Module 1 : Introduction to the Study of

Globalization, Economic Globalization &

Market Integration
Course Title : The Contemporary World
Course Number : GE 102
Course Description : This course introduces students to the contemporary world by
examining the multifaceted phenomenon of globalization. Using the various disciplines of
the social sciences, it examines the economic, social, political, technological, and other
transformations that have created an increasing awareness of the interconnectedness of
peoples and places around the globe. To this end, the course provides an overview of the
various debates in global governance, development, and sustainability. Beyond exposing
the student to the world outside the Philippines, it seeks to inculcate a sense of global
citizenship and global ethical responsibility.

Total Learning Time : 3 units (3 hours lecture per week)

Pre-requisites : NONE
(if there’s any)

Overview : The contemporary world is an ever-changing mix of social and

political changes. While religious, political, and ethnic conflicts continue, we are currently
living in one of the most peaceful eras in the history of the planet. Challenges of the 21st
century include emerging technologies, health care, overpopulation, climate change,
poverty, illiteracy, disease, and migration. How we choose to deal with these emerging
frontiers will shape this unit for future generations.

Learning Outcomes:
1. Distinguish different interpretations and approaches to globalization.
2. Analyze contemporary news events in the context of globalization.
3. Articulate personal positions on various global issues.
4. Analyze global issues in relation to Filipinos and the Philippines
5. Analyze contemporary news events in the context of globalization
6. Identify the ethical implications of global citizenship

Indicative Content:
This module discusses at least the following topics: Introduction to the Study of
Globalization, The Global Economy, Market Integration, Contemporary Global
Governance, Asian regionalism, Global Media Cultures, Mandated topic: Global
Demography, Global Migration, Sustainable Development and Global Food Security.

SHELLA S. DEMAFELIZ 1
DISCUSSION:

Globalization is the process by which the world, previously isolated through physical and
technological distance, becomes increasingly interconnected. It is manifested by the
increase in interaction between peoples around the world that involves the sharing of ideas,
cultures, goods, services and investment. Opening up international borders results in global
markets instead of local or national markets. This includes markets for goods, services,
labor and capital. For example, in our global economy a business in one country interacts
with people and businesses in other countries to produce
and sell its goods and services. When your family buys
fruit from your local store, you may end up buying apples
from Japan, dragon fruits from Vietnam, longan from
Thailand, and mangosteen from Malaysia.

The term “globalization” sometimes takes on

different meanings for different people and in
different circumstances. For example, sometimes the
term is used to refer to the increased role of large,
multinational corporations in the world economy. People
in developing countries outside the United States sometimes use the term to refer to the
dominance and influence of the United States on the world economy.

The term “globalization” is a current buzzword frequently used in the news. The term
probably was coined in the 1960s, and came into wide use in the 1990s. But globalization
has been around for centuries. For example, Marco Polo made a trading expedition from
Venice Italy, to what is today as Istanbul, Turkey, in the 13 th century. Native Americans
traded with others with different languages long before they began trading with European
settlers in the 17th century. French textile firms had branches in Rhode Island and Latin
America in the early 19th century.

Although globalization has been going on for centuries, historians and economists agree
that today we are in a period of rapid globalization and that it is on the increase worldwide.
International migration is on the rise. Businesses are expanding their operations in other
countries. Foreign direct investment is estimated to have increased 10 times since 1990.

The increase in globalization throughout the world in recent decades is due to many factors.
Of major importance is the fact that trade barriers have gradually been reduced around the
world, as have restrictions on the free flow of investment capital between countries. The
growth and sharing of technology are also important. Methods of transportation have
improved, making it easier for people to travel and to move goods and services across
borders. Methods of communication such as the internet have improved, making easier for
people to spread information and share ideas around the world. When business owners are
free to earn profits, they may try to do so by hiring people or buying ang selling in other
countries. Another important factor is the fall of communism. Countries of the former
Soviet Union, the Eastern Bloc and China that were once isolated due to the communist

SHELLA S. DEMAFELIZ 2
regimes now have more market-oriented economies and are doing business with the rest of
the world.

Globalization has many benefits. In many ways, globalization represents increased

freedom. When international borders are open, people are free to travel and immigrate to
other countries, to trade with whoever they wish, to invest wherever they wish and to
experience new cultures and new ideas. Opening up international trade provide consumers
with a wider variety of goods and services. By buying raw materials and hiring workers
from other countries, some businesses are able to lower their costs. These lower costs
usually generate lower prices leading to greater consumer demands for products of all
types. In addition to lower prices, international competition results in higher quality goods.
When markets operate across borders, people on both sides can benefit from economic
growth and increased wealth and more jobs overall. Developing countries benefit when
they rely on exports for economic growth. They also benefit when multi-national
corporations provide jobs in their countries, usually paying higher wages than those
prevailing for other jobs requiring similar skills. Globalization provides people better
access to medicine, information, education and new technology. Because of globalization,
many people in the world now live longer and with a higher standard of living. As a nation
experiences economic growth and its standard of living rises sufficiently, citizens are able
to afford and often begin demanding a cleaner and healthier environment.

Voluntary trade makes both parties better off. All countries have scarce resources and
cannot produce everything that everyone wants. To benefit from trade, countries specialize
in producing products where they have a comparative advantage. This mean instead of
producing everything for themselves, they specialize in producing the goods that they can
make at a lower opportunity cost than there trading partners. When they trade these goods
consumers in both countries benefit by being able to buy a greater variety of goods at lower
prices. For example, the United States and China are trading partners. The United States
can produce computers at a lower opportunity cost than China, and China can produce toys
at a lower opportunity cost than the United Sates. When US businesses import and sell
Chinese toys and Chinese businesses import and sell US computers, many people gain.
Even if a country made everything more efficiently than another country, the two countries
could trade based on differences on opportunity costs.

In recent years there have been large demonstrations against globalization in Seattle,
Prague, Washington and other cities. The concerns of these demonstrators vary. Some are
upset because they lost their jobs due to foreign competition. Others believe that
globalization is partly to blame for increased environmental damage throughout the world,
since globalization results in increase industrialization. Others says that open borders lead
to more terrorism, more illegal drug sales and the spread of AIDS and other diseases. Other
argue that globalization leads to less cultural diversity as Western ideas and values spread
around the world.
Some critics claim that some industrialized countries, including the United States, receive
more benefits from globalization than low-income countries. Some economists believe that
although increased globalization has had many benefits from people in the developing

SHELLA S. DEMAFELIZ 3
world in the past, it has not led to the elimination of world poverty. The number of people
living in poverty throughout the world remains unacceptably high. In addition, critics claim
that globalization has not led to more stability in developing countries, as evidenced by
financial crises in Asia and Latin America in the 1980s and 1990s.

Countries have their own laws and regulations with respect to trade, labor standards,
finance and the environment. There is not one worldwide organization that sets laws and
handles disputes in the global economy. However, the IMF, the World Bank and the WTO
play important roles.

The International Monetary Fund is a separate, specialized agency of the United Nations
system established in 1944 to help the world economy by encouraging countries to adopt
sound policies affecting exchange rates and currency values. In this way, it promotes world
trade. It gives advice to member countries and makes loans to its members that have
shortages of currency needed for trade. Presently (2020) the IMF had 189 member
countries.

The World Bank, officially called the International Bank for Reconstruction and
Development, is also a specialized agency of the United Nations established in 1944. It
also had 189 member countries at present (2020). The World Bank’s purpose is to fight
world poverty by promoting economic development. It does this by providing loans, policy
advice and technical assistance for development projects in poorer countries.

The World Trade Organizations is an international organization established to promote

international free trade. The WTO had 164 member countries and 24 observer governments
(Observer status is a privilege granted to non-members to give them an ability to
participate in the organization's activities. Observers generally have a limited ability to
participate in the Intergovernmental Organization (IGO), lacking the ability to vote or
propose resolutions.) It enforces rules to promote free international trade, and helps
countries negotiate to reduce trade barriers.

A multinational corporation (MNC) is a corporation that operates in two or more

countries. It has headquarters in one country and offices or plants in other countries, either
developing or developed. Examples include General Motors (USA), Coca-Cola (USA),
Nestle (Switzerland) and Volkswagen (Germany). The major goal of businesses, including
MNCs, is to maximize profits, and successful MNCs report higher profits due to their
global operations. One result of MNCs is foreign direct investment such as when a
company builds production facilities in other countries. In addition to providing capital,
MNCs provide jobs in the countries where they operate.

Critics of MNCs argue that foreigners pay very low rents for the right to use land and other
resources in poorer countries, and that they hire mostly unskilled labor and pay only
subsistence wages. They argue that when the goods and services produced are exported,
the foreign firms, not the people in foreign countries, reap most of the benefits through
increased revenues and profits.

SHELLA S. DEMAFELIZ 4
Outsourcing across international borders, sometimes called offshoring, occurs when, for
example, a firm in the United States tries to reduce costs by locating production facilities
in other countries and hiring cheaper foreign workers. Another example is when a US firm
hires workers in another country (e.g. India) to write computer software programs or
provide other services.

The U.S. business benefits because it has lower costs and can earn higher profits.
Consumers benefit because lower costs may result in lower prices and thus the ability to
demand more products. Foreign workers benefit because they have more jobs available to
them. U.S. workers benefit from the outsourcing from other countries when they work for
foreign firms in the United States and abroad.

Some U.S. workers are hurt because they lose their jobs to foreign workers who are willing
to work for less money. These U.S. workers may end up earning lower wages when they
find new jobs. However, in the long run, the increased demand by consumers will likely
generate many new jobs with higher wages.

Although it has recently become a political issue, international outsourcing has been going
on for centuries. One challenge for American workers is to make sure that they are able to
compete successfully in the global economy.

It is hard to imagine a world without globalization. There would be no imports, no exports,

no international travel, no immigration, no working abroad and no investing in other
countries. Globalization is here to stay. However, globalization did experience setbacks in
the first half of the 20th century – from two world wars, a worldwide depression and the
spread of communism. Some people think that the growth of international terrorism could
cause countries to become less open in the future. Despite this serious problem, most
experts believe that the future will see more globalization, rather than less. The benefits of
globalization are strong and widespread, and international organization such as the IMF,
the WTO and the World Bank encourage its spread. The critics of globalization bring up
some valid points, and the world of the future must find ways to deal with these problems.
Governments can ease the problems resulting from globalization by establishing job-
training programs and providing a safety net for those who have lost jobs due to foreign
competition.

Economic globalization
Economic globalization 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.

Global trade of goods and services are worth trillions of dollars each year. In this lesson,
you'll learn about global trade and its advantages, as well as barriers to trade.

SHELLA S. DEMAFELIZ 5
 What is Global Trade

Global trade, also known as international trade, is simply the import and export of goods
and services across international boundaries.

Goods and services that enter into a country for sale are called imports. Goods and services
that leave a country for sale in another country are called exports. For example, a country
may import wheat because it doesn't have much arable land, but export oil because it has
oil in abundance.

A fundamental concept underlying global trade is the concept of comparative advantage,

developed by David Ricardo in the 19th century. In a nutshell, the doctrine of comparative
advantage states that a country can produce some goods or services more cheaply than
other countries. In technical terms, the country is able to produce a specific good or service
at a lower opportunity cost than others.

An opportunity cost is the benefit one gives up in making an economic choice. The classic
example is guns and butter - domestic investment over defense spending. The more guns
you produce, the less funds are available to invest in public schools and infrastructure, for
example. The more you invest in the domestic economy, the less you can spend on defense.

Let's say that England produces more wheat per man-hour than Portugal, and Portugal
produces more wine per man-hour than England. Consequently, England has a comparative
advantage in producing wheat, and Portugal has a comparative advantage in producing
wine. In other words, England's opportunity costs for the production of wheat is lower than
for the production of wine, and Portugal's opportunity costs are lower for the production of
wine than for the production of wheat. Thus, England is better off producing wheat, selling
it to Portugal and buying its wine from Portugal. Portugal, on the other hand, is better off
selling its wine to England and buying its wheat from England.

What can we learn from this example? Global trade allows for specialization and lower
costs to consumers. Countries can focus on what they are best suited to do - engage in
activities with the lowest opportunity costs for them. Focusing on their comparative
advantages means they can maximize production and efficiency, which leads to greater
potential for profit and economic growth.

Global trade can create economic wealth on a global scale as each country maximizes its
revenue and growth by focusing on what it does best and saving money on imports that
would be more costly for it to produce domestically. A country generates revenue from
exporting the excess goods and services that its domestic market doesn't need to other
countries that have a different comparative advantage. The money it receives from the
exports can then be used to import goods and services it does not produce from the
countries that have a comparative advantage in the production of those goods and services

SHELLA S. DEMAFELIZ 6
- just like England and Portugal trading wine and wheat, but on a global scale with
countless products and services.

Global trade can also reduce international conflict and war. It may not make intuitive sense
at first glance, but think about it for a moment. Global trade creates long-term mutually
beneficial relationships or a symbiosis. If you start a war with someone who provides you
needed goods, such as wheat or oil, you may have just shot yourself in the foot. In other
words, global trade cultivates cooperation rather than conflict.

Barriers
A trade barrier is anything that hinders trade. You can generally divide barriers to trade
into two categories: policy barriers and natural barriers.

1. Policy trade barriers are barriers to trade intentionally imposed by

national governments. Primary policy barriers include:

Tariffs, which are special taxes imposed on imported goods that make them
more expensive. The purpose of a tariff is to make domestic goods that compete
against imported goods more competitive.
Quotas limit the amount of imported goods that can enter a country within a
certain period of time. Again, the intent is to make it easier for domestic
companies to compete.

2. Natural barriers to trade can be either physical or cultural. For instance,

even though raising beef in the relative warmth of Argentina may cost less
than raising beef in the bitter cold of Siberia, the cost of shipping the beef
from South America to Siberia might drive the price too high. Distance is
thus one of the natural barriers to international trade.

Language is another natural trade barrier. People who can’t communicate

effectively may not be able to negotiate trade agreements or may ship the
wrong goods.

ENRICHMENT TOPIC:
EUROPEAN UNION’S GSP+ SCHEME
The GSP+ scheme is designed to help developing countries assume the special burdens and
responsibilities resulting from the ratification of 27 core international conventions on
human and labour rights, environmental protection and good governance as well as
from the effective implementation thereof. It does so by granting full removal of tariffs on
over 66% of tariff lines covering a very wide array of products including, for example,
textiles and fisheries.

SHELLA S. DEMAFELIZ 7
The GSP Regulation sets strict and clear criteria for granting GSP+ (refer to the definition
and subj. matter portion below). Firstly, the applicant must meet economic criteria, i.e. it
must be a vulnerable developing country with a non-diversified economy and low level of
imports into the EU. Secondly, the country must have ratified the 27 international
conventions required under GSP+, it must not have formulated reservations which are
prohibited by these conventions, and the most recent conclusions of the monitoring bodies
under those conventions must not identify any serious failure to effectively implement
them.

There are currently 8 GSP+ beneficiaries: Armenia, Bolivia, Cape Verde, Kyrgyzstan,
Mongolia, Pakistan, the Philippines, and Sri Lanka. More countries can apply to become
beneficiaries in the future, if they meet the abovementioned criteria.

Duterte admin unfazed by EU parliament push for trade sanctions vs. PH over
‘rapidly deteriorating human rights’
https://www.cnnphilippines.com/news/2020/9/18/EU-Parliament-pushes-for-trade-
sanctions-vs.-PH-over--rapidly-deteriorating-human-rights-.html

Manila (CNN Philippines, September 18) — The Philippine government is unfazed by

the European Union's push for trade sanctions over what the foreign lawmakers described
as a "rapidly deteriorating human rights" situation and extrajudicial killings under
President Rodrigo Duterte's Metro administration, local officials indicated Friday.

The EU Parliament on Thursday adopted a resolution pushing for immediate trade

sanctions against the Philippines. The resolution called on the European Commission to
initiate the procedure for the temporary withdrawal of the Generalized Scheme of
Preferences Plus (GSP+) program granted by the 27-nation bloc to the Philippines "in the
absence of any substantial improvement and willingness to cooperate on the part of the
Philippine authorities."

EU sanctions on PH will cut 200,000 jobs, labor group warns

Read more: https://globalnation.inquirer.net/191019/eu-sanctions-on-ph-to-cut-
200k-jobs-labor-group-warns#ixzz6a5IDgvZo
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

Europe’s parliamentarians on Thursday voted overwhelmingly 626 to seven, with 52

abstentions, to adopt a resolution to withdraw the Philippines’ trade benefits under the
Generalized Scheme of Preferences Plus (GSP+) if the government did not abide by
international conventions on human rights.

It was the third time since 2016 that the European Parliament has made the threat in the
wake of extrajudicial killings linked to President Rodrigo Duterte’s bloody war on drugs

SHELLA S. DEMAFELIZ 8
in addition to deadly attacks on social activists, continuing corruption and threats against
press freedom.

No tariff is imposed on the more than 6,000 products exported to the European Union
from the Philippines under the GSP+ trading privilege. Among these products are
pineapples, mangoes, tuna, footwear and coffee.
Aside from trade sanctions, the European Parliament’s resolution also called on the EU
members to support a proposal to establish an “independent, international investigation”
of human rights violations in the Philippines.

It said there were also threats, harassment, intimidation, rape and violence against those
exposing extrajudicial killings; killings of human rights workers; and “deteriorating”
press freedom in the country, citing the case of Rappler CEO Maria Ressa, who was
convicted of cyber libel, and the shutdown of broadcast giant ABS-CBN.

The resolution also called for the immediate release of detained Sen. Leila de Lima,
saying she was being held on “politically motivated charges.”

Global Social Stratification

People in countries around the world experience different access to resources and
opportunities and different standards of living, based on their position in the global
hierarchy.

Firstly, some sociologists use a theory of development and modernization to argue that
poor nations remain poor because they hold onto traditional attitudes and beliefs,
technologies and institutions, such as traditional economic systems and forms of
government. Modernists believe that large economic growth is the key to reducing poverty
in poor countries.

Secondly, dependency theory blames colonialism and neocolonialism (continuing

economic dependence on former colonial countries) for global poverty. Countries have
developed at an uneven rate because wealthy countries have exploited poor countries in the
past and today through foreign debt and transnational corporations (TNCs). According to
dependency theory, wealthy countries would not be as rich as they are today if they did not
have these materials, and the key to reversing inequality to relieve former colonies of their
debts so that they can benefit from their own industry and resources.

Example: “China’s Debt Trap.” The term "debt-trap diplomacy" was coined by Brahma
Chellaney to describe China's predatory lending practices in which poor countries are
overwhelmed with unsustainable loans and would be forced to cede control of strategic
assets to China. A dozen of these countries owe debt of at least 20% of their nominal
GDP to China

SHELLA S. DEMAFELIZ 9
(Djibouti, Tonga, Maldives, the Republic of the Congo, Kyrgyzstan, Cambodia, Niger,
Laos, Zambia, Samoa, Vanuatu, and Mongolia).

Lastly, world systems theory suggests that all countries are divided into a three-tier
hierarchy based on their relationship to the global economy, and that a country’s position
in this hierarchy determines its own economic development. According to world systems
theory as articulated by sociologist Immanuel Wallerstein, core countries are at the top
of the global hierarchy as they can extract material resources and labor from less developed
countries. These core countries own most of the world’s capital and technology, and have
great control over world trade and economic agreements. Semi peripheral countries
generally provide labor and materials to core countries, which benefits core countries but
also increases income within the semi peripheral country. Peripheral countries are
generally indebted to wealthy nations, and their land and populations are often exploited
for the gain of other countries. Because of this hierarchy, individuals living in core
countries generally have higher standards of living than those in semi peripheral or
peripheral countries.

MARKET INTEGRATION
Market integration occurs when prices among different locations or related goods follow
similar patterns over a long period of time. Groups of goods often move proportionally to
each other and when this relation is very clear among different markets it is said that the
markets are integrated.

An international financial institution is a financial institution that has been established

by more than one country, and hence is subject to international law.

History of Global Market Integration

The nineteenth century saw substantial advances in international market integration, and
the creation of a truly world economy. Technological advance was critical in this. The
railroad locomotive and the marine steam engine revolutionized world transport from the
1830s onwards. Steamships connected the world's ports to each other, and from the ports
the railroads ran inland, creating a new and faster world transport network. Freight
rates fell, and goods could be carried across the world to ever more distant markets and
still be cheaper in those faraway places than the same item produced locally. Linked closely
to these changes was the electric telegraph, whose lines often ran along the new railroad
networks. Telegraph systems were established in most countries, including the major
market of British India, until 1854. Beginning with the first transatlantic cable, which was
laid by steamship in 1866, these existing domestic telegraph systems were linked together
by marine cables. The resulting international information network was crucial in
communicating details of prices and price movements, reducing the cost of making deals
and transactions. An infrastructural change of major significance came in 1869 with the
opening of the Suez Canal, which linked the Mediterranean Sea by way of Egypt to the Red
Sea: now ships sailing from Europe to Asia could take the new shortcut rather than sail all
the way around Africa. Immediately Asia was some 4,000 miles closer to Europe in

SHELLA S. DEMAFELIZ 10
transport terms, and freight costs fell. Yet the low efficiency of early steamships meant that
many bulk cargoes such as rice still were carried to Europe from Asia by sail around
the Cape of Good Hope. Technological change in the shape of steel hulls and steel masts
made sailing ships larger and more efficient, and they continued to be active until the more
efficient triple-expansion engine finally drove the sailing ships from the oceans during the
last quarter of the nineteenth century.

RISE OF FREE TRADE

Physical changes in lowering freight and transaction costs were not the only forces
stimulating market integration. It was normal for countries to impose import duties on
foreign goods, seeking to gain an inflow of gold in their foreign trade accounts by selling
more to each of their trading partners than they bought from them. But in 1846 the
merchants of Manchester, England, the center of the world's cotton textile industry, struck
their famous victory for free trade by forcing the British government to abandon tariffs on
all imported goods apart from a few luxury items. The tariffs on wheat were the first to go,
opening up the Great Plains of the United States for wheat production to supply Britain.
With free trade, no longer did trade relations with a foreign country have to balance or be
in surplus; rather, a deficit in trade with one country could be offset by a surplus in trade
with another country, liberalizing world trade in a way never previously seen. Britain
moved heavily into deficit on trade account, but this was sustained by considerable
invisible inflows generated by her substantial overseas investments, particularly in the
railroad systems of the United States.

An open market is an economic system with little to no barriers to free-market activity.

An open market is characterized by the absence of tariffs, taxes, licensing requirements,
subsidies, unionization, and any other regulations or practices that interfere with free-
market activity. This policy of open markets became a dominating principle extended
through much of the British Empire, including the key market of India, although Canada
and the State of Victoria in Australia chose to be notable exceptions. The United States
retained import duties, and after short periods of trade liberalization most European
countries also returned to protectionism so that their new manufacturing industries could
establish themselves safe from the competition of cheaper goods from Britain. Britain itself
ran heavy trade deficits with the United States due largely to grain purchases, and it also
had deficits with the newly industrialized countries of continental Europe, due to purchases
of manufactured goods. Britain was able to sustain these deficits because of its own sales
of manufactures, especially cotton yarn and textiles, to India and the rest of Asia, including
China. So the open-market policies of the British Empire played a crucial role in sustaining
a complicated interrelated mesh of world payments, and newly industrializing countries
took advantage of these open markets whilst maintaining their own protective walls. Each
country could specialize in producing those goods they were best endowed by nature to
produce, and could exchange them for the other products they needed. The vast market of
British India was crucial, and though Britain, the colonial power, was the leading supplier
of manufactured goods there, Germany and other industrial nations were free to trade, and

SHELLA S. DEMAFELIZ 11
did so very effectively. India itself had big surpluses with the rest of Asia, particularly
China, because of its sales of opium and of cotton yarn and textiles from Bombay.

INTEGRATION OF GRAIN MARKETS AT THE TURN OF THE CENTURY

Within Asia major effects of market integration were seen. Where a market area is fully
integrated, prices of a particular commodity will equalize across that area. Fluctuations in
prices across the region will synchronize, demonstrating that they are subject to the same
influences. Transport costs are crucial, and a commodity will only move from one location
to another if the cost of production in the place of origin plus the cost of transport is less
than the prevailing price for that commodity in the destination. In Asia the late nineteenth
century saw market integration in one of Asia's key commodities, rice. Prices moved in the
same way in the exporting countries (Burma, French Indochina, and Siam), in the great
redistribution centers (the British free ports Singapore and Hong Kong), and in the
receiving countries (India, Ceylon, the Straits Settlements, the Dutch East Indies, the
Philippines, China, and Japan). The movement of migrant workers to tin mines and rubber
and tea plantations in places like the Straits Settlements, the Dutch East Indies, and Ceylon
had created increased demand for rice in those countries which was now satisfied by rice
imports from those countries capable of producing supplies. Shifts in the flow of rice from
country to country and from year to year reflected harvest variations in both producers and
consumers. The transport and information networks established in the second half of the
nineteenth century had created an intra-Asian economy in which the income received by
rice cultivators was spent on the products of the new manufacturing industries of the region,
particularly the cotton yarn and textiles of the factories of Bombay, Shanghai, and Osaka.
Rice was also supplied in very substantial quantities to Europe, where it was used for food,
brewing, and starch. It joined a flow of wheat to Europe from Karachi. This period saw the
integration of the world wheat market and the world rice market, creating a global market
in basic food grains. The two markets interlocked in British India, which both consumed
and exported both crops. Now the world price of wheat and rice moved in unison, which
meant that the incomes of U.S. farmers and other world wheat producers were influenced
by forces such as a monsoon in India!

But this integration of the world wheat markets and world rice markets had serious
consequences. During the 1920s there was great expansion in the amount of land under
wheat and rice in the world at large. Normally, good wheat harvests were offset by poor
rice harvests, and good rice harvests were offset by poor wheat harvests. But when
favorable climatic conditions occurred for both grains, particularly beginning in 1928, this
resulted in a glut, forcing down prices and bankrupting farmers all over the world. As farm
incomes fell, so did the ability of farmers to purchase manufactured goods, and this affected
manufacturers, contributing to the worldwide Great Depression of the 1930s. As the
depression bit, countries increased their tariff duties to keep foreign products out of their
markets in order to help their own manufacturers and farmers. In 1932 even Britain, with
its deep commitment to free trade, was forced to turn to protectionism and surrender the
free trade ideal. Free trade and open markets were unfortunate casualties of the Great
Depression, and in fact their breakdown contributed to the slump's prolongation. The

SHELLA S. DEMAFELIZ 12
restoration of free trade and open markets was one of the primaries aims of those planning
the operation of the world economic system after the end of world hostilities in 1945.
But this integration of the world wheat markets and world rice markets had serious
consequences. During the 1920s there was great expansion in the amount of land under
wheat and rice in the world at large. Normally, good wheat harvests were offset by poor
rice harvests, and good rice harvests were offset by poor wheat harvests. But when
favorable climatic conditions occurred for both grains, particularly beginning in 1928, this
resulted in a glut, forcing down prices and bankrupting farmers all over the world. As farm
incomes fell, so did the ability of farmers to purchase manufactured goods, and this affected
manufacturers, contributing to the worldwide Great Depression of the 1930s. As the
depression bit, countries increased their tariff duties to keep foreign products out of their
markets in order to help their own manufacturers and farmers. In 1932 even Britain, with
its deep commitment to free trade, was forced to turn to protectionism and surrender the
free trade ideal. Free trade and open markets were unfortunate casualties of the Great
Depression, and in fact their breakdown contributed to the slump's prolongation. The
restoration of free trade and open markets was one of the primaries aims of those planning
the operation of the world economic system after the end of world hostilities in 1945.

Types of market integration

1. Horizontal Integration - This occurs when a firm or agency gains control of other
firms or agencies performing similar marketing functions at the same level in the
marketing sequence. In this type of integration, some marketing agencies combine
to form a union with a view to reducing their effective number and the extent of
actual competition in the market. It is advantageous for the members who join the
group.

SHELLA S. DEMAFELIZ 13
2. Vertical Integration - This occurs when a firm performs more than one activity in
the sequence of the marketing process. It is a linking together of two or more
functions in the marketing process within a single firm or under a single
ownership. This type of integration makes it possible to exercise control over both
quality and quantity of the product from the beginning of the production process
until the product is ready for the consumer. It reduces the number of middle men
in the marketing channel.

a) Forward integration - If a firm assumes another function of marketing

which is closer to the consumption function, it is a case of forward
integration. Example: wholesaler assuming the function of retailing

b) Backward integration - This involves ownership or a combination of

sources of suppl. Example: when a processing firm assumes the function
of assembling/purchasing the produce from the villages.

upload.wikimedia.org/wikipedia/commons/thumb/f/...en.wikipedia.org

3. Conglomeration - A combination of agencies or activities not directly related to

each other, when it operates under a unified management. The main motive behind
a conglomerate merger is diversification.

SHELLA S. DEMAFELIZ 14
 Conglomerate - Overview and Examples of ...corporatefinanceinstitute.com

DEFINITION AND SUBJECT MATTER

Gross domestic product: (GDP) The market value of all officially recognized final goods
and services produced within a country in a year, or over a given period of time; often used
as an indicator of a country’s material standard of living.

Per capita gross product (GDP domestic) is a metric that breaks down a country's
economic output per person and is calculated by dividing the GDP of a country by its
population.

Human Development Index (HDI): A composite statistic used to rank countries by level
of “human development,” taken as a synonym of the older term “standard of living. “

The Generalized System of Preferences (GSP) provides duty-free treatment to goods of

designated beneficiary countries. The program was authorized by the Trade Act of 1974
to promote economic growth in the developing countries and was implemented on January
1, 1976.

The Generalized Scheme of Preferences Plus (GSP+) is a special component of

the GSP scheme that provides additional trade incentives to developing countries already
benefitting from GSP.

EVALUATION:
Answer all questions legibly and comprehensively. Instructions on when and how
submission takes place will be made in the group chat.

GLOBALIZATION
1. Define globalization based on your understanding?
2. When did globalization begin? Explain how it became a phenomenon.
3. What has led to improvement of globalization?
4. What are some positive effects of globalization?
5. How does trading between two countries benefit both sides?
6. What are some negative effects of globalization?
7. What roles do the International Monetary Fund (IMF), the World Bank and the World
Trade Organization (WTO) play to help member States?

SHELLA S. DEMAFELIZ 15
8. What is MNC? How are multinational businesses affect poorer countries? Give an
example that are not mentioned in the module.
9. What are some of the issues involved with outsourcing jobs?
10. Can you imagine a world without globalization? Why?

ECONOMIC GLOBALIZATION
1. Explain economic globalization based on your own understanding?
2. What is Comparative Advantage? Give situational example of this theory.
3. Does Comparative advantage Theory have disadvantages? Yes or No and why?
4. How did European Union’s (EUs) GSP+ profited its beneficiaries?
5. Will it be reasonable for the EUs to adopt a resolution to withdraw the Philippines’
trade benefits under the Generalized Scheme of Preferences Plus (GSP+) if the
government did not abide by international conventions on human rights.
6. How will it affect the Philippine economy once EU decided to revoke the GSP+?
Shouldn’t the government be bothered by it?
7. Explain the saying that “no government in the modern world can still claim to have
the independence and sovereignty.”
8. Explain how traditional economic systems and forms of government contribute to
poor economic success of a country.
9. Explain China’s “debt trap” in the light of Dependency Theory.
10. What is the position of the Philippines in the three-tier hierarchy? Explain how our
position in the hierarchy will determines our economic development as explained by
world systems theory.

MARKET INTEGRATION
1. What is market integration?
2. What marks the start of market integration? Explain.
3. Explain in your own words how free trade stimulate market integration?
4. Differentiate open-market from protectionism. Explain how these two economic
systems in a way help domestic producer?
5. Make a timeline showing the integration of grain markets at the turn of the century.
6. Give 1 advantage and also 1 disadvantage for each market integration.
7. Explain how sellers on each market benefit from integration?
8. Can consumers benefit from the integration of two markets in terms of lower price,
quality products and sufficient supplies? Explain each.
9. Explain Forward and Backward market integration. Give a concrete example.
10. Explain ‘diversification’ which is the main motive of Conglomerate company.

Additional Reading:
What is Globalization
https://www.youtube.com/watch?v=xPD477FuqtY

The IBON Foundation is a non-profit research, education and information-development institution with programs in
research, education and advocacy based in the Philippines. It provides socioeconomic research and analysis on people's
issues to various sectors (primarily grassroots organizations).
https://iboninternational.org/about-us/

SHELLA S. DEMAFELIZ 16
Citation
“Dollar, David. 2004. Globalization, Poverty, and Inequality Since 1980. Policy Research Working Paper;
No.3333. World Bank, Washington, D.C. © World Bank. https://openknowledge.worldbank.org/handle/10986/14128
License: CC BY 3.0 IGO.”

Global Stratification and Inequality

https://courses.lumenlearning.com/boundless-sociology/chapter/global-
stratification/#:~:text=Sociologists%20use%20three%20primary%20theories,theory%2C%20and%20world%20system
s%20theory.

EU sanctions on PH will cut 200,000 jobs, labor group warns

Read more: https://globalnation.inquirer.net/191019/eu-sanctions-on-ph-to-cut-200k-jobs-labor-group-
warns#ixzz6a5IDgvZo

Duterte admin unfazed by EU parliament push for trade sanctions vs. PH over ‘rapidly deteriorating human
rights’
https://www.cnnphilippines.com/news/2020/9/18/EU-Parliament-pushes-for-trade-sanctions-vs.-PH-over--rapidly-
deteriorating-human-rights-.html

SHELLA S. DEMAFELIZ 17