The Global Economy: Trade, Globalization, and International Systems PDF

Chapter 2 The Global Economy  The Global Economy Learning Outcomes Activity At the end of this section, you are expected to: 1.Define economic globalization; Discussion Wrap-up 2.Analyze the actors that facilitate...

Chapter 2 The Global Economy  The Global Economy Learning Outcomes Activity At the end of this section, you are expected to: 1.Define economic globalization; Discussion Wrap-up 2.Analyze the actors that facilitate economic globalization; and 3.Articulate a stance on global economic integration.  The Global Economy Learning Instructions: Write agree if you think the statement is Outcomes Activity Discussion correct; otherwise, write disagree. Key in your answers Wrap-up in our GC. _____ 1. Economic globalization includes borderless exchange of goods and services. _____ 2. McDonalds is a transnational corporation. _____ 3. Global economy is influenced by global politics. _____ 4. Unilever is a multinational corporation. _____ 5. Economic globalization can refer to the increasing integration of economies around the world.  Working Definition Of Globalization Learning Outcomes Activity "Globalization refers to the expansion Discussion and intensification of social relations and consciousness across world-time Wrap-up and space (Steger, 2013)." Manfred Steger Globalization is a multidimensional implies that there are various phenomenon, creating economic, political, forms of connectivity cultural. and even technological forms of connectivity.  What is Economic Globalization? Learning Outcomes Activity refers to the expanding Discussion interdependence of world economies. Wrap-up Shangquan (2000) attributes this to the growing scale of cross-border trade commodities and services, flow of international capital, and wide and rapid spread of technology.  Economic Globalization Learning Outcomes  In the Philippines for instance, cross-border trading can be best Activity illustrated by the country's trading partnerships with China, the United States, and Australia Discussion  The flow of international capital can be observed in foreign direct Wrap-up investments (FDI). a type of investment in which a company establishes a business in another country for a production of goods or type of investment inservices which aand still takes company part in the management establishes a business inofanother that business. country for production of goods or services and still takes part in the management of that business. Example: Toyota Motor Philippines Corporation which is a subsidiary of Toyota Motor Corporation based in Toyota, Japan.  The flow of international capital can also be observed in foreign portfolio investments, trade flows, external assistance and external commercial borrowings, and private loan flows.  Economic Globalization for IMF Learning Outcomes Activity Discussion Wrap-up Economic globalization  a historical process, the result of human innovation and technological progress.  “It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders” (IMF, 2008).  Trading Learning Outcomes In the contemporary period, foreign expatriate Activity the country to manage their company's foreign Discussion subsidiaries the Wrap-up Philippines sends thousands of skilled workers to the Middle ta construction workers, seafarers, and nurses. Economic globalization can be traced from the time when there was economic movement in Asia, Africa, and Europe a network of trade through the Silk Road. routes connected the East (particularly China and the West).  Dimensions of Economy Learning Outcomes Activity (1) globalization of trade of Discussion goods and services; Wrap-up Four (2) globalization of financial interconnected and capital markets; dimensions of economy (3) globalization of technology (Benczes, 2014) and communication; (4) globalization of production. 1. GLOBALIZATION OF TRADE OF GOODS AND SERVICES The first dimension of economic WTO, established in interconnectedness is 1995, “ensures that demonstrated in the establishment trade flows as of the World Trade Organization smoothly, predictably, (WTO) that eases trade among and freely as possible" countries. (WTO, 2012). Another indicator is the emergence China-made products or parts of China as a major supplier and are sent to the United States. To exporter of manufactured goods meet this demand, China that has affected the world creates more jobs for its citizens. economy. Why do American companies set up Trade and services is the subsidiaries in the country? increasing number of Business Process Outsourcing (BPO)  Cheap labor cost, English proficiency, companies in the Philippines. and customer service skills are the common reasons. 2. GLOBALIZATION OF FINANCIAL AND CAPITAL MARKETS  The second dimensions is evident in the liberalization of financial and capital markets. This is seen cross-listing of shares on one or more foreign stock exchange, cross-hedging and diversification of portfolio, and round-the- clock trading worldwide, (National Research Council, 1995). 3. GLOBALIZATION OF TECHNOLOGY AND COMMUNICATION  The third dimension emphasizes that various transactions and interactivities that transpire instantly due internet and communication technology. 4. GLOBALIZATION OF PRODUCTION  The fourth dimension is best illustrated by the existence of multinational corporations (MNCs) and transnational corporations (TNCs). is also an MNC. The Coca-Cola Company Through its example of an MNC. Based in subsidiaries in Japan Atlanta, Georgia, USA, the and in the other parts company only manufactures of the world, it has syrup concentrates and sells been selling millions of them to various bottlers that vehicles every year hold exclusive territories in since 1998. different countries including the Philippines.  This implies that the world economy is no longer controlled by the nation- states, but it must be seen from a global context—the reliance and The most fitting integration of world economies. definition of Economic Globalization:  To illustrate, the price movements of imported fuels in the Philippines are the process of “making the world affected not only by the national Tax economy an 'organic system' by Reform for Acceleration and Inclusion's (TRAIN Law) excise tax extending transnational economic on fuels, but also by the peso-US processes and relations to more dollar exchange rate. At the same and more countries and by time, this exchange rate is also affected by the global market and the deepening the economic international economy's interest rates interdependencies among them like the European Union (EU) and (Szentes‘,2003).” the United States Federal Government's interest rates. It cannot be discounted that global corporations directly affect the inflow of US dollars in the Philippines.  Agents of Global Economies Learning Outcomes  Some scholars believe that it is still the nation-state but of Activity different levels. Discussion Boyer and Drache (1996) state that the role of nation-states as Wrap-up manager of the national economy is being redefined by globalization. nation-states still act as buffer to negative effects of Government policies and regulations globalization. either permit or deny the smooth  In support, Brodie (1996) calls the government as the connection among “midwives” of globalization. world economies. In It means that nation-states are still relevant despite the looming trade war between China assuming a global perspective and act as and the United mediators between the effects of globalization and States, each government imposes the national economy. high tariffs on goods and services. Thus,  Agents of Global Economies Learning Outcomes Activity  Some experts claim that the actors are now the global Discussion corporations. Wrap-up  Ohmae (1995) argues that the nation-state has ceased to exist as the primary economic organization unit in the global market. For instance, Filipino consumers prefer to consume and avail of global products and services like H&M, Uniqlo, Accenture, Amazon, Alibaba, and FedEx.  Reich (1999) posits that national products, technologies, corporations, and industries become obsolete as a result of transforming the national economy into a global one. San Miguel Corporation and Jollibee Foods Corporation are good illustrations of this effect.  International Structure For Money, Power, and Interest Learning Outcomes Activity Discussion International Monetary System (IMS) Wrap-up Established to be one of the actors that facilitate economic globalization. refers to internationally agreed rules, conventions, and institutions for facilitating international trade, investments, and flow of capital among nation-states.  Three Global IMS Learning Outcomes Activity Discussion Wrap-up  Two Financial Institutions Learning Outcomes Activity Discussion International Bank now known as the World Bank for Reconstruction Wrap-up and Development responsible for post-war (IBRD) reconstructions International aims to promote international Monetary Fund financial cooperation and (IMF) strengthen international trade.  Does economic globalization unites or divides the world? Learning Outcomes Activity For Benczes (2014), economic globalization Discussion Wrap-up fosters universal economic growth and development.  Globalization allows a worldwide distribution of incomes.  For instance, Australia cannot provide all the raw materials they need for certain products or services, so it needs other nation-states to produce or provide these materials.  Does economic globalization unites or divides the world? Learning Outcomes Activity  Economic globalization reduces poverty (World Bank, Discussion 2002). Wrap-up  As foreign countries are in need of workforce and human capital, Filipino nurses become overseas workers; they go to Europe and other foreign countries to support their families in the Philippines.  Globalization creates mutual dependence between developing and developed countries (Arrighi, 2005).  Some developing countries rely on developed countries for employment and income while the latter relies on the former for raw materials and services like labor.  Does economic globalization unites or divides the world? Learning Outcomes  Some observers of economic globalization believe that it Activity divides the world further. Discussion 1. Exploitation of goods and services Wrap-up o one might observe that the sources of goods and services are exploited. o economically poor nation-states depend on industrialized countries for employment and income, these industrialized countries compensate their labor with cheap cost. These industrialized countries even source materials from natural resources of poor nation-states as another form of exploitation. Some even destroy nature without doing anything to rehabilitate it.  Does economic globalization unites or divides the world? Learning Outcomes  Some observers of economic globalization believe that it Activity divides the world further. Discussion 2. Economic globalization does not benefit all nations Wrap-up (World Bank, 2002). o There is an uneven experience among nations. o Workers in TNCs are paid less compared to their counterparts in the companies' home countries. This shows how cheap labor is in the Philippines. 3. Capitalism created the different levels of wages in the economic arena of world systems (Wallerstien, 2005). o It further divides the world for it leads to inequality according to expertise, experience, and skills.  Conclusion Learning Outcomes Activity Economic globalization affects all nations and Discussion citizens through the increasing integration of Wrap-up economies around the borderless world. Its important players are the nation-states, global corporations, and the international monetary systems. Though some people believe that economic globalization brings unity of all economic movements, others believe that globalization furthers the separation among nation-states around the world.