TOPIC 1: THE GLOBAL ECONOMY

INTRODUCTION
We learn that politics, culture, and economy are interconnected. This chapter
will focus on the economic area of globalization and how it came to be. This
section will not only focus on the global history but apply the theories on the Figure 1
present situation, specifically with the global pandemic we are experiencing. [Link]
The discussion will provide how important the economy is. At the same time
the discussion will also focus on the matter of macro (global market) perspective and micro perspective
(community /individuals). The discussion will give the students a clear understanding of the structure of
the global economy and its consequences ([Link]).

LEARNING OBJECTIVES:
1. Define economic globalization
2. Identify the actors that facilitate economic globalization
3. Define the modern world system
4. Articulate stance on global economic integration

WHAT IS ECONOMIC GLOBALIZATION?

Most of the definitions of globalization centers on its economic dimensions.
Economic globalization is driven by the "growing scale of cross -border trade of
commodities and services" (Shangquan, 2000). Critical to economic globalization is
global economic integration. Economic integration means that separate production
operations are functionally related to each other and form a unified product or Figure 2
service. This requires efficient management of economic operations from different [Link]

areas in the world. In current times, this is made possible by innovations in

transport logistics, modernization of communication and transport systems, policies supporting
integration of different process along the globe, among others.

Economic globalization refers to the widespread international movement of goods, capital, services,
technology and information. It is the increasing economic integration and interdependence of national,
regional, and local economies across the world through an intensification of cross-border movement of
goods, services, technologies and capital. Economic globalization primarily comprises the globalization of
production, finance, markets, technology, organizational regimes, institutions, corporations, and people
([Link]

“Economic globalization involves a wide variety of processes, opportunities, and problems related to the
spread of economic activities among countries around the world.” – J.L. Pyle –

Economic globalization needs people who are familiar with the international economic situation, who
understand the legal and cultural framework of other nations, who have a good command of foreign
languages, and who can use advanced technology (WTO Accession and Socio-Economic Development in
China, 2009).

The various definitions of the economic globalization focus on increasing economic trade interrelations
among countries (Steger, 2010; Al-Rodhan, et al., 2006; Shangquan, 2000). This is governed by neoliberal
principles with the role of the market as a central driver of economic activities, with less government
interventions (Martin, Schumann & Camiller, 1997). Economic globalization entails global industrial
restructuring and readjustments where developed countries play a dominant role (Shangquan, 2000).

However, the process of global economic integration is not a modern phenomenon. The voyages of earlier
explorers including the formation of empire (i.e., Roman empire) critical in intercontinental trade and
were also a precursor of modern economic globalization. Chinese, and even earlier, trades in Asia also
serve as first -forms of economic expansion and later integration. Gills and Thompson (2006: 1) argues
that the globalization processes "have been ongoing ever since Homo sapiens began migrating from the
African continent ultimately to populate the rest of the world." Explorations in earlier times tend to focus
on a relatively smaller target of commodities of high value like spices, tea, gold, or other precious metals.
The difference now is the extent and reach of economic globalization, restructuring of economic systems,
and the dominant influence of the private sector in the global economy (Shangquan, 2000).

WHO ARE THE ACTORS THAT FACILITATE ECONOMIC GLOBALIZATION?

Globalization has opened the doors for other non-state authority and actors in driving economic
globalization (Madsen & Christensen, 2016; Sassen, 2006). Non-state actors include (1) international
economic organizations, (2) private sector led by multinational companies, (3) central banks, and (4)
global civil society. Let us discuss how each actor contributes to economic globalization.

(1) International Economic Organizations such as the International Monetary Fund (IMF), World
Bank, and Organization for Economic Cooperation and Development (OECD). These organizations
are critical in developing and pushing for neoliberal policies among different countries. They also
help facilitate trade and development discussions among various states. Another example are
regional organizations such as the Association of Southeast Asian Nations (ASEAN) and North
American Free Trade Agreement (NAFTA). These organizations promote regional agreements and
standards that facilitate better trade and exchange of knowledge, human resources, and regional
cooperation. The Group of 8 (G8) and G20 are advisory organizations that discuss current
economic and political problems and transfer the ideas from the groups' forum to national
legislative regulations (Shangquan, 2000).
(2) Multinational Companies (MNCs), which are considered to be the main carriers of economic
globalization (Shangquan, 2000). In 1996, there were 44,000 MNCs in the world with 280,000
overseas subsidiaries and branch offices (ibid). In 2006, there were 88,000 MNCs identified
(UNCTAD, 2007). In earlier times, trade companies such as the Dutch and British East India,
Muscovy Company, Royal African Company, and Hudson Bay Company were precursors of the
modern day MNCs (Hirst & Thompson, 2002). MNCs started to emerge during World War II when
US industrial production increased by 44 percent (Strange, 1996).
(3) Central Banks are the other prime movers of economic globalization, they are considered one of
the most powerful institutions in the world economy since they can lead economic development,
and some authors contend that central bank governors are more influential in their own national
economy than some politicians (Shangquan, 2000).
(4) Global Civil Society is a major driver of economic globalization. The global civil society has made
its mark in global development arena particularly during the UN Conference on Environment and
Development in 1992 (Keane, 2003). Global civil society seen as either composed of individuals or
groups of individuals disadvantaged by the effects of the globalization of the world economy, they
protest and seek alternatives while on the other hand, global social movement constituting a basis
for an alternative to a new world order (Gherghel, n.d.). Part of the global civil society are
Transnational Advocacy Networks (TAN), networks which are "organized to promote causes,
principled ideas, and norms, and they often involve individuals advocating policy changes that
cannot be easily linked to a rationalist understanding of their 'interests' (Keck & Sikking, 1998).

Considering the increased speed in exchange and frequency of trading due to technological
advancements, the world is quickly evolving. From songs Compact Disks to MP3 format that you can
download online. Physical exchange was gradually replaced or supplemented by online virtual access. On
the other hand, there is a cultural lag between not only nations but also in the communities that belong
to it. Internet connection is now considered as an essential commodity especially now that everything
that we do is now anchored to the world wide web. In these trying times of the COVID-19 pandemic,
access to the internet and personal priorities were the problems of a poor student. The discrepancies
between the rich and poor are still significant. This chapter assesses economic globalization and examines
who benefits and who is left out.

WHAT IS THE MODERN WORLD SYSTEM?

The seminal work of Immanuel Wallerstein on the world-system theory (1974) is a critical reference in the
theorization of globalization. In this work, he expounded on the theory on how the core came to dominate
the periphery areas particularly in the economic world system as a basis of his analysis. This transgresses
from the traditional analysis of colonization with nation-state as starting point.

For Wallerstein, a world system constitutes a social system composed of boundaries, structures, member
groups, rules of legitimation, and coherence (Wallerstein, 2011). World economy, according to
Wallerstein (2011), is divided into core states and peripheral areas including semi -peripherals. According
to the world -system theory, the peripherals are mostly where production or raw materials are sourced
out, while the semi -peripherals processed or distributed the products to the core areas—sites of major
demands for goods and services (Wallerstein, 2011). There are significant and meaningful movements of
resources, products, people in different economies facilitated by modern transport and communication
(Chase -Dunn, 2018).

ECONOMIC GLOBALIZATION TODAY

Exports make national economies grow. In the past, the countries who benefited most from the free trade
were the advanced nations that were producing and selling industrial and agricultural goods. The United
States, Japan, and the member-countries of the European Union were responsible for 65 percent of global
exports, while developing countries only accounted for 29 percent. More countries opened up their
economies to take advantage of the increased free trade, which results in higher percentages
accumulated by the developing countries. The trade liberalization has altered the dynamics of the global
economy.

In the recent decades, economic globalization has spiked in global growth rates, partly as a result of the
increased exports. According to the IMF, the global per capita GDP rose over five-fold in the second half
of the 20th century. Yet, economic globalization remains an uneven process, with some countries,
corporations, and even individuals are benefitting a lot more than others.

ECONOMIC CRISIS INTO SOCIAL CRISIS

Source(s): Atkinson [Link]. 2015. The Sociology Book: Big Ideas [Link] publishing 345 Hudson Street, New
York.
Karl Marx reiterated that capitalist societies are more prone to economic
crises and that this will worsen over time, which will lead to workers’
revolution. But why is it that when a society falls in a crisis, a different
change in the political climate often follows?

This question was posed by Jurgen Habermas in the early 1970s. Habermas
was intrigued by the relationship between capitalism and crises.

He also suggests that traditional Marxist theories of crisis tendencies are not
applicable to some Western late-capitalist societies. The reason is because
these societies have become more democratic and have changed
significantly because welfare-state policies, such as free healthcare
provision. Also, collective identities have fragmented and there is increased
individualization, and fewer class-based conflicts.

Although the economic cycles of prosperity and recession continue, policy

measures by nation-states have enabled them to avert major crises. Unlike
earlier capitalist societies, under state-regulated late-capitalism, the
primary site of crisis and conflict has shifted to the cultural and political
spheres. The crisis of modern Western society is, according to Habermas,
one of legitimation. Legitimacy has become the focal concern because the
state, as manager of the “free market” economy, has simultaneously to
Figure 3
solve economic problems, ensure democracy, and please the voters. If the [Link]
public feels government policies are unfair, it withdraws its support for the
government. The state therefore has the difficult task of balancing the pursuit for capital with maintaining
mass support. In other words, state policies must favor business and
property owners while appearing to represent the interests of all. This
means the conditions exist for government institutions to suffer a large-
scale loss of legitimacy.

If citizens sense that the government is just and benevolent, then they will
show support. If, however, they feel that policies are not in their interests,
Figure 4
[Link] people will respond with political apathy or even large-scale discontent and
protests. Given a threat to the status quo, a government may try to
appease its citizens with short lived social welfare measures.