The Globalization of
World Economics
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LEARNING OUTCOMES:
At the end of the lesson, you should be able to:
1. define economic globalization;
2. identify the actors that facilitate economic globalization;
3. narrate a short history of global market integration in the twentieth century;
and
4. articulate your stance on global economic integration.
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ECONOMIC GLOBALIZATION
The International Monetary Fund (IMF) regards “ economic globalization” as a
historical process representing the result of human innovation and technological
progress.
It is the movement of goods, services, and capital across borders. These changes are
products of people, organizations, institutions and technologies.
How will we know that there
is economic globalization
and increasing integration
in the global market?
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According to the IMF, increased trade also means that
“
investments are moving all over the world at faster speeds.
According to United Nations Conference on Trade and
Development (UNCTAD), the amount of foreign investments
flowing across the world has increased drastically, this
means that there is a dramatic increase also in global trade.
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INTERNATIONAL TRADING
SYSTEM
▫ The oldest trading route is the silk road – a network of pathways in the ancient
world spanned from China to what is now the Middle East and to Europe
▫ However, The silk road was international but not global.
▫ According to Dennis O. Flynn and Arturo Giraldez, the age of globalization began
when “ all important populated continents began to exchange products
continuously
▫ Flynn traced back this happening in 1571 during the Galleon Trade.
▫ The Galleon trade was part of the Age of Mercantilism.
▫ From the 16th century to the 18th century, countries primarily in Europe competed
with one another to sell more goods as a means to boost their country’s income.
▫ To defend their products from competitors who sold goods more cheaply, these
regimes imposed high tariffs, forbade colonies to trade with other nations,
restricted trade routes and subsidized its exports.
▫ MERCANTILISM thus was a system of global trade with multiple restrictions.
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INTERNATIONAL TRADING
SYSTEM
▫ 1867, there was a more open trade system that was lead by UK,US and other
European Nations.
▫ They Adopted the Gold standard
▫ The system allows more efficient trade and prevent isolationism of the mercantilist
era.
▫ There was a common currency- all based on the value of Gold.
▫ But this system was still very restrictive, the countries were compelled to back their
currencies with fixed gold reserves. It stopped during the World War I.
▫ The Great Depression happened (1920s-1930)
▫ Today the world economy operates based on the fiat currencies- currencies that
are not backed by precious metals and whose value is determined by their cost
relative to other currencies.
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THE BRETTON WOOD SYSTEM
▫ After the two world wars, world leaders sought to create a global economic system
that would ensure a longer-lasting global peace.
▫ One of their ways is to set up a network of global financial institutions that would
promote economic interdependence an prosperity.
▫ The Bretton Wood System was inaugurated in 1944 .
▫ This system was influenced by John Maynard Keynes who believed that economic
crisis occur not when a country does not have enough money, but when money is
not being spent and, thereby, not moving.
▫ When the economies slowdown, the government should reinvigorate markets with
infusions of capital. This active role of the government is known as global
Keynesianism
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THE BRETTON WOOD SYSTEM
The 2 financial institutions are :
International Bank for Reconstruction and Development (IBRD, World Bank)
-responsible for funding postwar reconstruction projects
International Monetary Fund (IMF)
- The global lender of last resort to prevent individual countries from
spiraling into credit crisis
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Shortly after Bretton Woods, other
countries made their own economic
integration through GENERAL
AGREEMENT ON TARIFFS AND
TRADE in 1947.
GATT
The main purpose was to reduce tariffs
and other hindrances to free trade
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1940s-1970s during this period, people are more allowed to
purchase more goods and in the process increase demand for
these products. As demand increased, so did the prices of
these goods. The theory went that, as prices increased
companies would earn more and would have more money to
hire workers.
In the early 1970s, however, the prices of oil rose sharply as a
result of the Organization of Arab Petroleum Exporting
Countries (OAPEC) imposition of oil embargo. Stagflation NEOLIBERALISM
happened, a decline in economic growth and AND ITS
employment( stagnation) alongside with the sharp increase in
prices ( inflation) DISCONTENTS
A new economic idea emerged and it is called as the
NEOLIBERALISM. GATT ‘s function was continued by the
WORLD TRADE ORGANIZATION.
With the new policy it advocates minimal government spending
and the privatization of government controlled services.
SHOCK THERAPY necessary for long term economic growth .
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Advocates of neoliberalism are
President Ronald Raegan and
British Prime Minister Margaret
NEOLIBERALISM
Place your screenshot here
Thatcher .
The defects of this economic idea
was shown during the collapsed of
communism in Russia.
Oligarchy immersed in the society.
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What can you say about the
ECONOMY TODAY?
