Understanding Economic Globalization and Its Global Impact
School
Batangas State University**We aren't endorsed by this school
Course
GED 301
Subject
Economics
Date
Dec 12, 2024
Pages
5
Uploaded by AmbassadorThunder7222
THE GLOBAL ECONOMYOrigin of Economic GlobalizationIt can be traced from history the time when there was aneconomic movement in Asia, Africa and Europe called the SilkRoad, a trade route which connects the East, particularlyChina, and the West. This route brings us to the history ofhow Philippines was discovered by the Portuguese and Spainenvoys in search of spices and eventually led to colonization.At this present day ti e, foreign expatriates come to thecountry to manage their company’s foreign subsidiaries.Likewise, the Philippines send thousands of skilled workers tothe Middle East as construct i on workers, seafarers, nurses ,etc.Economicglobalizationreferstotheexpandinginterdependence of world economies.The term global economy also refers to the interconnectedworldwideeconomicactivitiesthattakeplacebetweenmultiple countries.These economic activities can have either a positive ornegative impact on the countries involved.TheInternationalMonetaryFund(IMF)alsodefinedEconomic Globalization as a historical process, the result ofhuman innovation and technological progress(IMF,2008)How does global economy work?A global economy is one in which goods and services aretraded across national borders. Because the trade is amongsovereign nations, those nations may enact trade restrictionsthat alter free market out comes.The New World Economy is characterized by:·Moreoptionsforproduction.Nomatterwhatyourproduction process, the chances are that the same capabilities exist elsewhere.· The chance to create new markets· Small firms can think big· A more level playing field· Networks are important· Culture is no constraintEconomic globalization is one of the three main dimensionsof globalization commonly found in countries, academicliterature, with the two others being political globalizationand cultural globalization, as well as the general term ofglobalization.Itreferstothewidespreadinternationalmovementofgoods,capital,services,technologyandinformation. It is the increasing economic integration andinterdependence of national, regional, and local economiesacross the world through an intensification of cross-bordermovement of goods, services, technologies and capital.There are numerous benefits of a global economy, whichinclude the Free trade, an excellent method for countries toexchange goods and services. It also allows countries tospecialize in the production of those goods in which theyhaveacomparativeadvantage.Internationalforcesarereshaping the world of business, but also creating newopportunities and a more level playing field for small firms.Economy is considered very important because it is the thingthat allows us to survive and thrive. A system where nomoney is involved and trade is done as direct exchange ofgoods is an economytoo. Having enough is extremelyimportant for stability, low crime levels and cultural, scientificand technological progress. So, to improve the economy,someSpecificactors that facilitateeconomicglobalization arehighlighted as follows:· The International Economic and Financial Organization· The International Governmental Organization (IGOs)· The Media· The Multilateral Development Banks· The Nation-States· The Non-Governmental Organizations (NGOs)· The Trans-National Corporations (TNCs)· The United Nations (UN) SystemThese are the agents that bring about the interdependenciesof global economies. Some experts believe that these actorsare the global corporations and that it is still the nation-statesbutofdifferentlevels.Brodie2006)callsthegovernment as the "midwives of globalization" which meansthattheroleofnation-statesisbeingredefinedbyglobalization and are relevant despite assuming a globalperspective. It acts as mediators between the effects ofglobalization and the national economy.MARKET INTEGRATIONMarketintegrationoccurswhenpricesamongdifferentlocations or related goods follow similar patterns over a longperiod of time.Groups of goods often move proportionally to each other andwhen this relation is very clear among different markets it issaid that the markets are integrated.Integrated marketing allows you to spread your marketingmessages across multiple channels and increases the chancesof it being heard. Best of all customers engaged throughmultiple channels tend to spend more than other customers.Therefore spreading your marketing message can increaseyour return on investment.Global market integration did not happen overnight. It wasthe result of the establishment of a global economy thatinvolved the homogenization of trade and commerce. Priortothetrendsinglobalizationinthe20thcentury,internationaltrade ofgoodsand serviceswerealreadypracticed.The integration of the globalmarketstartedwhenbigAmerican corporations began to emerge after the SecondWorld War with the rise of new conglomerates. InternationalTelephoneandTelegraphboughtAvisRent-a-Car,Continental Banking, Sheraton Hotels, and Hartford FireInsurance (American History,2018). Later, Japan and Europefollowed suit. Japanese global automobile corporations likeToyota, Nissan, and Isuzu took off after the giant Americaneconomies flourished. These companies prospered as theprimary and global makers of trucks for the Japanese military(Dower 1992). Renault automobiles, a French multi-national
automobile manufacturer was also used to help in themilitary post-war operations. The rise of American, Japanese,and European global corporations paved the way for thefurtherColonization and imperialism rose as the new ways of puttingorder to the economic interrelationships among countries.Throughcolonialism,equity,corporateownership,management subsidiaries, and central headquarters whichsupply goods and services were establish through colonialism.Types of Related Markets where Market Integration OccursStock Market IntegrationThis is a condition in which stock markets in differentcountries trend together and depict same expected riskadjusted returns. Two markets are perfectly integrated ifinvestors can pass from one market to another withoutpaying any extra costs and if there are possibilities ofarbitration which ensures the equivalence of stock prices onboth markets (56).Financial Market IntegrationIt is an open market economy between countries facilitatedby a common currency and the elimination of technical,regulatory and tax differences to encourage free flow ofcapital and investment across borders (57). It occurs whenlending rates in several different markets begin to move intandem with one another. Emergence of similar patternswithin the capital, stock, and financial markets with thosetrends coming together to exert a profound influence on theeconomy of that nation is involved in the integration within anation.Global CorporationA global corporation is a business that operates in two ormore countries. It also goes by the name "multinationalcompany" (58). Several advantages are offered by globalexpansionofbusinessoverrunningastrictlydomesticcompany. Success in different types of economies is achievedby means of multiple countries operation while it causes alsologisticandculturalchallenges.Expandingrevenueopportunities and diversifying business risk are the purposesof becoming global corporation. Access to more customersandcapitalisobtainedthroughamodelthatworksdomestically well and translates foreign markets well.The Finance Function in a Global CorporationAs corporations go global, capital markets open up withinthem, giving companies a powerful mechanism for arbitrageacross national financial markets (62). Chief financial officers(CFOs) must balance the opportunities with the challenges ofoperatinginmultipleenvironmentsinmanagingtheirinternal marketsin buildingan advantage.Thesethreefunctions can be created by CFOs through exploiting theirinternal capital markets.1. FinancingA group's tax bill can be reduced by the CFO like borrowing incountries with high tax rates and lending to operations incountries with lower rates.2. Risk ManagementGlobal firms can offset natural currency exposures throughworldwideoperationsinsteadofmanagingcurrencyexposures through financial markets.3. Capital budgetingGetting smarter on valuing investment opportunities CFOscan add value.Foreign Direct InvestmentForeign Direct Investment (FDI) was of corporate origin. It is amajor driver of extended global corporate development. It isan investment made by a company or individual in onecountry in business interests in another country, in the formofeitherestablishingbusinessoperationsoracquiringbusiness assets in the other country, such as ownership orcontrolling interest in a foreign company and the key featureof foreign direct investment is that it is an investment madethatestablisheseithereffectivecontrolof,oratleastsubstantial influence over, the decision making of a foreignbusiness (63).BRICS Economies· Brazil, Russia, India, China and South Africa (BRICS) is anacronym for the combined economies of Brazil, Russia, India,China and South Africa. BRIC, without South Africa, wasoriginally coined in 2003 by Goldman Sachs, which speculatesthat by 2050 these four economies will be the most dominant.South Africa was added to the list on April 13,2011 creating "BRICS"General Agreement on Trade in Services (GATS)· The General Agreement on Trade in Services (GATS) is thefirst multilateral agreement covering trade in services whichwas negotiated during the last round of multilateral tradenegotiations, called the Uruguay Round, and came into forcein 1995.General Agreement on Tariffs and Trade (GATT)· deals with trade in goods. The two primary objectives ofGATTS are to ensure that all signatories are treated equitablywhen accessing foreign markets; and second, to promoteprogressive liberalization of tradeTHE GLOBAL INTERSTATE SYSTEMLesson 3DEFINING “INTERSTATE”A system of unequally powerful and competing states inwhich no single state is capable of imposing control on allothers. These states are in interaction with one another in aset of shifting alliance and wars and changes in relativepower of states upsets any tempo ary set of alliances, leadingto restructuring of balance of power”DEFINING “STATE”States are independent political communities each of whichpossesses a government and assert sovereignty in relation toa particular portion of the earth’ s surface and particularsegment of human population ( Hedley Bull) ”NATIONThe concept of nation emphasizes the organicties that holdgroups of people together and inspire a sense of loyalty andbelonging – i.e., ethnicity, language, religion, and others(Schattle, 2014)
STATE NATION· A legal and political entity· Linked to a territory· Exist with sovereignty· Established consciously· United by law· A socio-cultural entity· Linked to a group people· May exist even w/o sovereignty· Can be created unconsciously· United by bond and shared historyNATION-STATE·Thisreferstomoderncountriesandtheirpoliticalapparatuses rules over a single nation. It is a political community that emanates from civic societyto legitimately execute peace.The State and the Economic Interdependence· The belief that globalization imposes a forced choice uponstates either to conform to free market principles or run therisk of being lef t behind is termed into a phrase called“ Golden Straitjacket”· There are two things that will happen if a country is inGolden Straitjacket: the economy grows and politics shrinks.It is a straitjacket because it narrows the political andeconomic policy choices of those in power to relatively tightparametersNeoliberalism· the intensification of the influence and dominance of capital.· It values market exchange capable of acting as a guide to allhuman action.· It emphasizes the significance of contractual relations in themarketplace.· the social good will be maximized by maximizing the reachand frequency of market transactionsEconomic SovereigntyThepowerornationalgovernmentstomakedecisionsindependently of those made by other governments. Thereare four diff. concepts of sovereignty.· International legal Sovereignty,· Westphalian Sovereignty,· Interdependence Sovereignty and· Domestic Sovereignty.World’s Three Leading Financial Institutions· World Bank (WB)- The international financial institution thatprovides loans to countries of the world for capital projects.It was established by the United Nations Monetary andFinancial Conference or the Bretton Woods conference.· International Monetary Fund (IMF)- It does so in three ways:keeping track of the global economy and the economies ofmember countries; lending to countries with balance ofpayments difficulties; and giving practical help to member· World Trade Organization (WTO)-regulates internationaltrades deals with the rule of trade between nations, ensurethe trade will flows smoothly, predictably and freely aspossible. Act as forum in negotiation trade agreementsEuropean integrationIs the process of industrial, political, legal, economic, socialand cultural integration of states wholly or partially in Europe.European integration has primarily come about through theEuropean Union and its policiesEuropean Union (EU)Is an international organization comprising 28 Europeancountries and governingcommoneconomic,social,andsecurity policiesEconomic Integration· can be described as a process and a means by which a groupof countries strives to increase their level of welfare.· It is an arrangement between different regions that oftenincludes the reduction or elimination of trade barriers, andthe coordination of monetary and fiscal policies.Seven Stages of Economic Integration· Preferential trading area (PTA· Free trade area· Customs union· Common market· Economic union· Economic and monetary union· Complete economic integrationPreferential Trade Areas (PTAs)Happenswhenthere’sanagreementonreducingoreliminating tariff ( tax or duty to be paid on a particular classof imports or exports) barriers on selected goods importedfrom other members of countries within the geographicalregion or areas.Free Trade Agreements (FTAs)Eliminate import tariffs as well as import quotas betweensignatory countries. These agreements can be limited to afew sectors or can encompass all aspects of internationaltrade.Custom UnionRemoval of tariff barriers between members, together withthe acceptance of a common or unified external tariff againstnon-membersCommon Market (CM)All barriers to the mobility of people, capital and otherresources within the area in question, as well as eliminatingnon-tariff barriers to trade, such as the regulatory treatmentofproductstandardsareremovedbyCMasidefromcontaining the provisions of a customs union.Economic UnionThe trading bloc that has both a common market betweenmembers, and a common trade policy towards non-members,although members are free to pursue independent macro-economic policiesEconomic and Monetary Union (EMU)Involves a single economic market, a common trade policy, asingle currency and a common monetary policy.
Complete Economic IntegrationThe final stage of economic integration in which memberstates completely forego independence of both monetaryand fiscal policies.Theories of European IntegrationNeo-functionalism· This theory focuses on the supranational institutions of theEU of which the main driving forces of integration areinterest group activity at the European and national levels,political party activity, and the role of governments andsupranational institutions.· It is a theory of regional integration, building on the work ofErnst B. Haas, an American political scientist and LeonLindberg, also an American political scientist.IntergovernmentalismThistheoryprovidesaconceptualexplanationoftheEuropean integration process. The main concept of theIntergovernmentalism is emphasizing on the role of nationalstates in the European integration; in another words it arguesthat "European integration is driven by the interest andactions of nation states" . This theory was suggested byStanley HoffmannLiberal IntergovernmentalismApplicationofrationalinstitutionalismtothefieldofEuropean integration is the aim of this theory.Multi-level Governance (MLG)WritersdefinedMLGasdispersionofauthorityacrossmultiple levels of political governance. (Liesbet Hooghe andGary Marks )Transnational Activism in StatesTransnational ActivismDefined as the mobilization of collective claims by actorslocated in more than one country and/or addressing morethanonenationalgovernmentand/orinternationalgovernmental organization or another international actor.Social MovementIs a type of group action. It refers to the organizationalstructuresandstrategiesthatmayempoweroppressedpopulations to mount effective challenges and resist themore powerful and advantaged elites".Global Justice MovementDescribes the loose collection of individuals and groups oftenreferredtoas a“movementofmovements”,whoadvocatefairtraderulesandarenegativetocurrentinstitutions of global economics such as the World TradeOrganizationNew Transnational ActivismIsasmultifacetedastheinternationalism.Althoughglobalization and global neo-liberalism are frames aroundwhich many activists mobilize, the protests and organizationsare not the product of a global imaginary but of domesticallyrooted activists who are the connective tissue of the globaland the local, working as activators, brokers and advocatesfor claims both domestic and internationalSocial Media and the StateSocial media is a computer-based technology that facilitatesthe sharing of ideas and information and the building ofvirtual networks and communities.CONTEMPORARY GLOBAL GOVERNANCEGlobal Governance or World GovernanceIs a product of neo-liberal paradigm shifts in internationalpolitical and economic relations . It is a movement towardspoliticalintegrationoftransnationalactorsaimedatnegotiating responses to problems that affect more than onestate or region. It tends to involve institutionalization. Theseinstitutions of global governance – the United Nations, theInternational Criminal Court , the World Bank, etc. – tend tohave limited or demarcated power to enforce compliance.Global Governance or World GovernanceThe capacity of within the international system, at any givenmoment to provide government-like services and publicgoodsintheabsenceofaworldgovernment.Itisacombination of informal and formal ideas, values, rules,norms, procedures, practices, policies, and organizations thathelpallactors-state,internationalorganization,non-government organizations identify ,understand, and addresstransboundary problems.International Organization (IOs)Commonly used to refer international intergovernmentalorganizations on groups that are primarily made up ofmember-states.Powers of International Organization· Power of classification· Power to fix meanings· Power to diffuse norms· Because of these immense powers, IOs can be sources ofgreat good and great harm.Roles and Functions of the United NationsAs an intergovernmental organization, the United Nation istasked to promote international co-operation and to createand maintain international order.Roles and Functions of the United NationsThe United Nations (UN) in the world of politics has the rolesof preventing and managing conflicts, regulating armaments,championing human rights and international humanitarianlaw,liberatingthecolonized,providingeconomicandtechnicalaidinnewlyliberatedcountries,organizingelections, empowering women, educating children, feedingthe hungry, sheltering the disposed and displaced, housingthe refugees, tending the sick and coordinating disaster reliefand assistance.Four Main Purposes of the UN Charter1. Maintaining worldwide peace and security2. Developing relations among nations3. Fostering cooperation between nations in order to solveeconomic,social,cultural,orhumanitarianinternationalproblems4. Providing a forum for bringing countries together to meetthe UN's purposes and goal
The UN aims to save succeeding generations from thescourge of war; to reaffirm faith in fundamental human rights;to establish conditions under which justice and respect forthe obligations arising from treaties and other sources ofinternational law can be maintained; and to promote socialprogress and better standards of life in larger freedomChallenges of Global Governance in the Twenty-first CenturyIt is a process which allows interconnectivity across differentbordersandsovereignterritories.Globalgovernanceisgoverning, without sovereign authority, relationships thattranscend national frontiers. Global governance has evolvedas one of the most influencing tools for globalization whichhasledtothefoundationofsustainabledevelopmentprojects around the globe.Challenges of Global Governance in the Twenty-first Century·Issuesthatinvolveinterwovendomesticandforeignchallenges include threats at the beginning of the centurywhichincludeethnicconflicts,infectiousdiseases,andterrorism as well as a new generation of global challengesincluding climate change, energy security, food and waterscarcity, international migration flows and new technologies.·Withinstatesthefirsttrajectoryorpathisthedepoliticizationwhichcanbeobservedintheformofdelegating decisions to independent regulators and experts,central banks, or judiciaries.· A second trajectory is the rescaling of economic and socialrelations well beyond the territorial boundaries of nationstates, facilitated by transnational legal arrangements thathave their roots in national lawThe Role of the Nation -State in GlobalizationBasic Elements of a State1. Territory2. People3. Sovereign Power ( the authority of a state to govern itself)Nation- state role in globalization is complex. Since nation-states are divided by physical and economic boundaries,reducedbarriersininternationalcommerceandcommunicationareconsideredtheirpotentialthreat.Sovereigntyofindividualnationsisnotabolishedbyexpanded trade among countries, instead globalization is aforce that changed the way nation-states deal with oneanother, particularly in the area of international commerce.In setting international commerce policies, isolated statesare forced to engage to one another , while nation-state’ sdomesticroleunchanged.Rolesofsomestateswerediminishedwhileothershaveexaltedroleisduetointeractions of various economi c imbalances.Globalization’ s Impact on the State1. Poverty2. Environmental pollution3. Economic crisis4. Organized crime and terrorismDecision making processes in globalization is complex as ittakes place in various levels such as sub-national, national,and global which lead to the growth of a multi-layeredsystem of governance.