery countries struggle to catch up.
• Global trade increases pollution from shipping and manufacturing.
• The rise of global brands and cultures can overshadow local traditions.

Global Economic Integration

• Global economic integration is the process of unifying markets where countries collaborate.
• Social media connects people globally within seconds which results in faster communication.
• Trade lowers costs and improves affordable prices for consumers.
• Understanding globalization broadens international job prospects.
• Companies may move positions to countries where Labor costs are cheaper.
• Countries that rely too much on other countries may struggle during global crises.