The-Structures-of-Globalization_20240306_124432_0000.pptx

STRUCTURE OF GLOBALIZATION

1. GROUP 2 “Structures of Globalization” ALLOY, JASMINE S. DUG-AS, HONEY JEAN S. TAKAYAN, ANGELICA MAE A. LEAL, BRYAN ANZEL

2. UNIT II THE STRUCTURES OF GLOBALIZATION Learning Objectives: After studying the unit, the students should be able to: • define economic globalization • explain the two major driving forces of global economy • differentiate economic globalization from internationalization • trace the origin of economic globalization

3. THE STRUCTURES OF GLOBALIZATION 1. THE GLOBAL ECONOMY 2. Market Integration 3. The Global Interstate System 4. Contemporary Global Governance

4. ECONOMIC GLOBALIZATION It refers to the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies. THE GLOBAL ECONOMY

5. According to the International Monetary Fund economic globalization is 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. It also refers to the movement of people (labor) and knowledge (technology) across international borders. In economic terms, globalization is nothing but a process making the world economy an organic system by extending transnational economic processes and economic relations to more and more countries and by deepening the economic interdependencies among them . THE GLOBAL ECONOMY

6. Two Major Driving Forces for Economic Globalization The rapid growing of information in all types of productive activities 2. Marketization means turning government-run businesses into companies that operate more like private businesses. This is done by changing the rules they follow, like reducing government funding and restructuring management. THE GLOBAL ECONOMY

7. Dimensions of Economic Globalization The globalization of trade of goods and services The globalization of financial and capital markets The globalization of technology and communication 4. The globalization of production THE GLOBAL ECONOMY

8. Difference between Economic Globalization from Internationalization Economic globalization is a functional integration between internationally dispersed activities which means that it is a qualitative transformation rather than a quantitative change while; Internationalization is an extension of economic activities between internationally dispersed activities. THE GLOBAL ECONOMY

9. Origin of Economic Globalization Economic globalization started with long-distance trade like the Silk Road in the 16th century, connecting Asia, Africa, and Europe. In the 17th and 18th centuries, global economy was mainly about trade, not production. In the 19th century, globalization took a modern shape with increased trade, leading to a period of relative peace and economic stability before World War I. Global trade grew significantly in the 19th and 20th centuries, outpacing the growth of developed economies. THE GLOBAL ECONOMY

10. International Monetary Systems and Gold Standard International monetary system (IMS) refers to a system that forms rules and standards for facilitating international trade among the nations. It helps in reallocating the capital and investment from one nation to another. It is the global network of the government and financial institutions that determine the exchange rate of different currencies for international trade. It is a governing body that sets rules and regulations by which different nations exchange currencies with each other . THE GLOBAL ECONOMY

11. Evolution of the International Monetary System Before 1870 to 1914, trade relied on gold and silver without much help from institutions. Gold was important for stable trade, leading to the gold standard where currencies were backed by gold reserves. After World War I, gold's use declined due to war costs and inflation, leading to the Great Depression. In 1944, nations created the Bretton Woods system to stabilize currencies using the US dollar. This ended in 1971 due to trade deficits and inflation, leading to the flexible exchange rate system. The gold standard didn't effectively control inflation or maintain balance in international transactions. 1.THE GLOBAL ECONOMY

12. European Monetary Integration European monetary integration is a long process starting from the late 1960s to create a united currency and financial system among European countries. It aims to reduce reliance on the US dollar and stabilize exchange rates. While it brought benefits, recent challenges include economic imbalances and fiscal issues, leading to crises. The European Monetary System (EMS) and later the European Economic and Monetary Union (EMU) with the euro were steps toward this integration. However, the EU faced significant challenges during the global financial crisis, leading to the establishment of financial rescue programs like the European Stability Mechanism (ESM). These efforts depend on member states' willingness to reform the governance of the eurozone for future stability. 1.THE GLOBAL ECONOMY

13. International Trade and Trade Policies International trade is when goods or services are exchanged between countries. It helps countries' economies grow and allows people to buy things they need. Trade makes products cheaper because of competition. It also lets countries specialize in what they're good at making. Trade policies are rules that countries make about how they trade with each other. These rules include taxes, inspections, and quotas. Each country has its own trade policies to help its international trade. 1.THE GLOBAL ECONOMY

14. Focuses of Trade Policy in International Trade Tariffs -are taxes imposed on specific imports or exports, allowing countries to protect their local industries. Some nations levy heavy tariffs on imports to inflate their prices in local markets and encourage demand for domestic products. Trade Barriers - are government-imposed measures designed to reduce the competitiveness of imported goods compared to local ones, affecting specific products or trade partners. These barriers include tariffs, duties, subsidies, embargoes, and quotas, and can be related to product standards, technical requirements, or administrative procedures. Safety - inspection regulations enforced by public officials ensure imported products meet high safety and quality standards in the country. 1.THE GLOBAL ECONOMY

15. Types of Trade Policies National Trade Policy -This safeguards the best interest of its trade and citizen. Bilateral trade Policy - It regulates trade between two nations based on their national trade policies and negotiations. International Trade Policy - It is shaped by organizations like OECD, WTO, and IMF, focusing on the interests of both developed and developing nations. 1.THE GLOBAL ECONOMY

16. Trade Policy and International Economy Developed countries favor free trade, while developing nations often prefer partially protected trade to safeguard local industries. Globalization depends on sound trade policies, fair trade practices, and opportunities for international trade growth. The World Trade Organization (WTO) It is oversees global trade rules, ensuring smooth and predictable trade between nations, facilitating access to markets, and promoting international trade. 1.THE GLOBAL ECONOMY

17. Global Economy Outsourcing Outsourcing involves seeking partners for specific investments governed by incomplete contracts, influenced by market thickness, search costs, and contracting environments. Subcontracting, especially in industries like construction and IT, entails assigning tasks under a contract to a subcontractor. It's a way for firms to establish bilateral relationships and have partners make investments to produce goods/services meeting their needs, although contracts don't always guarantee the same level of care as if tasks were performed in-house. 1.THE GLOBAL ECONOMY

18. One of the most rapidly growing components of international trade is the outsourcing of intermediate goods and business services. There are three essential features of a modern outsourcing strategy. 1. Firms must search for partners with the expertise that allows them to perform the particular activities that are required. 2. They must convince the potential suppliers to customize products for their own specific needs. 3. They must induce the necessary relationship-specific investments in an environment with incomplete contracting. 1.THE GLOBAL ECONOMY

19. Possible Determinants of the Location of Outsourcing 1. Size of the country can affect the “thickness” of its markets. 2. The technology for search affects the cost and likelihood of finding a suitable partner. 3. The technology for specializing components determines the willingness of a partner to undertake the needed investment in a prototype. 4. The contracting environments can impinge on a firm’s ability to induce a partner to invest in the relationship. 1.THE GLOBAL ECONOMY

20. THE STRUCTURES OF GLOBALIZATION 1. The global economy MARKET INTEGRATION 3. The Global Interstate System 4. Contemporary Global Governance

21. It refers to how easily two or more markets can trade with each other. It occurs when prices among different locations or related goods follow similar patterns over a long period of time. It may also refer to the movement of prices of related goods and services sold in a defined geographical location in similar patterns. MARKET INTEGRATION

22. One way of helping integration of market by reducing barriers to trade and increasing fluidity between markets is through “ foreign trade” . Market integration exists when there are exerted effects that prompt similar changes or shifts in other markets that focus on related goods on events occurring within two or more markets. MARKET INTEGRATION

23. Types of Related Markets where Market Integration Occurs: STOCK MARKET INTEGRATION This is a condition in which stock markets in different countries trend together and depict same expected risk adjusted returns. Two markets are perfectly integrated if investors can pass from one market to another without paying any extra costs and if there are possibilities of arbitration which ensures the equivalence of stock prices on both markets MARKET INTEGRATION

24. FINANCIAL MARKET INTEGRATION It is an open market economy between countries facilitated by a common currency and the elimination of technical, regulatory and tax differences to encourage free flow of capital and investment across borders . It occurs when lending rates in several different markets begin to move in tandem with one another. MARKET INTEGRATION

25. GLOBAL CORPORATION Is a business that operates in two or more countries. It also goes by the name "multinational company“. Example: One can find more customers in a country whose economy is vibrant and expanding in lieu of stagnant local and domestic economy or market share that has hit a plateau MARKET INTEGRATION

26. Historical Periods of Global Corporation HISTORICAL GLOBALIZATION An approach to the study of globalization that locates the phenomenon itself in early patterns of trade and exchange. Globalization began in early historical periods as cities and countries expanded beyond their borders. This led to complex interactions through trade and industry, influenced by emerging technologies, particularly in shipping and navigation. Modern nation-state systems allowed for increased global capital and wealth. American corporations led economic recovery and expansion, followed by multinational corporations (MNCs) and the transformation of global corporations from WWII to the present. MARKET INTEGRATION

27. The Finance Function in a Global Corporation CHIEF FINANCIAL OFFICERS(CFOs) must balance the opportunities with the challenges of operating in multiple environments in managing their internal markets in building an advantage. 3 FUNCTIONS can be created by CFO’S FINANCING RISK MANAGEMENT CAPITAL BUDGETING MARKET INTEGRATION

28. FOREIGN DIRECT INVESTMENT (FDI) was of corporate origin. It is a major driver of extended global corporate development. It is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company and the key feature of foreign direct investment is that it is an investment made that establishes either effective control of, or at least substantial influence over, the decision making of a foreign business MARKET INTEGRATION

29. BRICS Economies BRICS Is an acronym for the combined economies of Brazil, Russia, India, China and South Africa . BRIC , without South Africa , was originally coined in 2003 by Goldman Sachs , which speculates that by 2050 these four economies will be the most dominant. South Africa was added to the list on April 13, 2011 creating "BRICS". These five countries were among the fastest growing emerging markets as of 2011 . Further, Brazil, Russia, India and China (BRIC) refer to the idea that China and India will, by 2050, become the world's dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. Due to lower labor and production costs in these countries now including a fifth nation, South Africa, many companies have also cited BRIC as a source of foreign expansion opportunity i.e. promising economies in which to invest. MARKET INTEGRATION

30. The General Agreement on Trade in Services (GATS) Is the first multilateral agreement on services trade, providing rules, commitments, and dispute resolution mechanisms. It negotiated during the Uruguay Round or multilateral trade negotiations. General Agreement on Tariffs and Trade (GATT) Is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. MARKET INTEGRATION

31. TWO PRIMARY OBJECTIVES OF GATTS to ensure that all signatories are treated equitably when accessing foreign markets to promote progressive liberalization of trade and services. MARKET INTEGRATION

32. THE STRUCTURES OF GLOBALIZATION 1. THE GLOBAL ECONOMY 2. Market Integration 3. The Global Interstate System 4. Contemporary Global Governance

33. Globalization and the Nation- States Globalization in the early years of the 21st century has not displaced the state. Max Weber, a German social theorist define state as a compulsory political organization with a centralized government that maintains a monopoly of the legitimate use of force within a certain territory (66). Hedley Bull, a 20th century international philosopher stated that states are independent political communities each of which possesses a government and asserts sovereignty in relation to a particular portion of the earth’s surface and a particular segment of the human population (67). This means that government and constitutions come and go but states readily endure. GLOBAL INTERSTATE SYSTEM

34. The State and the Economic Interdependence The belief that globalization imposes a forced choice upon states either to conform to free market principles or run the risk of being left behind is termed into a phrase called “Golden Straitjacket” by Thomas Friedman, a neoliberalism journalist and advocate, to illustrate the forcing of states into policies that suit the preferences of investment houses and corporate executives (Electronic Herd) who swiftly move money and resources into countries favored as adaptable to the demands of international business and withdraw even more rapidly from countries deemed uncompetitive. GLOBAL INTERSTATE SYSTEM

35. The State and the Economic Interdependence Further, countries are compared to individual stocks where the states and their government are rewarded and punished similar to buying and selling shares of individual companies. States also have lost an important element of economic sovereignty and that neo-liberalism is beyond contestation. GLOBAL INTERSTATE SYSTEM

36. The State and the Economic Interdependence There are two things that will happen if a country is in Golden Straitjacket: the economy grows and politics shrinks. It is a straitjacket because it narrows the political and economic policy choices of those in power to relatively tight parameters. This is the reason of the difficulty of finding any real differences today between ruling and opposition parties in those countries that have put on the Golden Staitjacket GLOBAL INTERSTATE SYSTEM

37. Neoliberalism and Economic Sovereignty Neoliberalism is the intensification of the influence and dominance of capital. It is the elevation of capitalism as a mode of production into an ethic, a set of political imperatives, and a cultural logic. It is a project to strengthen, restore, or, in some cases, constitute anew the power of economic elites. It values market exchange as an ethic in itself capable of acting as a guide to all human action and substituting for all previous held ethical beliefs. It emphasizes the significance of contractual relations in the marketplace. It also holds that the social good will be maximized by maximizing the reach and frequency market transactions, and it seeks to bring all human action into domain of the market GLOBAL INTERSTATE SYSTEM

38. Economic integration- can be described as a process and a means by which a group of countries strives to increase their level of welfare. GLOBAL INTERSTATE SYSTEM

39. There are four different concepts of sovereignty. These include: International Legal Sovereignty - It refers to the acceptance of a given state as a member of the international community. Westphalian Sovereignty- It is based on the principle that one sovereign state should not interfere in the domestic arrangements of another. Interdependence Sovereignty –It is the capacity and willingness to control flows of people, goods and capital into and out of the country. Domestic Sovereignty- It is the capacity of a state to choose and implement policies within the territory GLOBAL INTERSTATE SYSTEM

40. Economic sovereignty on the other hand is the power or national governments to make decisions independently of those made by other governments. Seven Stages of Economic Integration 1. Preferential trading area (PTA) 2. Free trade area 3. Customs union 4. Common market 5. Economic union 6. Eonomic and monetary union 7. Complete economic integration GLOBAL INTERSTATE SYSTEM

41. European integration- is the process of industrial, political, legal, economic, social and cultural integration of states wholly or partially in Europe. European integration has primarily come about through the European Union and its policies. European Union (EU),- is an international organization comprising 28 European countries and governing common economic, social, and security policies. In the early 21st century EU expanded into central and eastern Europe with the following members: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. GLOBAL INTERSTATE SYSTEM

42. Complete Economic Integration - is the final stage of economic integration in which member states completely forego independence of both monetary and fiscal policies. States that participate in complete economic integration have no control of economic policy including economic trade rules. Political integration- refers to the integration of components within political systems; the integration of political systems with economic, social, and other human systems; and the political processes by which social, economic, and political systems become integrated. GLOBAL INTERSTATE SYSTEM

43. Neo-functionalism - This theory focuses on the supranational institutions of the EU of which the main driving forces of integration are interest group activity at the European and national levels, political party activity, and the role of governments and supranational institutions. Intergovernmentalism - This theory provides a conceptual explanation of the European integration process. The main concept of the Intergovernmentalism is emphasizing on the role of national states in the European integration; in another words it argues that "European integration is driven by the interest and actions of nation states" (87). This theory was suggested by Stanley Hoffmann. GLOBAL INTERSTATE SYSTEM

44. Liberal Intergovernmentalism- This a dominant political theory developed by Andrew Moravsik in 1993 to explain European integration. Application of rational institutionalism to the field of European integration is the aim of this theory. New Institutionalism - This theory emphasized the importance of institutions in the process of European integration. Its three key strands are: rational choice, sociological and historical. GLOBAL INTERSTATE SYSTEM

45. Multi-level Governance (MLG)- This is a new theory of European integration. Writers Liesbet Hooghe and Gary Marks defined MLG as dispersion of authority across multiple levels of political governance. Transnational activism - can be defined as the mobilization of collective claims by actors located in more than one country and/or addressing more than one national GLOBAL INTERSTATE SYSTEM

46. The new transnational activism is as multifaceted as the internationalism. Although globalization and global neo-liberalism are frames around which many activists mobilize, the protests and organizations are not the product of a global imaginary but of domestically rooted activists who are the connective tissue of the global and the local, working as activators, brokers and advocates for claims both domestic and international. GLOBAL INTERSTATE SYSTEM

47. Social media is a computer-based technology that facilitates the sharing of ideas and information and the building of virtual networks and communities. GLOBAL INTERSTATE SYSTEM

48. Global governance or world governance is a product of neo-liberal paradigm shifts in international political and economic relations. Global governance can be understood as the sum of laws, norms, policies, and institutions that define, constitute, and mediate trans-border relations between states, cultures, citizens, intergovernmental and nongovernmental organizations, and the market. CONTEMPORARY GLOBAL GOVERNANCE

49. Our Main Purposes of the UN Charter (114) - a written grant by a country's legislative or sovereign power, by which an institution such as a company, college, or city is created and its rights and privileges defined. Maintaining worldwide peace and security 2. Developing relations among nations 3. Fostering cooperation between nations in order to solve economic, social, cultural, or humanitarian international problems 4. Providing a forum for bringing countries together to meet the UN's purposes and goals CONTEMPORARY GLOBAL GOVERNANCE

50. The Role of the Nation -State in Globalization Basic Elements of a State 1. Territory 2. People 3. Sovereign Power CONTEMPORARY GLOBAL GOVERNANCE

51. Nation- state role in globalization is complex. Since nation-states are divided by physical and economic boundaries, reduced barriers in international commerce and communication are considered their potential threat. CONTEMPORARY GLOBAL GOVERNANCE

52. Nation-states are challenged by multinational corporations to address the issue of foreign direct investments to force nation-states to ascertain the allowable international influence in their economies. A sense of interdependence is created by globalization among nations to create among nations of differing economic strengths an imbalance of power. The role of the nation-state in a global world is largely a regulatory one as the chief factor in global interdependence (118c). In setting international commerce policies, isolated states are forced to engage to one another, while nation-state’s domestic role is 51 The Contemporary World 2020 unchanged CONTEMPORARY GLOBAL GOVERNANCE

53. Globalization’s Impact on the State Factors which lead to the increase and acceleration of movement of people, information, commodities and capital. Lifting of trade barriers Liberalization of world capital markets Swift technological progress (information technology, transportation and communication) CONTEMPORARY GLOBAL GOVERNANCE

54. Problems afflicting the world today which are increasingly transnational in nature those that cannot be solved at the national level or State to State negotiations. Poverty Environmental pollution Economic crisis Organized crime and terrorism CONTEMPORARY GLOBAL GOVERNANCE

55. Effects of greater economic and social interdependence to national decision- making processes. It calls for a transfer of decisions to the international level It requires many decisions to be transferred to local levels of government due to an increase in the demand for participation. CONTEMPORARY GLOBAL GOVERNANCE

56. The following can be guaranteed only by the States through independent courts: Respect of human rights and justice Promote the national welfare Protect the general interest CONTEMPORARY GLOBAL GOVERNANCE

57. The State has the roles in operating the intricate web of multi-lateral arrangements and inter-governmental regimes, enter into agreements with other States, make policies which shape national and global activities, agenda of integration by clearly pronouncing the problem of capacity inadequacy of individual States CONTEMPORARY GLOBAL GOVERNANCE

58. The State has the roles in operating the intricate web of multi-lateral arrangements and inter-governmental regimes, enter into agreements with other States, make policies which shape national and global activities, agenda of integration by clearly pronouncing the problem of capacity inadequacy of individual States CONTEMPORARY GLOBAL GOVERNANCE

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