JiEMPORARY WORLD LISANDRO E. CLAUDIO PATRICIO N. ABINALESContents An Introductory Note to the Student ix Unit 1 LESSON 1 LESSON 2 LESSON 3 | The Relevance of this Course x This Book's Approach xi The Structures of Globalization 1 What is Globalization? 2 Global Experiences 5 Some Description 6 Globalization: A Working Definition 7 Conclusion: Globalization from the Ground Up 9 The Globalization of World Economics 12 International Trading Systems 13 The Bretton Woods System 16 Neoliberalism and Its Discontents 17 The Global Financial Crisis and the Challenge toNeoliberalism 19 Economic Globalization Today +22 Conclusion 24 A History of Global Politics: Creating an International Order 26 The Attributes of Today's Global System 27 The Interstate System 30 Internationalism 31 Conclusion 37=— { LESSON 4 LESSON 5 Unit 2 LESSON 6 LESSON 7 LESSON 8 YS The United Nations and Contempo, Global Governance ty What is an International Organization? 40 The United Nations 42 Challenges of the United Nations 45 Conclusion 46 AWorld of Regions 50 Countries, Regions, andGlobalization 51 Non-State Regionalism 53 Contemporary Challenges toRegionalism 56 Conclusion 58 A World of Ideas: Cultures of Globalization 61 The Globalization of Religion 62 Realities 65 Religion for and against Globalization 66 Conclusion 69 Media and Globalization 72 Media and Its Functions 73 The Global Village and Cultural Imperialism 75 Critiques of Cultural Imperialism 77 Social Media and the Creation of Cyber Ghettoes 78 Conclusion 81 The Global City 83 Why Study Global Cities? 84 Defining the Global City 85 Indicators for Globality 86 The Challenges of Global Cities 89 The Global City and the Poor 91 Conclusion 93 ocarineu wit CamSceUnit3| Movement and Sustainability 95 LESSON9 Global Demography 96 The “Perils” of Overpopulation 98 It’s the Economy, Not the Babies! 101 Women and Reproductive Rights 102 The Feminist Perspective 104 Population Growth and Food Security 105 Conclusion 107 uessoN10 Global Migration 109 What is Migration? 109 Benefits and Detriments for the Sending Countries 112 The Problem of Human Trafficking 114 Integration 115 LessoN11 Environmental Crisis and Sustainable Development 119 The World’s Leading Environmental Problems 120 Man-made Pollution 122 “Catching Up” 125 Climate Change 127 Combating Global Warming 128 Conclusion 130 Conclusion: The Global Filipino 132 Endnotes 135 Bibliography 155 Index 172 About the Authors ocarinieu wit LaMSceAn Introductory Note to the Student Why do you need to study the world? At first glance, the world, as a concept, is abstract. After all, your daily experiences are considered interactions with your country. When you read the news, you read about the Philippines. When you engage in an official transaction like paying taxes, you deal with the Philippine government. Almost all of your classmates and teachers are Filipino. However, you only need to step back a little bit to see that the world “out there” is already here. For example, you likely have relatives who are overseas Filipino workers (OFWs). Every time these relatives visit or send something home, they are bringing part of the world with them. Even if you have not traveled outside the Philippines, you have likely heard stories about foreign countries from these family members. Some relatives might have told you about the wonders of Rome. Others may have shown you pictures of Sanf'rancisco’s Golden Gate Bridge. Others may have described the lights and towering buildings of Shinjuku. Needless to say, the media and the internet are also your windows to the contemporary world. You watch American movies and can probably sing at least one K-pop song. If a major political event occurs, you don’t even need to go to CNN.com to find out more details; friends are already posting articles on Facebook. Finally, your consumption habits are global. You have dined in a McDonald’s, ridden in a Japanese car, maybe owned a Korean mobile phone, and eaten Australian beef. You are already a citizen of the world whether you are aware of it or not. Just by living your life, you automatically think about the contemporary world. This course will be your guide. — ocarimieu wit LaMSceThe Relevance of this Course As the semester progresses, we expect you to realize the relevance of the material gradually. The succeeding lessons will introduce you to the major themes in the study of the world while Providing opportunities for you to connect this knowledge with your experiences as a Filipino student. At the outset, though, why study this course? Why is it required for all students in higher education? First, studying the outside world is a cure to parochialism or an outlook that is limited to one’s immediate community. A Person who is concerned only with his/her family, village, or even country is parochial. The parochial person is, thus, close-minded. By teaching you about the world, this course aims to stretch the limits of your imagination and outlook. We will share with you unfamiliar ideas and cultures that may spark new interests and concerns, Not everything in this book will excite you, and that is fine. However, we hope that, at the end of the semester, you would have discovered new intellectual interests that you will continue to Pursue, We also wish for you to explore the places, peoples, ideas, and cultures that you care about and value. This expansion of one’s ethical horizons, as you will see, is the very core of what it means to be a global citizen, Second, it is important to study the world because it can teach you more about yourself, Knowing about other countries allows you to compare your society with others. The experiences of communities outside the Philippines may provide solutions to many of the country’s current problems. They may also provide warnings about what not to do. Everyone, for example, desires Sconomic growth. Isn't it beneficial if policymakers know what economic models and policies have worked for other countries and what have not? Philippine national hero Jose Ri ocarineu wit VamScewill happen even when you least expect it; the urge is like a ghost that suddenly appears, Lastly, you need to study the world because you will be interacting with it. In 2009, an average of 4,018 Filipinos per day left to become OFWs. In 2015, that number increased to 6,092. More and more Filipinos are living and working abroad. For those of you who plan to work in another country after graduation, this course can serve as an orientation. Nevertheless, even those who choose to remain in the Philippines must confront the phenomenon of globalization. Many of you will work for foreign companies operating in the country, especially because of the growth of call centers and the busines process outsourcing (BPO) industry as a whole. Due to the internet, cheaper travel costs, and larger trade of goods and services, the world has grown more interdependent. Filipinos are increasingly becoming aware of this interdependence. You cannot avoid globalization so you might at as well study it. This Book’s Approach This book will not take you on a country-per-country tour of the world. Such an approach is impractical and tedious. Moreover, any good world almanac can give you quick overviews of these countries. Instead, this book will focus on themes, problems, and | issues, The goal is not simply to tell you about what is “out there,” but also to expose you to the ideas that allow you to make sense of that “out there.” Central to the study of the world is the concept of globalization—the deepening global interconnectedness of places, ideas, economies, cultures, and people. The first lesson will discuss this concept further. However, for now, it is sufficient to say that studying globalization allows one to step back and ask: “What is going on in our world today?” As the study of globalization progresses, we will take your attention deliberately away from the Philippines. Most of the core courses of the new general education (GE) curriculum ask ocarineu wit LamMSceQuestions about yourself in a national context. eed Rizal; examine primary readings in Philippine history; and, in the course Understanding the Self, a section leads you to reflect on suvnal identity. These courses are all necessary; you should reflect about yourself and your country. This course, however, will challenge you to think beyond your country and ask what it means to be a citizen of the world. Thus, most of the examples and case studies will be about peoples and places outside of the Philippines, Nevertheless, we acknowledge the need to connect the study of globalization to local experiences. For this reason, we will use the boxed text with the label “Localizing the Material” to provide examples that are relatable to the Filipino reader. As for classroom activities, it will be up to your teacher to integrate, conduct, and facilitate them. After each lesson, however, we provide guide questions which you may wish to answer before the class. As you answer these questions either on a notebook or just in your own mind, please do not lose sight of the main question of the course: What does it mean to be a citizen of the world? The course will be challenging. Much of the materials you will find are new and unfamiliar, Despite this, we hope that you will enjoy reading this book and taking this course. This may be one of the few times in your life as a college student when you are explicitly challenged to transcend the borders of your nation, your countrymen, and ultimately, your imagination. ~ Lisandro E. Claudio Patricio N. Abinales ocdiileu witil vd SceThe Structures of Globalization This unit will introduce you to the various drivers of the globalization process, with specific focus on economics and politics. Although it emphasizes that you experience globalization on an “everyday” level, you must also realize that there are big institutions that create large-scale changes. This unit will first trace the emergence of these institutions historically. It will then move on to explain how they affect the countries and people today. The major learning outcomes of this unit are to: «analyze the various contemporary drivers of globalization; and + describe the emergence of global economic and political systems. ocarimieu wit VamMSceThe Structures of Globalization This unit will introduce you to the various drivers of the globalization process, with specific focus on economics and politics. Although it emphasizes that you experience globalization on an “everyday” level, you must also realize that there are big institutions that create large-scale changes. This unit will first trace the emergence of these institutions historically. It will then move on to explain how they affect the countries and people today. The major learning outcomes of this unit are to: + analyze the various contemporary drivers of globalization; and + describe the emergence of global economic and political systems. CETTE Witt VMS CE© Learning Outcomes ‘tthe end ofthis lesson, you should be able to: ization for the course; 1. agree ona working definition of globali S 1 differentiate the competing conceptions of globalization: and 3, narrate a personal experience of globalization. AStory: Gio, Latif, and the Laksa When Gio was a second-year international affairs student in to join the school a university in Cebu City, he obtained funding team participating in an international Model UN competition in Sydney, Australia. At the height of the competition, Gio made plenty of new friends and became particularly close to Latif from the Malaysian team. The two first started talking when Latif asked Gio where he was from. Upon discovering that the Gio was from the Philippines, Latif lit up and declared that he was a big fan of Filipino actors Jericho Rosales and Kristine Hermosa. Gio was pleasantly surprised to learn that Latif had seen every episode of the ABS-CBN telenovela Pangako sa ‘Yo ("The Promise"). The show had aired on Malaysian TV a few years back, and its two stars had developed a modest following. Ashamed that he did not know as much about Malaysia as Latif knew about the Philippines, Gio asked Latif what his country was like. Latif, he discovered, was from a Muslim university in Kuala Lumpur. Gio asked him what he liked best about living in “KL,” and Latif immediately mentioned the food. Latif explained that i Kuala Lumpur, one can find Chinese, Indian, and Malay ae He told Gio that this assortment of foodways was the result of - : dvarmeu win LamSc:What is Globalization? | 3 how the British reorganized Malaysian society during the colonial times. The British did little to change the way of life of the Malays who were the original residents, but brought in Chinese laborers to work in the rubber Plantations and tin mines, and Indians to help manage the bureaucracy and serve as the initial professional core of a potential middle class. One of the ways that these ethnic groups were identified was through their foodways. According to Latif, Malaysia eventually became famous for these cuisines which can be found in the various “hawker centers" across the nation’s cities and towns, These food stands are located in outdoor food parks where locals and tourists taste the best of Malaysia, from nasi lemak to laksa. Gio interrupted Latif and asked, “What is laksa?” He felt more ashamed at his lack of knowledge. ‘Ahh....let me show you what it is and how itis prepared!” replied Latif, The next day, Latif took Gio to a Malaysian restaurant a few blocks away from the university. Gio was surprised to discover that Malaysian food was readily available in Sydney. Having noticed this, Latif explained to his Filipino friend that, over the years, as more and more Malaysian students moved to Sydney to study, Malaysian restaurants followed suit. Soon after, they were catering not only to these students, but to Australia-born “sydneysiders” as well, whose culinary tastes were becoming more and more diverse. Gio finally had his first taste of laksa—a rice noodle soup in a spicy coconut curry sauce. He found the flavors intense since, like most Filipinos, he was not used to spicy food. However, in deference to his friend, he persisted and eventually found himself enjoying the hot dish. After the meal, Gio and Latif went to a nearby café and ordered “flat whites"—an espresso drink similar to latte, which is usually served in cafés in Australia and New Zealand. Both knew what flat whites were since there were Australian-inspired cafés in both Kuala Lumpur and Cebu. wiul LamSceee The Structures of Globalization Laksa:a rich and spicy rice noodle soup The new friends promised to stay in touch after the competition, and added each other on Facebook and Instagram, Over the next two years, they exchanged e-mails and posts, congratulated each other for their achievements, and commented on and liked each other's photos. Latif sent his mother's recipe to Gio and the latter began cooking Malaysian food in his home. A few years after graduation, Gio moved to Singapore, joining many other overseas Filipino workers (OFWs) in the city-state. The culture was new to him, but one thing was familiar: the food served in Singapore was no different from the Malaysian food he had discovered through Latif. He would later learn from Singaporean colleagues that the island country was once part of the British colony of Malay and the postwar independent Federation of Malaysia. Singapore, however, separated from the Federation in August 1965 and became a nation-state. Today, they may be two distinct countries in this part of the world, but Singapore and Malaysia still share the same cuisine. After he settled down in his apartment, Gio sought out and found a favorite laksa stall in Newton Hawker Center. He would spend his weekends there with with friends eating laksa and other dishes. ocarimieu wit LamMSceWhat is Globalization? | 5 ‘Ahawker center in Singapore One Saturday, while Gio was checking his Facebook feed along the very busy Orchard Road—Singapore’s main commercial road—he noticed that Latif had just posted something 5 minutes earlier. It was a picture from Orchard Road. Surprised but also excited, Gio sent Latif a private Message. Latif replied immediately saying that he too had moved to Singapore and was, at that moment, standing in front a department store Just a few blocks away from where Gio was. The two friends met up, and after a long hug and quick Questions as to what each was up to, they ducked into a café and fenewed their international friendship. ..by ordering a pair of flat whites, Global Experiences Gio and Latif’s story is fictional but very plausible since it is, in fact, based on the real-life experience of one of the authors. It was through such friendships that one was able to appreciate the meaning and impact of globalization. We begin our definition of globalization with this narrative to illustrate how concrete the phenomenon is. The story shows how globalization operates at multiple, intersecting levels, The spread of Filipino TV into Malaysia suggests how fast this Popular culture has proliferated and criss-crossed all over Asia, ocarineu wit LamMSceq i 6 | The Structures of Globalization Latif participated in jg - io and The Model UN activity that Gio OH ional politics, Gj, rr a inte t an international competition about in : it ional comp: f IN) in Syd, { met Latif (a Malaysian involved in tne eee the pie | . . 4, in! | global city that derives its wealth am Iso a metropolis of capital that flows through it. Sydney is Pate families of international ais or foreigners ere the industries that also sell their products abroad. After t e two had gone back to their home countries, Gio and Latif kept in touch through Facebook, a global social networking site that provides instantaneous communication across countries and continents, They preserved their friendship online and then rekindled this face-to-face in Singapore, another hub for global commerce, with 40 percent of the population being classified as “foreign talents. What other hints of globalization did you find in the story? Some Description Our discussion should begin with this intuitive sense that something is happening, and it is not affecting everyone in the same way. Gio’s story is a very privileged way of experiencing global flows, but for other people, the shrinking of the world may not be as exciting and edifying. For example, it is very common for young women in developing countries to be recruited in the internet as “mail-order brides” for foreign men living in other countries. After being promised a good life once married to a kind husband in a rich city, they end up becoming sexual and domestic servants in foreign lands. Some were even sold off by their “husbands” to gangs which run prostitute rings in these cities. Like Gio, they too have experienced the shrinking of the world, albeit negatively. Governments that decide to welcome the foreign investments on the belief that they provide jobs and capital for the country offer public lands as factory or industrial sites, In the Process, poor people living in these lands, also called “urban poor communities,” are being evicted by the government. The irony is that these People —Searineu wit GamSceWhat is Globalization? | 7 a removed from their “slums” are also the labor force sought eee ae They had to be kicked out of their homes, paar at they could take an hour or two of bus travel om relocated communities back to the “old home” for minimum-wage work. Because different people encounter globalization in a variety of —_ is deemed useful to ask simple questions like: “Is globalization good or bad? Is it beneficial or detrimental?” The discussion begins with two premises. First, globalization is a complex phenomenon that occurs at multiple levels. Second, it is an uneven process that affects people differently. Globalization: A Working Definition Most accounts view globalization as primarily an economic process. When a newspaper reports that nationalists are resisting “globalization,” it usually refers to the integration of the national markets to a wider global market signified by the increased free trade. When activists refer to the “anti-globalization” movement of the 1990s, they mean resisting the trade deals among countries facilitated and promoted by global organizations like the World Trade Organization. Globalization scholars do not who criticize unfair international necessarily disagree with people | trade deals or global economic in fact, many are sympathetic to the critique of lization. Academics differ from journalists and because they see globalization in much s lenses that organizations. I economic global political activists, however, broader terms. They view the process through variou consider multiple theories and perspectives. Academics call this an interdisciplinary approach, and it is this approach used by the general education (GE) courses that you will be taking alongside this one. The best schol: by Manfred Steger and intensification ©} atly description of globalization is provided who described the process as “the expansion f social relations and consciousness across ocarneu wit LamSce8 | The Structures of Globalization mt Expansion refers to “| world-time and across world sPe nd the mlipliatin the creation of new social netWOr” litical, econom; existing connections that cut across traditional P . oe iB ian dari es.” These various Connections : for example, establish ney cultural, and geographic a f jal media, occur at different levels. Social m te sil international groupg global connections between PP” Gare networks that of non-governmental organizations \ ae aed more specific up—social workers on aac iP Gio was able to from different corners of the globe. In the StOFy, join a Model UN competition because his university was part of an international network. othe expansion, stretching, and 3Not only are global connections ‘oming more closely-knit and Intensification refers acceleration of these networks. multiplying, but they are also bec expanding their reach. For example, there has always been a strong financial market connecting London and New York. With the advent of electronic trading, however, the volume of that trade increases exponentially, since traders can now trade more at higher speeds. The connection is thus accelerating. Apart from this acceleration, however, as the world becomes more financially integrated, the intensified trading network between London and New York may expand and stretch to cover more and more cities. ‘After China committed itself to the global economy in the 1980s, for example, Shanghai steadily returned to its old role as a major trading post. It is not only in financial matters that you can find these connections. In 2012, when the monsoon rains flooded much of Bangkok, the Honda plant making some of the critical car parts temporarily ceased production. This had a strong negative effect ‘on Honda-USA which relied heavily on the parts being imported from Thailand. Not only was it unable to reach the sales targets it laid ont bat the ability of the service centers nationwide to assist Honda owners also suffered. As a re: company’s global profits also fell nl the Japan 28 The final attribute of this definiti he fi ition relates to the way people perceive time and space. Steger notes that “globalization es ocdiileu WIL amScé/ What is Globalization? | 9 do not occur merely at an objective, material level but they also words, people ia ae plane of human consciousness.’ In other eee gin to feel that the world has become a smaller place and distance has collapsed from thousands of miles to just a mouse-click away. One can now e-mail a friend in another country and get a reply instantaneously, and as a result, begins to perceive their distance as less consequential. Cable TV and the internet has = exposed one to news from across the globe, so now; he/she has this greater sense of what is happening in other places. Steger posits that his definition of globalization must be differentiated with an ideology he calls globalism. If globalization represents the many processes that allow for the expansion and intensification of global connections, globalism is a widespread belief among powerful people that the global integration of economic markets is beneficial for everyone, since it spreads freedom and democracy across the world.*It is a common belief forwarded in media and policy circles. In the next lesson, you will realize why it is problematic. For now, what is crucial to note is that when activists and journalists criticize “globalization,” they are, more often than criticizing some manifestations of globalism. Often, these not, jal to insist that criticisms are warranted. Nevertheless, it is cruci s a process refers to a larger phenomenon that “globalization” a have cannot simply be reduced to the ways in which global markets been integrated. Conclusion: Globalization from the Ground Up ‘All this talk of large, intersecting processes may be confusing. Indeed, it may be hard to assess globalization or comment on it because it is so diffuse and almost fleeting. Some scholars have, therefore, found it simpler to avoid talking about globalization as a whole. Instead, they want to discuss “multiple globalizations,” instead of just one process. —————STATINET WITT U: amScé10 | The Structures of Globalization Appadurai, different king, For anthropologist Arjun liffere »pologi and intersecting dimensions 4 globalization occur on multiple ¢ u a integration that he calls “scapes.” An ethnonetpe Or exam refers to the global movement of people, while a “mediascaper about the flow of culture. A “technoscape "refers to the Circulation of mechanical goods and software; a “financescape” denotes the global circulation of money; and an ideoscape’” is the Tealm where political ideas move around. Although they intersect, these various scapes have differing logics. They are thus distinct windows into the broader phenomenon of globalization. Appadurai’s argument is simple: there are multiple globalizations. Hence, even if one does not agree that globalization can be divided into the five “scapes,” it is hard to deny Appadurai’s central thrust of viewing globalization through various lenses, Depending on what is being globalized, a different dynamic (or dynamics) may emerge. So while it is important to ask “What is globalization?” it is likewise important to ask “What is/are being globalized?” Depending on what is being globalized, the vista and conclusions change. The structure of the lessons that follow will reflect this multidimensional understanding of globalization. Each of the lessons will focus on a particular kind of globalization. Every one of them will be about different networks and connections that are expanding and intensifying in the contemporary world. Treat each lesson not as an end in itself but as window to the broader phenomenon of globalization. ocarmeu wit CamSceWhat is Globalization? | 11 @) Guide Questions 1. How have you experienced globalization? 2. Whyisit crucial to emphasize that globalization is uneven? 3. What s the difference between globalization and globalism? w Learning Activity: = How Globalized is Your Home? Go to your room and do an inventory of everything you have in your possession. You will find out that the most essential among the “things” in your room are footwear, clothes, computers (ifany), cell phones, television (if possible), and maybe a radio. If you are a student, you may also notice books, newspapers, news magazines, not to mention school supplies and equipment. Organize your inventory into two types: first, “things” that are made in the Philippines and second, those that are of foreign brands, List the countries of origin of your foreign-brand items. Do the same thing for the kitchen and the living room. These should include appliances. In class, compare your lists with those of your classmates to determine which countries make the most household and personal needs you and your families have. Make a similar list for Philippine-made stuff. In the process, discuss why certain products are made in the Philippines while others are produced abroad. canned wit LaMSce@ earning Outcomes ‘At the end of this lesson, you should be able to: 1. define economic globalization, 2. _ identify the actors that facilitate economic globalization; 3. narrate a shor history of global market integration in the twentieth century; and 4. articulate your stance on global economic integration. me ee eee The International Monetary Fund (IMF) regards “economic globalization” as a historical process representing the result of human innovation and technological progress. It is characterized by the increasing integration of economies around the world through the movement of goods, services, and capital across borders. These changes are the products of people, organizations, institutions, and technologies.’ As with all other processes of globalization, there is a qualitative and subjective element to this definition. How does one define “increasing integration”? When is it considered that trade has increased? Is there a particular threshold? Even while the IMF and ordinary people grapple with the difficulty of arriving at precise definitions of globalization, they usually agree that a drastic economic change is occurring throughout the world. According to the IMF, the value of trade (goods and services) as a percentage of world GDP increased from 42.1 percent in 1980 to 62.1 percent in 2007.8 Increased trade also means that investments are moving all over the world at faster speeds. According to the United Nations Conference on oo evatitic wit CamSceThe Globalization of World Economics | 13 Trade and Development (UNCTAD), the amount of foreign direct investments flowing across the world was USS 57 billion in 1982. By 2015, that number was $1.76 trillion.’ These figures represent a dramatic increase in global trade in the span of just a few decades. Ithas happened not even after one human lifespan! Apart from the sheer magnitude of commerce, we should also note the increased speed and frequency of trading. These days, supercomputers can execute millions of stock purchases and sales between different cities in a matter of seconds through a process called high-frequency trading. Even the items being sold and traded are changing drastically. Ten years ago, buying books or music indicates acquiring physical items. Today, however, @ “book” can be digitally downloaded to be read with an e-reader, and a music “album” refers to the 15 songs on mp3 format you can purchase and download from iTunes. This lesson aims to trace how economic globalization came about. It will also assess this globalization system, and examine who benefits from it and who is left out. International Trading Systems International trading systems are not new. The oldest known, international trade route was the Silk Road—a network of pathways in the ancient world that spanned from China to what is now the Middle East and to Europe. It was called as such because one of the most profitable products traded through this network was silk, which was highly prized especially in the area that is now the Middle East as well as in the West (today’s Europe). Traders used the Silk Road regularly from 130 BCE when the Chinese Han dynasty opened trade to the West until 1453 BCE when the Ottoman Empire closed it. However, while the Silk Road was international, it was not truly “global” because it had no ocean routes that could reach the American continent. So when did full economic globalization ocarineu wit VamScez 14 | The Structures of Globalization begin? According to historians Dennis O. Flynn and Artur Giraldez, the age of globalization began when “all important Populated continents began to exchange products continuously both with each other directly and indirectly via other continents and in values sufficient to generate crucial impacts on all trading Partners.” Flynn and Giraldez trace this back to 1571 with the establishment of the galleon trade that connected Manila in the Philippines and Acapulco in Mexico." This was the first time that the Americas were directly connected to Asian trading routes, For Filipinos, it is crucial to note that economic globalization began on the country’s shores, 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 (called monetary reserves later on), To defend their products from competitors who sold goods more cheaply, these regimes (mainly monarchies) imposed high tariffs, forbade colonies to trade with other nations, restricted trade Toutes, and subsidized its exports. Mercantilism was thus also a system of global trade with multiple restrictions. A more open trade system emerged in 1867 when, following the lead of the United Kingdom, the United States and other European nations adopted the gold standard at an international monetary conference in Paris. Broadly, its goal was to create a common system that would allow for more efficient trade and prevent the isolationism of the mercantilist era. The countries thus established a common basis for currency prices and a fixed exchange rate system—all based on the value of gold. Despite facilitating simpler trade, the gold standard was still a very restrictive system, as it compelled countries to back their currencies with fixed gold reserves. During World War I, when countries depleted their gold reserves to fund their armies, many were forced to abandon the gold standard. Since European countries had low gold reserves, they adopted floating currencies that were no longer redeemable in gold. ocarinieu wil LamSceThe Globalization of World Economics | 15 ol The gold standard, though once common, has proven to be a very restrictive form of globalizing trade. Returning to a pure standard became more difficult as the global economic crisis called the Great Depression started during the 1920s and extended up to the 1930s, further emptying government coffers. This depression was the worst and longest recession ever experienced by the Western world. Some economists argued that it was largely caused by the gold standard, since it limited the amount of circulating money and, therefore, reduced demand and consumption. If governments could only spend money that was equivalent to gold, its capacity to print money and increase the money supply was severely curtailed. Economic historian Barry Eichengreen argues that the recovery of the United States really began when, having abandoned the gold standard, the US government was able to free up money to spend on reviving the economy.” At the height of World War II, other major industrialized countries followed suit. ‘Though more indirect versions of the gold standard were used until as late as the 1970s, the world never returned to the gold standard of the early 20th century. Today, the world economy operates based on what are called fiat currencies—currencies that are not backed by precious metals and whose value is determined by their cost relative to other currencies. This system allows governments to freely and actively manage their economies by increasing or decreasing the amount of money in circulation as they see fit. ocarinieu wit VamSce1 6 | The Structures of Globalization { The Bretton Woods System \ After the two world wars, world leaders sought to create | global economic system that would ensure a longer-lasting globa | Peace. They believed that one of the ways to achieve this goal wa | to set up a network of global financial institutions that woul: Promote economic interdependence and prosperity. The Brettor Woods system was inaugurated in 1944 during the United Nations | Monetary and Financial Conference to prevent the catastrophes of the early decades of the century from reoccurring and affecting international ties. The scenic Bretton Woods where policymakers established the contours of modem global economics The Bretton Woods system was largely influenced by the ideas of British economist John Maynard Keynes who believed that economic crises occur not when a country does not have enough money, but when money is not being spent and, thereby, not moving. When economies slow down, according to Keynes, governments have to reinvigorate markets with infusions of capital. This active role of governments in managing spending served as the anchor for what would be called a system of global Keynesianism. Delegates at Bretton Woods agreed to create two financial institutions. The first was the International Bank for Reconstruction and Development (IBRD, or World Bank) to be responsible for funding postwar reconstruction projects. It was ocarimeu win CamSceThe Globalization of World Economics | 17 a critical institution at a time when many of the world’s cities had been destroyed by the war. The second institution was the International Monetary Fund (IMF), which was to be the global | lender of last resort to Prevent individual countries from spiraling into credit crises. If economic growth in a country slowed down because there was not enough money to stimulate the economy, the IMF would step in, To this day, both institutions remain key players in economic globalization, Shortly after Bretton Woods, various countries also committed themselves to further global economic integration through the General Agreement on Tariffs and Trade (GATT) in 1947, GATT’s main purpose was to reduce tariffs and other hindrances to free trade. Neoliberalism and Its Discontents The high point of global Keynesianism came in the mid- 1940s to the early 1970s. During this period, governments poured money into their economies, allowing people to purchase more goods and, in the process, increase demand for these products. As demand increased, so did the prices of these goods. Western and some Asian economies like Japan accepted this rise in prices because it was accompanied by general economic growth and reduced unemployment. The theory went that, as prices increased, companies would earn more, and would have more money to hire workers. Keynesian economists believed that all this was a necessary trade-off for economic development. In the early 1970s, however, the prices of oil rose sharply as a result of the Organization of Arab Petroleum Exporting Countries’ (OAPEC, the Arab member-countries of the Oganization of Petroleum Exporting Countries or OPEC) imposition of an embargo in response to the decision of the United States and other countries to resupply the Israeli military with the needed arms during the Yom Kippur War. Arab countries also used the embargo to stabilize their economies and growth. The “oil embargo” canned wit VaMSce18 | The Structures of Globalization affected the Western economies that were reliant on ojj.n To make matters worse, the stock markets crashed in 1973. 1974 after the United States stopped linking the dollar to gold, effectively ending the Bretton Woods system." The result was a phenomenon that Keynesian economics could not have Predicted—a phenomenon called stagflation, in which a decling in economic growth and employment (stagnation) takes place alongside a sharp increase in prices (inflation). Around this time, a new form of economic thinking was beginning to challenge the Keynesian orthodoxy. Economists such as Friedrich Hayek and Milton Friedman argued that the governments’ practice of pouring money into their economies had caused inflation by increasing demand for goods without necessarily increasing supply, More profoundly, they argued that government intervention in economies distort the proper functioning of the market. Economists like Friedman used the economic turmoil to challenge the consensus around Keynes's ideas. What emerged was a new form of economic thinking that critics labeled neoliberalism. From the 1980s onward, neoliberalism became the codified strategy of the United States Treasury Department, the World Bank, the IMF, and eventually the World Trade Organization (WTO)—a new organization founded in 1995 to continue the tariff reduction under the GATT. The policies they forwarded came to be called the Washington Consensus. The Washington Consensus dominated global economic policies from the 1980s until the early 2000s. Its advocates pushed for minimal government spending to reduce government debt. They also called for the privatization of government-controlled services like water, power, communications, and transport, believing that the free market can produce the best results. Finally, they pressured governments, particularly in the developing world, to reduce tariffs and open up their economies, arguing that it is the quickest way to progress. Advocates of the Washington Consensus conceded that, along the way, certain industries would be affected and die, but they considered this “shock therapy” necessary for long-term economic growth. canned wil CamSceThe Globalization of World Economics | 19 ‘The appeal of neoliberalism was in its simplicity. Its advocates like US President Ronald Reagan and British Prime Minister Margaret Thatcher justified their reduction in government spending by comparing national economies to households. Thatcher, in particular, promoted an image of herself as a mother, who reined in overspending to reduce the national debt. The problem with the household analogy is that governments are not households, For one, governments can print money, while households cannot. Moreover, the constant taxation systems of governments provide them a steady flow of income that allows them to pay and refinance debts steadily. Despite the initial success of neoliberal politicians like Thatcher and Reagan, the defects of the Washington Consensus became immediately palpable. A good early example is that of post-communist Russia. After Communism had collapsed in the 1990s, the IMF called for the immediate privatization of all government industries. The IMF assumed that such a move would free these industries from corrupt bureaucrats and pass them on to the more dynamic and independent private investors. What happened, however, was that only individuals and groups who had accumulated wealth under the previous communist order had the money to purchase these industries. In some cases, the economic elites relied on easy access to government funds to take over the industries. This practice has entrenched an oligarchy that still dominates the Russian economy to this very day. The Global Financial Crisis and the Challenge to Neoliberalism Russia's case was just one example of how the “shock therapy” of neoliberalism did not lead to the ideal outcomes predicted by economists who believed in perfectly free markets. The greatest recent repudiation of this thinking was the recent global financial crisis of 2008-2009. Scanned wit LamSce20 | The Structures of Globalization Neoliberalism came under significant strain during 4 global financial crisis of 2007-2008 when the world Xperience the greatest economic downturn since the Great Depression, The crisis can be traced back to the 1980s when the Uniteg States systematically removed various banking and investmen, restrictions. The scaling back of regulations continued until the 2000s, Paving the way for a brewing crisis. In their attempt to promote the free market, government authorities failed to regulate bad investments occurring in the US housing market. Taking advantage of “cheap housing loans,” Americans began building houses that were beyond their financial capacities. To mitigate the risk of these loans, banks that were lending houseowners’ money pooled these mortgage payments and sold them as “mortgage-backed securities” (MBSs). One MBS would be a combination of multiple mortgages that they assumed would pay a steady rate, Since there was so much surplus money circulating, the demand for MBSs increased as investors clamored for more investment opportunities. In their haste to issue these loans, however, the banks became less discriminating. They began extending loans to families and individuals with dubious credit records—people who were unlikely to pay their loans back, These high-risk mortgages became known as sub-prime mortgages. Financial experts wrongly assumed that, even if many of the borrowers were individuals and families who would struggle to pay, a majority would not default. Moreover, banks thought that since there were so many mortgages in just one MBS, a few failures would not ruin the entirety of the investment, Banks also assumed that housing prices would continue to increase. Therefore, even if homeowners defaulted on their loans, these banks could simply reacquire the homes and sell them at a higher price, turning a profit, Sometime in 2007, however, home prices stopped increasing as supply caught up with demand. Moreover, it slowly became — ocarmeu wi CamSce‘The Globalization of World Economics | 21 apparent that families could not pay off their loans. This realization triggered the rapid reselling of MBSs, as banks and investors tried to get rid of their bad investments. This dangerous cycle reached a tipping point in September 2008, when major investment banks like Lehman Brothers collapsed, thereby depleting major investments. The crisis spread beyond the United States since many investors were foreign governments, corporations, and individuals. The loss of their money spread like wildfire back to their countries. ‘These series of interconnections allowed for a global multiplier effect that sent ripples across the world. For example, Iceland’s banks heavily depended on foreign capital, so when the crisis hit them, they failed to refinance their loans. As a result of this credit crunch, three of Iceland’s top commercial banks defaulted. From 2007 to 2008, Iceland’s debt increased more than seven-fold. Until now, countries like Spain and Greece are heavily indebted (almost like Third World countries), and debt relief has come at a high price. Greece, in particular, has been forced by Germany and the IMF to cut back on its social and public spending. Affecting services like pensions, health care, and various forms of social security, these cuts have been felt most acutely by the poor. Moreover, the reduction in government spending has slowed down growth and ensured high levels of unemployment. The United States recovered relatively quickly thanks to a large Keynesian-style stimulus package that President Barack Obama pushed for in his first months in office. The same cannot be said for many other countries. In Europe, the continuing economic crisis has sparked a political upheaval. Recently, far- right parties like Marine Le Pen’s Front National in France have risen to prominence by unfairly blaming immigrants for their woes, claiming that they steal jobs and leech off welfare. These movements blend popular resentment with utter hatred and racism. We will discuss their rise further in the final lesson. Scameu wit LamSce22 | The Structures of Globalization Economic Globalization Today al crisis will take decades to resolve, ‘Thy tain nationalist and leftist groups o¢ closing national economies to world trade, however, will no longer work. The world has become too integrated. Whatever one’, opinion about the Washington Consensus is, it is undeniable that some form of international trade remains essential for countries to develop in the contemporary world. The global financi solutions proposed by cer! Exports, not just the local selling of goods and services, make national economies grow at present. In the past, those that benefited the most from 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 the developing countries only accounted for 29 percent. When more countries opened up their economies to take advantage of increased free trade, the shares of the percentage began to change. By 2011, developing countries like the Philippines, India, China, Argentina, and Brazil accounted for 51 percent of global exports while the share of advanced nations— including the United States—had gone down to 45 percent."® The WTO-led reduction of trade barriers, known as trade liberalization, has profoundly altered the dynamics of the global economy. In the recent decades, partly as a result of these increased exports, economic globalization has ushered in an unprecedented spike in global growth rates. According to the IMF, the global per capita GDP rose over five-fold in the second half of the 20th century. It was this growth that created the large Asian economies like Japan, China, Korea, Hong Kong, and Singapore.** And yet, economic globalization remains an uneven process, with some countries, corporations, and individuals benefiting a lot more than others. The series of trade talks under the WTO have canned wiutcamsSceThe Globalization of World Economics | 23 led to unprecedented reductions in tariffs and other trade barriers, but these processes haye often been unfair, First, devel F eloped countries are often protectionists, as they repeated] ly refuse to lift Policies that safeguard their primary products that Could otherwise be overwhelmed by imports from the developing world. The best example of this double standard is Japan's determined tefusal to allow rice imports into the country to protect its farming sector. Japan’s justification is that rice is “sacred.” Ultimately, itis its economic muscle as the third largest economy that allows it to resist pressures to open its agricultural sector. The United States likewise fiercely protects its sugar industry, forcing consumers and sugar-dependent businesses to pay higher prices instead of getting cheaper sugar from plantations of Central America. Faced with these blatantly protectionist measures from powerful countries and blocs, poorer countries can do very little to make economic globalization more just. Trade imbalances, therefore, characterize economic relations between developed and developing countries. ‘The beneficiaries of global commerce have been mainly transnational corporations (TNCs) and not governments. And like any other business, these TNCs are concerned more with profits than with assisting the social programs of the governments hosting them. Host countries, in turn, loosen tax laws, which prevents wages from rising, while sacrificing social and environmental programs that protect the underprivileged members of their societies. The term “race to the bottom” refers to countries’ lowering their labor standards, including the protection of workers’ interests, to lure in foreign investors seeking high profit margins at the lowest cost possible. Governments weaken environmental laws to attract investors, creating fatal consequences on their ecological balance and depleting them of their finite resources (like oil, coal, and minerals). ocarimeu wi LamSce24 | The structures of Globalization Localizing the Material Many Philippine industries were devastated by unfair trade deals under the GATT and eventually the WTO. One sector thay Was particularly affected was Philippine agriculture. According tg Walden Bello and a team of researchers at Focus on the Global South, the US used its power under the GATT system to prevent Philippine importers from purchasing Philippine poultry ang Pork—even as it sold meat to the Philippines. | Although the Philippines expected to make up losses in | Sectors like meat with gains in areas such as coconut Products, No significant change was realized. In 1993, coconut exports amounted to $1.9 billion, and after a slight increase to $2.3 billion in 1997, it returned to $1.9 billion in 2000. Most strikingly, Bello and company noted that the Philippines became a net food importer under the GATT. In 1993, the country had an agricultural trade surplus of $292 million. It had a deficit of $764 million in 1997 and $794 million in 2002. ~ Bello, Walden, Herbert Docena, Marissa de Guzman, and Mary Lou Malig, The Anti-Development State: The Political Economy of Permanent Crisis in the Philippines. London and New York: Zed Books, 2006, 140-142. Conclusion International economic integration is a central tenet of globalization. In fact, it is so crucial to the process that many writers and commentators confuse this integration for the entirety of globalization. As a reminder, economics is just one window into the phenomenon of globalization; it is not the entire thing. Nevertheless, much of globalization is anchored on changes in the economy. Global culture, for example, is facilitated by trade. Filipinos would not be as aware of American culture if not for the trade that allows locals to watch American movies, listen to American music, and consume American products. The globalization of politics is likewise largely contingent on trade relations. These days, many events of foreign affairs are conducted to cement trading relations between and among states, ocarimeu wil LamSceThe Globalization of World Economics | 25 Given the stakes involved in economic globalization, it is perennially important to ask how this system can be made more just. Although some elements of global free trade can be scaled back, policies cannot do away with it as a whole, International policymakers, therefore, should strive to think of ways to make trading deals fairer. Governments must also continue to devise ways of cushioning the most damaging effects of economic globalization, while ensuring that its benefits accrue for everyone. 2 Guide Questions i How do economic forces facilitate the deepening of globalization? How isthe Philippines central to the history of economic globalization? Compare and contrast the assumptions of the original Bretton Woods system with those of the Washington Consensus, i) we Learning Activity: Global Economic Institutions With the help of the school administration, organize a school trip to and familiarization tour of an international economic organization (Asian Development Bank) or an international company (Honda, McDonald’s, etc.). Gather as much information as you can during the tour. If this activity cannot be arranged, go to the web and accomplish these tasks: (a) research the origins and history of the institution you have chosen; (b) map the international connections it has created; (c) identify the major country-leaders of this institution; and (d) locate the Philippines in this map of interconnections. Then answer this question: How does this institution influence global economic activity? How does it affect economics in the Philippines? scanned wiur camSc