LESSON 2: THE GLOBALIZTION OF THE WORLD ECONOMICS

 The International Monetary Fund (IMF) regards “economic globalization” as a historical representation the
result of human innovation and technological progress.
 ECONOMIC GLOBALIZATION- the state by which increasing integration of economies around the world occurs.
 Even while the IMF and the ordinary people grapple with the difficulty of arriving of the precise definitions of
globalization, they usually agree that drastic economic change is occurring throughout the world.
 Increased trade also means that investments are moving at faster speed.
 HIGH-FREQUENCY TRADING- a process by which supercomputers can execute millions of stock purchases and
sales between different cities in just a second.

INTERNATIONAL TRADING SYSTEMS

INTERNATIONAL TRADING SYSTEM- is a trade system of exchanging capitals, goods and services across
international borders or territories.
The oldest known international trade route was the SILK ROAD- an ancient network of pathways that connects
the East and West.
However, the Silk Road was international, it was not the truly “global” trade pathway.

HISTORY OF ECONOMIC GLOBALIZATION

 “The age of globalization began when ‘all important populated continents began to exchange began
to exchange products continuously’.”—Historians Dennis O. Flynn and Arturo Giraldez
 When they trace back to 1571 with the establishment of GALLEON TRADE- the connection of Manila
(Philippines) and Acapulco (Mexico).
 The existence of the competition of selling goods between countries to countries primarily Europe to
boost the MONETARY RESERVES- a central bank’s holdings of a country’s currency and precious
metals.
 The existence of value of gold or the GOLD STANDARD- a monetary system where a country’s
currency or paper money has a value directly linked to gold.
 The replacement of gold standard into FLOATING CURRENCY- has a floating exchange rate which
changes based on the demand and supply mechanisms of foreign exchange market.
 Returning to a pure standard became more difficult as global economic crisis called GREAT
DEPRESSION.
 Today, the world economy operates based on what are called FIAT CURRENCIES- a legal tender
whose value is backed by the government that issued it.

THE BRETTON WOODS SYSTEM

A global economic system ensuring the longer-lasting global peace.
Was largely influenced by the ideas of British economist John Maynard Kenes.
GLOBAL KEYNESIANISM- an approach to economics which emphasizes responsible public management of
economic problems in a world-system context.

TWO FINANCIAL INSTITUTIONS (Bretton Woods Delegates)

 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRP or World Bank)
- Responsible for funding projects.
 INTERNATIONAL MONETARY FUND (IMF)
- Global lender.
NEOLIBERALISM AND ITS DISCONTENTS
KEYNESIANISM- economic theories and programs ascribed to John M. Keynes. Came in the mid 1940’s to the
early 1970’s and believes in the theory that as prices increased, companies would earn more, and would have more
money to hire workers.

STAGFLATION- a combination of stagnation and inflation.

STAGNATION- a decline in economic growth and employment.

INFLATION- a sharp increase in prices.

EMBARGO- used to stabilize the economy and growth. A government order that limits trade in some way.

FRIEDRICH HUYEK and MILTON FRIEDMAN- argued that the government’s practice of pouring money into
their economies had caused inflation by increasing demand for goods without necessarily increasing supply.

NEOLIBERALISM- became the codified strategy of USTP, World Bank, IMF, and WTO to continue the tariff
reduction under GATT.

WASHINGTON CONSENSUS- a policy that pushed for minimal government spending to reduce government
debt. It advocates called for the privatization of government controlled services believing that the free market can
produce the best result.

SHOCK THERAPY- the death of certain industries but is considered necessary for long term economic growth.

ECONOMIC GLOBALIZATION TODAY

 The world has become integrated that makes the global financial crisis takes decades to resolve.
 Exports nowadays and local selling of goods and services make national economics grow rather than the past
that those benefited the most from the free trade were the advanced nation.
 As a result of an increased of exports, economic globalization has ushered in an unprecedented spike in global
growth rates and yet, remains an uneven process.
 Developed countries are often protectionist, as they repeatedly refuse to lift policies that safeguard their
primary products that could otherwise be overwhelmed by imports from the developing world.
 The beneficiaries of global commerce have been mainly transnational corporations (TNC’s) and not the
government.