THE CONTEMPORARY WORLD

MODULE 1

GLOBALIZATION

 Derived from the word “globalize” which refers to the emergence of an international network of
economic systems.
 A process of interaction and integration among the people, companies, and government of
different nations.
 “The expansion and intensification of the social relations and consciousness across the world
time and across world – space.” –Manfred Steger
 Human beings have encountered many changes over the last century especially in their social
relationships and social structures of these changes, one can say that globalization is very
important change, if not, the most important. – Bauman (2003)
 Globalization as the process of world shrinkage, of distance getting shorter, things moving
closer; it pertains to the increasing ease with which somebody on one side of the world interact,
to mutual benefit with somebody on the other side of the world. – Thomas Larsson
 Globalization as colonization. – Martin Khor

THERE ARE 3 TYPES OF GLOBALIZATION

1. Economic Globalization
 Refers to interconnectedness of economies through trade and exchange of resources. It also
refers to the widespread international movements of goods, services, capital, technology and
information. Economic globalization primarily comprises the globalization of product,
finance, markets, technology, organizational regimes, institutions, corporations, and
labour.
 Example:
I used cooking oil for Carbonara in which I took the ingredients from the package of my
mother from South Korea.

2. Social Globalization
 It pertains to human interaction within cultural communities, encompassing topics like
family, religion, work and education. It is a global interconnectedness between the people. It is
also a measure of how easily information and ideas pass before people in their own country and
between different countries (includes access to internet and social media networks.)
 Example:
Internationally popular films, books and TV series, The Harry Potter/ Twilight films and
books have been successful all over the world, making the characters featured globally
recognizable.
3. Political Globalization
 Refers to the amount of political cooperation that exists between different countries. Political
Globalization refers to the growth of the worldwide political system, both in size and complexity.
It also refers to the organization of different countries intro trade blocs.
 Example:
The development and growing influence of international organizations such as the UN or
WHO means governmental action takes place at an international level.

Why do we need to study globalization?

 It will enable us to connect to other countries.

 It will enable us to understand the standard of living in other countries and improve
development of politics, technology, sciences, culture, education and economy.
 Internet provide us necessary information like facts and trivia on different concerns and trends
in the field of early childhood education, which serve as guides for us to become a better and
competent early childhood educator in the near future.
 Globalization taught us how to save and budget allowance because of the continuous price
increase in basic needs such as food, clothing, and even transportation in our country.
 Provides us with the tools necessary to be productive members of our local and global
communities. The purpose of studying globalization to understand the differences and
similarities of different cultures and to understand how we are connected and at the same time
separated from the world. (Steger, 2009)

THE TASK OF DEFINING GLOBALIZATION

Broad and inclusive

 “Globalization means the onset of the borderless world.”- Ohmae 1992.

 Example:
In a nutshell, broad and inclusive globalization gives everyone a chance to participate in
the management in such a way that the perspectives or plans a country have is reflected in their
policies. This leads to a more secured opportunities and benefits for everyone. Advantage and
disadvantage are also provided below

ADVANTAGES
 Equal opportunities for everyone
 Secured opportunities for
everyone
 Growth for the countries
 Development of the nations
DISADVANTAGES
 Reshaping of government institutions to
cater for everyone
 Economic processes need to be
reorganized
 Social processes require reorganization
 Failure to focus on the country’s own
people and policies
 Narrow and exclusive

 “The characteristics of the globalization trend include the internationalizing of production, the
new international division of labor, new migratory movements from South to North, the new
competitive environment that accelerates these processes, and the internationalizing of the
state… making the states into agencies of the globalizing world”. - Robert Cox
 This definition of globalization focuses on the one spot, particularly its own. It has a very
limited point of view because of the lack of reference. It fails to recognize the role of other
parties as a potential partner.
 Example:
In global trade, a nation that takes narrow point of view usually starts the trade wars
because it excludes others. It usually has the support of its own constituents and is commended
for taking a protectionist stand. In terms of globalization, narrow and exclusive means that the
focus of the globalization would be limited to the country alone

ADVANTAGES DISADVANTAGES
 Focuses on the development of the  Results to trade wars with other
country countries
 Enhancement of the policies in a  Limited perspective
country  Failure to establish connections with
 Supported by people other countries
 Gives importance to the people and
the cultures inside the country

NATURE OF GLOBALIZATION

1. Liberalization
 It stands for the freedom of the entrepreneurs to establish any industry or trade or business
venture, within their own countries or abroad or in short “removing of controls”.
2. Free trade or the free market
 It stands for free flow of trade relations among all the nations.
3. Globalization of Economic Activity
 Economic activities are to be governed both by the domestic market and also the world market.
It stands for the process of integrating the domestic economy with world economies. The
features of the globalization of economic activity include an international development of
trade, production, investments and flow of workforce.

 International Trade: relates to the exchange of capital and goods in the global market.
International trade is an exchange involving a good or service conducted between at least
two different countries. The exchanges can be imports or exports. An import refers to a good
or service brought into the domestic country. An export refers to a good or service sold to a
foreign country.
  Production: It is a process of transforming tangible and intangible inputs into goods or
services. Raw materials, land, labor and capital are the tangible inputs, whereas ideas,
information and knowledge are the intangible inputs. These inputs are also known as factors
of production.
 Investment: It is an asset or item accrued with the goal of generating income or
recognition. In an economic outlook, an investment is the purchase of goods that are not
consumed today but are used in the future to generate wealth. In finance, an investment
is a financial asset bought with the idea that the asset will provide income further or will
later be sold at a higher cost price for a profit
 Workforce: is the number of people who are employed plus the unemployed who are
looking for work. The labor pool does not include the jobless who aren't looking for work.

4. Liberalization of Import-Export System

 It stands for liberating the import- export activity and securing a free flow of goods and
services across borders.
5. Privatization
 Keeping the state away from ownership of means of production and distribution and letting the
free flow of industrial, trade and economic activity across borders. Privatization is a way to
equalize the proper distribution of goods and services not only within one’s jurisdiction but
also outside to avoid that instance of concentration of goods in the hands of one person.
6. Increased Collaborations
 Encouraging the process of collaborations among the entrepreneurs with a view to secure rapid
modernization, development and technological advancement. Each and every entrepreneur
follows a specific guideline that will govern them. This is employed to harmonize price increase
so that those who are less in life can freely participate in free flow of countries production and
wealth.
7. Economic Reforms
 Encouraging fiscal and financial reforms with a view to give strength to free world trade, free
enterprise, and market forces. To freely protect every country in their international
transactions, reforms are considered. For instance, the inclusion of private enterprises in a
country’s jurisdiction. A very good example of this is the establishment of world bank where
countries can freely borrow amount to answer the economic deficits suffered by a country
within a fiscal year.

Anti-Globalization

 Many anti-globalism activists see globalization as the promotion of a Corporatist agenda, which
is intent on constricting the freedoms of individuals in the name of profit. They also claim that
increasing autonomy and strength of corporate entities increasingly shape the political policy of
nation-states.
 Globalization imposes credit-based economics, resulting in unsustainable growth of debt and
debt crises.
Pro-Globalization

 Supporters of free trade point out those economic theories such as comparative advantage
suggests that free trade leads to a more efficient allocation of resources, with all those involved
in the trade benefitting. In general, they claim that this leads to lower prices, more employment
and better allocation of resources.

GLOBALIZATION IN THE PHILIPPINES

The country is taking part in the process of globalization ever since the country signed
agreements with World Trade Organization in 1995.

Now, globalization is very effective in the Philippines, it has allowed major changes in the nation
like more labor, and more Filipino and foreign companies has emerged in the nation in order to help the
country’s developing economy.

Globalization can make the Philippines into a better nation if the Philippine leaders make their
economy more advance through global trading and allowing more foreign investors to the help boost
the economy. And by accomplishing those goals, the Philippines should be able to reduce the poverty
level as well as increase labor force for job opportunities for those that are in need for a living.
However, since the poverty level is still increasing, most Filipinos has managed to find work overseas
and they have managed to seek better living than in the Philippines. The most effective factor in the
Philippines is education. The society’s mentality is to be educated and it’s with education that people in
the nation see their opportunity for a better life in the future.

THE MERITS AND DEMERITS OF GLOBALIZATION

Globalization is one of the most controversial issues of our times. Others generally believe that it
brings greater economic efficiency that will eventually result in bring prosperity for the world. Critics
think that it will largely benefit those who are already rich, leaving most of the world poorer than
before. Economic globalization is generally applauded by corporate leaders and economics. But
opposition to economic globalization is widespread in the labor and environmental movements for it
has promoted exploitation of workers, children, farmers, and the environment.

The Merits (Advantages) of the Globalization

1. Peaceful Relations
 Most of the countries have resorted to trade relations with each other in order to boost their
economy, leaving behind any bitter past experiences if any. Example is the establishment of the
United Nations, which is a clear manifestation of establishing friendly relationship among all
signatory countries.

2. Employment
 Considered as one of the most crucial advantages, globalization has led to the generation of
numerous employment opportunities. Companies are moving towards the developing countries
to acquire labor force. Along with modernization is the goal of developing the economic status of
a nation. This is feasible only if we allow capitalist to pursue the rare business purpose. With
this, different businesses are organized. Thus, the creation of different job opportunities thereby
leading to employment of individuals around the world.

3. Education
 A very critical advantage that has aided the population is the spread of education. With
numerous educational institutions around the globe, one can move out from the home country
for better opportunities elsewhere. The existence of economic goals must always be coupled
with honing one’s mind. Therefore, educational institutions are needed to support this claim.
Along with modernization, it is no longer impossible for people around the globe to develop
themselves as we have institutions ready to support us holistically.

4. Product
 Quality The product quality has been enhanced so as to retain the customers. Today the
customers may compromise with the price range but not with the quality of the product. Low or
poor quality can adversely affect customer satisfaction. A very good example is our conception
as to Chinese products. If we are to compare it with products of other countries, we commonly
say that Chinese products are of poor quality and that of US products fully satisfy our standards.
This is just a clear indication that modernization or globalization made us more of a wise buyer.

5. Cheaper Price
 Globalization has brought in fierce competition in the markets. Different business schemes are
actually adapted by the business owner to get more, as the law of supply and demand dictates.
The competition among business owners give security among customers. This is by way of
considering low prices or rates to get more demand because the more the demand is, the bigger
the return of investment is on the part of the owner, as everything is considered already by the
owner whenever he resorted to low price schemes.

6. Communication
 Every single information is easily accessible from almost every corner of the world circulation of
information is no longer a tedious task, and can happen a second. The internet has significantly
affected the global economy, thereby providing direct access to information and products. For
example, messenger or Facebook can give us information as to what is happening on the other
side of the world.

7. Transportation
 Considered as the wheel of every business organization, connectivity to various parts of the
world is no more a serious problem. Today with various modes of transportation available, one
can conveniently deliver the products to a customer located at any part of the world. In the past,
 there are no airplanes, vessels, or any means of transportation. However, with the advent of
technology, people can travel worldwide.

8. GDP Increase
 Gross Domestic Product, commonly known as GDP, is the money value of the final goods and
services produced within the domestic territory of the country during an accounting year.
Naturally, this is because of the chances given to a country to freely trade their local products.
The more transaction a country can get, either locally or internationally, can greatly affect its
GDP.

9. Free Trade
 A policy in which a country does not levy taxes, duties, subsidies, or quota on the import/export
of goods and services from other countries. There are countries which have resolved to free
trade in specific regions. This allows consumers to buy goods and services, comparatively at a
lower cost. Example, ASEAN Countries are all engaged to free trade unionism. So, what di we
mean by this? This means that they can import and export services without the need of paying
import quotas and duties.
10.Travel and Tourism
 Globalization has promoted tourism to great heights. International trade among different
countries also helps in increasing the number of tourists that visit different places around the
world. This is possible by way of locally introducing the tourist spots of a country by means of
technology. For example, “Its more fun in the Philippines”. Here, they promote tourism through
Facebook, Instagram, tweeter and other social acts that helps us to boost tourism.

11.External Borrowing
 With the help of globalization, there is opportunity for corporate, national, and sub-national
borrowers to have better access to external finance, with facilities such as external commercial
borrowing and syndicated loans

The Demerits (Disadvantages) of the Globalization

1. Health Issues
 Globalization has given rise to more health risks and presents new threats and challenges for
epidemics. E.g. The dawn of HIV/AIDS. Having its origin in the wilderness of Africa, the virus has
spread like wildfire throughout the globe in no time. Widespread threats to global health persist
– AIDS, TB, Malaria – Infectious diseases – Chronic illnesses: Hypertension, diabetes –
Environmental: Cancer, respiratory. Food items are also transported to various countries, and
this is a matter of concern, especially in case of perishable items, and Covid-19 virus.

2. Loss of Culture
 With large number of people moving into and out of a country, the culture takes a backseat.
People may adapt to the culture of the resident country. They tend to follow the foreign culture
 more, forgetting their own roots. This can give rise to cultural conflicts. E.g. a loss of a person’s
culture usually due to change in environment such as change due to immigration.

3. Uneven Wealth Distribution

 It is said that the rich are getting richer while the poor are getting poorer. In the real sense,
globalization has not been able to reduce poverty. The power play among nations. Regardless of
whether you like it or not, US is always advance in terms of educational status. And since they
are advanced, we can therefore say that their position is far better than any other country. For
instance, the main role given to them by U.N.

4. Environment Degradation
 The industrial revolution has changed the outlook of the economy. Industries are using natural
resources by means of mining, drilling, etc. which puts a burden on the environment. The
establishment of different infrastructures will always lead to risking the environment as we will
be needing space for the organization of this. Sometimes, these spaces considered our forest and
different land forms which are essential to ecosystem.

5. Disparity
 Though globalization has opened new avenues like wider markets and employment, there still
exists a disparity in the development of the economies. Structural unemployment owes to the
disparity created. Developed countries are moving their factories to foreign countries where
labor is cheaply available. Again, a constant power play among nation. Those who have more can
get more in cheapest way possible. However, those who are less, is at the brink of dealing with
other countries, normally at a higher rate.

6. Conflicts
 It has given rise to terrorism and other forms of violence. Such acts not only cause loss of human
life but also huge economic losses. Media today, exposing Muslims as terrorist is an example of
this. What has been show to our news today is a great thing to consider because this sends a
signal to the viewer that this is this without even evaluating the true nature and consequences of
what has been shown. With these conflicts that have been created, and sometimes, though it is
sad to admit, it leads to war.

7. Cut-throat Competition
 Opening the doors of international trade has given birth to intense competition. This has affected
the local markets dramatically. The local players thereby suffer huge losses as they lack the
potential to advertise or export their products on a large scale. Therefore, the domestic markets
shrink. The concept of (tatsulok) should be considered in explaining this part. The bigger the
authority a country have, the bigger the voice they have.
 THE CONTEMPORARY WORLD
MODULE 2

ASPECTS OF GLOBALIZATION

Cultural Globalization

 This refers is the transmission of ideas, meanings, and values around the world in such a way as to
extend and intensify social relations. This process is marked by the common consumption of
cultures that have been diffused by the Internet, popular culture media, and international travel.
Cultural Globalization involves the spread of language, the arts, food, business ideas and technology,
and therefore its impact is felt by almost everybody around the world. One of the most obvious
examples of Globalization is McDonalds that is present here in the Philippines and around the
world. Another example, some of the students using Anneong into our language as well instead of
hello.

Economic Globalization

 I’m sitting on a chair that was made in China. As I look on the motor that I am using, it carries a
Japanese plate. And as I look on my laptop, the hardware is made in Taiwan. Without a doubt, I am
surrounded by products that have come to me from across the seas. In other words, my daily life is a
living example of the globalization of the world's economy. Economic Globalization is the economic
mixing and interdependence of economies across the world through as escalation of cross-cultural
of movement of goods, services, technologies and wealth.

Industrial Globalization

 Every country in the world is moving towards specialization. Specialization may be referred to as
the phenomenon of producing only that product in which the country has competitive advantage in
terms of cost. For example, Singapore specializes in pharmaceutical while the US specializes in
military equipment. Therefore, the countries exchange their industrial products, which are known
as trade, and fulfill the requirements of their people. Every country of the world today is involved in
trade and is depended on some other country one way or the other. The US is the biggest economy
in the world and even that is depended on other countries for many of its needs. Hence the
industries of the world today are considered to be working not for their native countries but for the
world as a whole.

Financial Globalization

 It may be defined as the emergence of worldwide financial markets and better access to external
financing for corporate, national and sub-national borrowers. Some projects in the Philippines were
sponsored by foreign investors. They may be in the form of international organizations or
independent investors. The IMF and the World Bank today give funds to various countries for
 developmental projects. We may say, that today the financial markets of the world have untied in
such a way that finances are easily available throughout the world.

Informational Globalization

 This aspect of Globalization has perhaps had the greatest impact on the world today. Sitting at one
end of the world, you can have access to the information available in any other part of the world
with just the push of a button. Internet, television, telephone, fax, etc. are some of the inventions
that may be considered as a part of the informational Globalization process where the information
flow has dramatically increased between geographically remote areas of the world.

Ecological Globalization

 The effects of globalization in the ecology are still not completely identified, though some studies
suggest that the process of globalization has many consequences in our ecology.

Globalization and the Politics

 Through globalization, political issues such as the rights of women and children are now currently
discussed; many laws are now already implemented regarding the issues on the rights of women
and children.

Globalization with technology

 Technology really plays a huge part in the life of every individual. Also, through the advancement of
technology we can now already communicate with others despite the distance that separates us.
And through our technology today, the process of globalization is now taking place much faster.

Geographical Globalization

 Globalization is moving towards the trend of a borderless world. We can now explore different
countries without having any dangers. As an example, migration to major cities and first world
countries has increased during the period of Globalization. Family structures in places such as
Ecuador have changed, where community members and relatives have begun helping with childcare
as male adults have often migrated to North America and other regions for city-based jobs.

THE METAPHORS OF GLOBALIZATION

We will use the metaphor of a “solid” to describe epochs before the era of globalization.
Similarly, the global world will be described as being “liquid.” The use of such metaphors is designed to
give the reader a better and a more vivid sense of the global age and how it differs from prior epochs.

SOLID AND LIQUID

1. SOLIDITY- Refers to the barriers that prevent or make difficult the movement of things, it can be
either natural or manmade.
 Examples:
Natural Solids Man-made Barriers
 Land forms  Great Wall of China
 Bodies of Water  Berlin Wall
 Nine-dash line

An imaginary line such as the Nine-dash line of China used by the People’s Republic of China in their claim
to the South China Sea is an example of modern man-made solid.

2. LIQUID

As state of matter, takes the shape of its container which means liquids are not fixed, therefore refers to
increasing ease of the movement of people, things, information and places in the contemporary world. Today’s
liquid phenomena change quickly and their aspects, spatial and temporal are continuous fluctuation. This means
that space and time are crucial elements of Globalization, in global finance, for instance changes in the stock
market are a matter of seconds. Another characteristic if liquid phenomenon are that their movement is difficult
to stop.

Example:
Videos uploaded on YouTube or Facebook are unstoppable once they become viral. The so-called internet
sensation becomes famous not only in their homeland but also to the entire world.
The forces (the liquid ones) made political boundaries more permeable to the flow of the people or things
(Cartier, 2000). This brings to us to what Ritzer regarded as the most important characteristic of liquid. It tends
to melt whatever stands in its path (especially solid). The clearest example is the decline, if not death of the
nation-state.
Liquidity and Solidity are in constant interaction, liquidity is the one increasing and proliferating today.
Therefore, the metaphor that could best describe globalization is liquidity.
FLOWS OF GLOBALIZATION

Flows are the movement of people, things, places and information brought by the growing “porosity’ of
global limitations. (Ritzer, 2015)

Closely related to the idea of liquidity, and integral to it, is another key concept in thinking about
globalization, the idea of flows (Appadurai 1996); after all liquids flow easily, far more easily than solids. In fact, it
is the concept of flows that is widely used in the literature on globalization and it is the concept that will inform a
good deal of the body of this book. Because so much of the world has “melted” or is in the process of “melting”
and has become liquefied, globalization is increasingly characterized by great flows of increasingly liquid
phenomena of all types, including people, objects, information, decisions, places, and so on.

For example, think the different foreign cuisines being patronized and consumed by the Filipinos. Aside
from local dishes, many of us are fond of eating of sushi, ramen, hamburger, and French fries – food introduced to
us by foreign cultures. Clearly, foods are being Globalized.

Another example of flows is the Global Financial Crisis. As Lander (2008) puts it: “In global financial system,
national boarders are porous”. This mean that a financial crisis in a given country can bring ramification on other
regions of the world. An example of which is the spread of the effects of American Financial Crisis in Europe
2008.

There are 2 types of Flows:

1. Cultural flows- refer to the different "objects, skills, beliefs and practices" from different parts of the
world that travel around. This can be music, food, religious beliefs, languages, clothing, foreign films, etc. For
example, American music and films are listened and watched by a lot of people across the world. That is the
reason for why people from the other part of the world are influenced by the “American culture”. When so many
cultures link together, we can see new culture being created.

2. Information flows- refer to the flow of information across the world. People from around the world are
able to exchange knowledge and information from anywhere. For example, people can search for any information
they want on “Google Search” which is a very useful tool that brings together all the websites from around a
world.

CONCEPTS OF GLOBALIZATION

Globalization as a Process, Condition and Ideology

 Globalization is a Process

Globalization – A set of social processes that appear to transform our present social condition of weakening
nationality into one globality; human lives played out in the world as a single place; redefining landscape of
sociopolitical processes and social sciences that study these mechanisms. It is also interaction and integration
between people, companies, and governments worldwide. It is a process driven by international trade and
investment and aided by information technology. This process has effects on the environment, on culture, on
political systems, on economic development and prosperity, and on human physical well-being in societies
around the world.

Steger thinks globalization is about movement from one point to another. Therefore, globalization –
dynamism, transformation, movement, destruction and creation. For Steger, globalization isn’t only the economic
or the market.

During the late 20th century, globalization rapidly expanded to resemble the form which it is commonly
known as today. Some suggest, however, that since the process of globalization results in the world becoming
increasingly integrated, then it must have existed since the beginning of man. The process of globalization is said
to have existed at least several hundred years ago. Evidence to support this rests on the knowledge that, around
that time, European countries began to expand and colonize the continents of Australia, Africa, North America,
and South America.

Towards the end of the 19th century, world trade and investment experienced rapid expansion. The
world was further united when the Gregorian calendar was adopted. The International Date Line, Prime Meridian
and world time zones were also established at that time. International standards were also devised in the areas of
telegraphy and signaling. The period of economic depression between World War I and World War ll slowed
down progress towards globalization when a number of countries introduce anti-free trade measures in an
attempt to stimulate their own economies. It did not take long, however, for companies to become interested in
expanding their business by operating in the markets of foreign nations. Developments in communication and
transport, particularly that of air travel, soon made possible for these companies to carry out their plans. The
development of the internet continued to assist these companies, creating transnational corporations (businesses
with a base in one country but conducting operations in a number of other countries) the way of the future.

 Globalization as a Condition

Globality – A social condition characterized by tight economic, political, cultural and environmental
interconnections and global flows, making currently existing political borders and economic boundaries
irrelevant.

The often-repeated saying that globalization (the process) leads to more globalization (the condition)
does not allow us to draw meaningful distinctions between the causes and effects. The term globality is used to
signify a future social condition characterized by thick economic, political, and cultural interconnections and
global flows that make currently existing political borders and economic barriers irrelevant. Yet, it should not be
assumed that ‘globality’ refers to a determinate endpoint that precludes any further development. Rather, this
concept points to a particular social condition destined to give way to new, qualitatively distinct, constellations.
Moreover, we could easily imagine different social manifestations of globality: one based primarily on values of
individualism and competition, as well as on an economic system of private property, another embodying more
communal and cooperative social arrangements, including less capitalistic economic relations. These future
alternatives expose the fundamentally the indeterminate character of globalization.

 Globalization as an Ideology

Global Imaginary - A concept referring to people growing consciousness of belonging to a global

community -destabilizes and unsettles the conventional parameters within which people imagine their
communal existence.

Globalization as an ideology has six core claims. First, that it is about the liberalization and global
integration of markets. Second, it is inevitable and irreversible. Third, nobody is in charge of globalization.
Fourth, globalization benefits everyone. Fifth, it furthers the spread of democracy in the world. Finally,
Globalization requires a global war on terror. Market globalism, justice globalism, religious globalism’s’
investigates the ideologies underlying globalization, which endow it with values and meanings. Market globalism
advocates promise a consumerist, neoliberal, free-market world.

THEORETICAL PARADIGMS OF GLOBALIZATION

WORLD SYSTEMS

Views globalization not as a recent phenomenon but as virtually synonymous with the birth and spread of
World Capitalism. (Wallerstein)

Key Structure of the Capitalist World System

 1. Core - Powerful and developed centers of the system - Western Europe, North America and Japan

2. Periphery - Regions that have been forcibly subordinated to the core through colonialism or other means
- Latin America, Africa, Asia, Middle East and Eastern Europe

3. Semi-Periphery - States and regions that were previously in the core and are moving down in the
hierarchy or those that were previously in the periphery and are moving up.

GLOBAL
CAPITALISM

 Treat
globalization as a
novel stage in the
evolving system
of the world of
capitalism
(capitalist
globalization)
 Focus on new
global production
and financial
system– both
seen to have
superseded
earlier national
forms of
capitalism
 Emphasize the
rise of the
processes that
cannot be framed within the nation-state/inner-state system – which lies at the core of the world- system
theory and most traditional macro- social theories

THE NETWORK SOCIETY

Does not subscribe to the contention that capitalism fuels globalization

 PREMISE: Technological change are the underlying causes of the several processes that comprise
globalization – Manuel Castells called The Rise of the Network Society – “new economy”
NEW ECONOMY is: informational, knowledge-based; global, in that production is organized on a global scale;
networked, in that productivity is generated through global networks of interaction

 CASTELL: Networked enterprise makes material the culture of the informational, global economy: it
transforms signals into commodities by processing knowledge
TRANSNATIONALITY AND TRANSNATIONALISM

Transnational processes and practices are defined broadly as the multiple ties and interactions- economic,
political, social and cultural that link people, communities and institutions across the borders of nation-states.
Transnationality is also a principle of carrying out an action across national NNHU88888888888888borders,
so as to have effects at a more general level. This principle allows the exchanging of information and expertise,
or benchmarking practices in different members’ state.

Transnationalism is an umbrella concept encompassing a wide variety of transformative processes, practices and
developments that take place simultaneously at a local and global level. It centers on exchanges, connections
and practices across boarders (economic, political, social and cultural that links people, institution across
borders of nation-state resulting to the rise of new communities and the formation of the new social identities
and relations.

GOLBAL CULTURE

 Emphasize the rapid growth of the mass media and resultant global cultural flows and images in recent
decades evoking the image famously put forth by Marshal McLuhan of the “the global village”
 Ritzer – McDonaldization – is a sociocultural process by which the principles of the fast-food restaurant came
to dominate more and more sectors of US and later world society

THE CONTEMPORARY WORLD

MODULE 3

The Global Economy

What is Economy?
An economy is the large set of inter-related production, consumption, and exchange activities that aid in
determining how scarce resources are allocated. The production, consumption, and distribution of goods and
services are used to fulfill the needs of those living and operating within the economy, which is also referred to as
an economic system.

What is Global Economy?

The sum of activities that take place both within a country and between different countries and traditional
geographic boundaries did not restrict economic transactions and consumer activities.

What is Economics?
 Economics is the study of how humans make decisions in the face of scarcity. These can be individual
decisions, family decisions, business decisions or societal decisions. If you look around carefully, you will see that
scarcity is a fact of life. Scarcity means that human wants for goods, services and resources exceed what is
available. Resources, such as labor, tools, land, and raw materials are necessary to produce the goods and services
we want but they exist in limited supply. Of course, the ultimate scarce resource is time- everyone, rich or poor, has
just 24 hours in the day to try to acquire the goods they want. At any point in time, there is only a finite amount of
resources available.

Two major types of Economics:

1. Microeconomics- this focuses on the behavior of individual consumers and producers. (E.g. how a single
individual will decide for his purchases, a household, a business/organization or a government agency)
2. Macroeconomics- this examines overall economies on a regional, national, or international scale.

Macroeconomics addresses why some countries grow faster than others, and have higher standards of
living than others. (E.g. the percentage of unemployment, GDP, Inflation rate is studied and used by the
government to address problems in the society).

Interconnectedness Dimensions of Globalization

1. The Globalization of trade of goods and services;
2. The Globalization of financial and capital markets;
3. The Globalization of technology and communication; and
4. The globalization of product

MARKET INTEGRATION

When prices among different location or related goods follow the same patterns over a long period of time,
market integration exist. Similarly, when groups of prices often move proportionally to each other and when this
relation is very clear among different markets it is said that the markets are integrated. Hence, it could be
concluded that market integration is an indicator that explains how much different markets are related to each
other. Integration is taken to denote a state of affairs or a process involving attempts to combine separate national
economies into larger economic region .

What is International Trade?

The exchange of goods or services across national borders or territories. This activity allows greater
competition and competitive pricing in the market. The competition results in affordable products for the
consumer. The exchange of goods has impact to the economy of the world due to influence of market forces or
interplay of supply and demand. It makes goods and services obtainable which may not otherwise be available to
consumers globally. As the saying goes "no nation in this world is geographically complete with resources that its
people need." This supports the reality that no country can exist on its own.

Advantages of International Trade

 According to Michael P. Todaro and Stephen C. Smith (2003) and Lieberman, Marc & Robert E. Hall
(2008), the following are highly possible benefits to both the exporters and importers: (a) developing gains,
wherein goods become available especially in regions where they are hardly produced, (b) short specialization gains
wherein production of goods increases the purchasing power of the importing nations, (c) dynamic gains wherein the
process of economic growth and development is facilitated with more advanced technologies, (d) political spin-off
gains whereby the promotion of friendly relations as conflict and hostilities may be avoided, and (e) debt relief due to
wider access to international market which would not only raise incomes but could also improve the ability of
heavily indebted countries to pay back foreign financial obligations.

Theories of International Trade

The applicability of international trade policies vary depending on which countries are involved in the
export and import activities. Similarly, the theories of international trade where trading parties lean on to as basis
of economic rational decisions are usually based from exporters and importers' numerous experiences of successes
and failures. These theories serving as intellectual references help explain and clarify conditions or circumstances
of having potential edge in trading activities. The following are few of the known theories of international trade.

1. Mercantilism is a political and an economic doctrine which believes that the power and prestige of any
nation depends on its accumulation of gold and silver. By encouraging exports and restricting imports, the
government can stimulate national output and reduce unemployment. According to mercantilist theory,
countries should export more than doing import, and if successful, would receive the value of trade
surpluses.

2. Comparative Advantage Theory explains that a country is said to have a competitive or comparable
advantage over others if the production of a particular good or provision of a service is far efficiently
produced compared to the performance of competing countries. Efficiency on production could be through
lower price, finest product quality, and responsiveness on the product availability. The superiority of a
country's capability in production serves as an edge of a nation over others more .

3. Absolute Advantage Theory posits that a country is said to have a total advantage over another in the
production of a particular good if it produces the goods that is not available in other countries. For instance,
the Middle East of the Asian continent has monopoly on the production and supply of petroleum products;
Georgia State of the US has absolute advantage on the supply of coca-cola concentrates; while Bangladesh
has total advantage on the supply of jute (the raw material in producing plastic-like sacks)

4. Purchasing Power Parity Theory of Gustav Cassel explains that to prevail the equilibrium level of a flexible
exchange between two countries, a single currency in circulation is indispensably necessary.

Regulation or Control Placed on Trade (as forms of protectionism)

The specific goal of protectionists trade policies 1s to expand domestic production in the protected
industries, benefiting the local Owners, workers and suppliers. The following forms of control mechanism are
imposed or domestically practiced by many countries for many protective reasons.
 1. Tariff: A tax imposed by the government on foreign goods or on goods produced abroad and sold
domestically in the destination country. It is a tax or duty levied on the traded commodity as it crosses a
national boundary. It is a special tax that applies only to goods traded internationally.

2. Quota: It is a non-tariff that refers to the limit on the quantity of goods produced abroad and sold
domestically. It is the limit on quantities of goods that may be imported or exported over a given time in
interval. So, importers typically are limited to a maximum number of products that they can sell in the home
market over specific periods. Quotas cause prices to increase in the home market. This induces domestic
producers to increase in production and Quota: It is a nontariff that refers to limit on the quantity of goods
consumers to reduce consumption.

3. Subsidy: An alternative to restricting the terms under which foreigners can compete in the home market. It
means that the government may subsidize domestic producers purposely local producers to become more
competitive to produce what the local constituents need and with it the country will not become heavily
dependent on imported supplies.

4. Export Subsidy: This refers to the financial assistance of a Country which intends to avail priority attention
from porting Country through direct payments or granting of tax relief/

Components of International Trade:

 Export- are products that are sold to the global market. Exports are goods and services that are
produced in one country and sold to buyers in another country.

 Import- are products that are bought from the global market. This may be good or service bought in
one country that was produced in another. Countries are most likely to import goods or services that their
domestic industries cannot produce as efficiently or cheaply as the exporting country. Countries may also
import raw materials or commodities that are not available within their borders.

Factors that affect the economic development of a country:

Human Resource

Refers to one of the most important determinants of economic growth of a country. The quality and
quantity of available human resource can directly affect the growth of an economy. The quality of human
resource is dependent on its skills, creative abilities, training, and education. If the human resource of a country
is well skilled and trained, then the output would also be of high quality. On the other hand, a shortage of skilled
labor hampers the growth of an economy, whereas surplus of labor is of lesser significance to economic growth.
Therefore, the human resources of a country should be adequate in number with required skills and abilities, so
that economic growth can be achieved.

Natural Resources

Natural resources involve resources that are produced by nature either on the land or beneath the
land. The resources on land include plants, water resources and landscape. The resources beneath the land or
 underground resources include oil, natural gas, metals, non-metals, and minerals. The natural resources of a
country depend on the climatic and environmental conditions. Countries having plenty of natural resources
enjoy good growth than countries with small amount of natural resources. The efficient utilization or
exploitation of natural resources depends on the skills and abilities of human resource, technology used and
availability of funds. A country having skilled and educated workforce with rich natural resources takes the
economy on the growth path. The best examples of such economies are developed countries, such as United
States, United Kingdom, Germany, and France. However, there are countries that have few natural resources,
but high per capita income, such as Saudi Arabia, therefore, their economic growth is very high. Similarly, Japan
has a small geographical area and few natural resources, but achieves high growth rate due to its efficient
human resource and advanced technology.

Technological Development

Refers to one of the important factors that affect the growth of an economy. Technology involves
application of scientific methods and production techniques. In other words, technology can be defined as
nature and type of technical instruments used by a certain amount of labor. Technological development helps in
increasing productivity with the limited amount of resources. Countries that have worked in the field of
technological development grow rapidly as compared to countries that have less focus on technological
development.

Social and Political Factors

Play a crucial role in economic growth of a country. Social factors involve customs, traditions, values
and beliefs, which contribute to the growth of an economy to a considerable extent. For example, a society with
conventional beliefs and superstitions resists the adoption of modern ways of living. In such a case, achieving
becomes difficult. Apart from this, political factors, such as participation of government in formulating and
implementing various policies, have a major part in economic growth.

What is World Economy?

 Large geographic zone within which there is a division of labor and hence significant internal exchange of
basic or essential goods as well as flows of capital and labor.
 A defining feature of a world-economy is that it is not bounded by a unitary political structure. Rather, there
are many political units inside the world-economy, loosely tied together in our modern world system in an
interstate system.

Examples:

 The European Union (EU) - The EU is the world's largest trading bloc, and second largest economy, after the
USA.
 The Asia-Pacific Economic Cooperation (APEC) - is a regional economic forum established in 1989 to
leverage the growing interdependence of the Asia-Pacific.

What unifies the global economic system most is the DIVISION OF LABOR. Division of Labor is an economic
concept which states that dividing the production process into different stages enables workers to focus on specific
tasks. If workers can concentrate on one small aspect of production, this increases overall efficiency – so long as
there are sufficient volume and quantity produced.

Although the economic global system has some common cultural patterns, called “GEOCULTURE”. It does
mean that neither political nor cultural homogeneity is to be expected or can be found in a world economy.

Capitalism

Characteristics of Capitalism

It is but ideal for the people of the democratic country to live by the value and spirit of democracy. Hence, its
people subscribe to a capitalism that is characterized as a decentralized economic system. Actually, the countries
that uphold this so called free-market or free- enterprise economy include Philippines, France, Canada, Mexico,
Singapore, Peru, and USA. Socio-economic and socio-political theorists claim that majority of the nations of the
world are now moving towards decentralized economy side. Historically, this is marked by the fall of Berlin Wall in
Europe. In fact, majority of the countries across the World that committed membership in the former Allied Force
organized by USA and Europe prior to World War II were capitalist nations. This does not mean however that
capitalism is a superior economic system. Its operational efficiency as a system remains dependent from its
political leaders expected to be statesmen and exceptional prime movers of good governance. The political leaders
who exemplify the ability to provide sound and healthy economic policies or laws that are indispensably
responsive to the welfare of private economic affairs, in certain manner, will bring about a stable or strong
economy.

Capitalism, as mentioned earlier, is an economic system or ideology in which factors of production are
privately owned by households, industry, and market institutions operated for private profit. The profit in the form
of gain by the private sector is a driving force serving as latent reward in their effort to manage, supervise and
control privately the resources guaranteed by existing laws of the country.

Adam Smith (1723-1790), a Scottish philosopher, economist and the father of modern capitalism,
popularized this system in his book entitled An Inquiry into the Nature and Causes of the Wealth of Nations. As
classicist, he is regarded pro-industrial development. He was particularly influenced by the French philosopher
François Quesnay (1694-1774), a French economist, the principal founder of the physiocratic school that based its
political and economic doctrines on the supremacy of natural law, wealth and order. Quesnay as physiocrat
claimed that natural resources play a very important role to economic growth and development. The natural
resources provide the permissive environment, basic raw materials and food supplies needed for human existence.
He argued that commerce and industry were essentially non-productive and only agriculture could increase
wealth.

The central thesis of Wealth of Nations is that capital is best employed for the production and distribution of
wealth under conditions of governmental non-interference otherwise known as laissez-faire. To explain further
this concept, Smith asserted the idea that economic welfare is believed best attained through legal and technical
supports of government to the private sectors who do most of the economic activities (Fajardo, 1995). According to
Smith in his excerpt "Every individual employs his capital, so that its produce may be of greatest value. He
generally neither intends to promote the public interest nor knows how much he is promoting it. He intends only
his own security, only his own gain, and he is led by an invisible hand to promote an end which was no part of his
intention. By pursuing his own interest he frequently promotes that of society more than when he really intends to
promote it."

Smith's assumption on price determination is a consequence or invisible hand. This mind construct refers to
the interplay of demand and supply which in fact serves as a market force in determining fair market prices of
commodities or services. With this system, Fajardo (1995) and

Todaro (2003) also pointed out the freedom of choice over goods and the various alternative uses of
income. Hence, the production and consumption of commodities is largely dependent on buyers' and sellers
interactions. There are many other freedoms that citizens of a capitalistic economy enjoy which include the right to
own property, freedom of competition, enterprise and cooperation.

The right to own property is inherent in democratic countries or free market economy. This is a freedom or
privilege among citizens. As per age-old capitalist maxim, people in a democratic society receive material rewards
according to the potential labor they exert." However, freedom in the context of social justice would not mean
absolute right to own anything that a person desires. If the private business enterprises operate for the provision
of basic goods and services but monopolistically control the price, the government invokes its authority anytime
especially when it finds the public or national interest of supreme concern.

The freedom of competition as second characteristic refers to the right, privilege and chance for members
of the business community to compete within bounds of legality and morality in terms of affordable price and best
quality of goods and services they offer to the consuming public. In order for entrepreneurs to win over others in
terms of business expansion, the name of the game is not directly focused on how much gain or profit would every
product or service could be sold. The universal truth in business success lies in the ability to continuously improve
the quality of any product it offers in the market. Thus, cut-throat competition practice is discouraged since it has
more of the disadvantages to the general public.

The freedom of enterprise as third characteristic is referred to the right and privilege among firms or
market institutions on any form of intent to put up or establish a business provided that the enterprise is not a
prejudice to the public interest and for as long as its products are not harmful to end users or consumers. In the
Philippines, the power of taxation has regulative measures to protect the interest of the local industry The
government agencies are also watchful over the operation of foreign businesses whose proven attempt is
profiteering through oligopoly and monopsony. The freedom of cooperation as fourth characteristic covers the
right or privilege among members of the business sector to unite or collaborate under permissive extent of
corporation or business merging laws, with the ultimate economic interest to fulfil any attempts or ambitions to
pull together all productive resources to enhance material gain or to elevate intangible satisfaction.

NOTE: There are other Economic systems aside from Capitalism

Economic Recession

It is a downturn in real Gross National Product (GNP - is an estimate of total value of all the final products and
services turned out in a given period by the means of production owned by a country's residents) for two or
more successive quarters. Characterized by the significant decline in economic activity spread across the
 economy. Well known examples of recessions include the global recession in the wake of the 2008 financial
crisis and the Great Depression of the 1930s.

Economic Depression

A prolonged period characterized by high unemployment, low output and investment, depressed business
confidence, falling prices, and widespread business failure. It is commonly defined as an extreme recession that
lasts three or more years or which leads to a decline in real Gross Domestic Product (GDP- is the monetary value
of all finished goods and services made within a country during a specific period) of at least 10% in a given year.

FREE TRADE

Wherein international trade (the importation and exportation) left to its natural course without tariffs and
non-tariffs barriers such as quotas, embargoes, sanctions or other restriction.

 Tariffs – taxes or duties to be paid on a particular class of imports or exports

 Embargo - a government-instituted prevention of exports to a certain country. Official ban on trade or other
commercial activity. (The United States has imposed several long-running embargoes on other countries
including Cuba, North Korea and Iran)
 Economic Sanctions – commercial and financial penalties applied by one or more countries against a
targeted country, group or individual.

Free Trade Areas – a group of countries within which tariffs and non-tariffs trade barriers between the members
are generally abolished but with no common trade policy toward non-members. Both in the sense o geography and
price, is the foundation of these trading agreements. However, tariffs are not necessarily complete abolished for all
products.

Free trade areas impose exclusivity among its members since the world is not entirely a free trade economy.

WORLD’S MAJOR FREE TRADE AREAS

1. North American Free Trade Agreement (NAFTA)

 Free trade between the three member nations, Canada, the US and Mexico
 Effective on January 1, 1994 – although tariffs weren’t fully abolished until 2008
 Canada is the largest exporter of goods in the US.

2. Association of Southeast Asian Nations Free Trade Area (AFTA)

 The original members were Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand. Four
countries have subsequently joined: Vietnam, Laos, Myanmar and Cambodia
 The AFTA was signed in January 1992 in Singapore
 The bloc has largely removed all export and import duties on items traded between the nations.
 It has also entered into agreements with a number of other nations, including China, eliminating
tariffs on around 90% of imported goods.

3. European Union
  Is a single market, which is similar to a free trade area in that it has no tariffs, quotas or taxes on
trade.
 The 28 member countries of EU: Austria, Italy, Belgium, Latvia, Bulgaria, Lithuania, Croatia,
Luxembourg, Cyprus, Malta, Czech Republic, Netherlands, Denmark, Poland, Estonia, Portugal, Finland,
Romania, France, Slovakia, Germany, Slovenia, Greece, Spain, Hungary, Sweden, Ireland and United
Kingdom.

FREE TRADE ISSUE

In government, free trade is predominately advocated by political parties that hold right-wing economic
positions, while economically left-wing political parties generally support PROTECTIONISM.

 Protectionism – the theory or practice of shielding a country’s domestic industries from foreign
competition by taxing imports to protect their domestic industries.
 Economic Nationalism or Economic Patriotism – an ideology that favors state interventionism in the
economy, with policies that emphasize domestic control of the economy, labor, and capital formation, even if
this requires the imposition of tariffs and other restriction on the movement of labor, goods and capital.

THE ROLE OF INTERNATIONAL FINANCIAL INSTITUTION IN THE CREATION OF GLOBAL ECONOMY

International Financial Institution

 International non-profit agencies are one of the major sources of financing like regional development
banks or banks globally - To finance productive development projects or to promote economic development

WORLD BANK

 Multinational financial institution established at the end of World War II (1944) to help provide longterm
capital for the reconstruction and development of member countries.
 It provides much of the planning and financing for economic development projects involving billions of
dollors.

Purpose for the setting up of bank

1. To assist in the reconstruction and development of territories of members

2. To promote private foreign investment by means of guarantees or participation in loans and other
investment made by private investors
3. To promote the long-range balanced growth of international trade and the maintenance of equilibrium in
balance of payment
4. To conduct its operations with due regard to the effect of international investment on business conditions in
the territories of members
5. To assist in bringing about a smooth transition from a wartime to a peacetime economy.

What does the World Bank do?

 The World Bank is the world’s largest source of development assistance

  The main focus is on helping the poorest people and the poorest countries hut for all its clients, the Bank
emphasizes the need for:
i. Investing in people, particularly through basic health and education;
ii. Protecting the environment;
iii. Supporting and encouraging private business development;
iv. Strengthening the ability of the governments to deliver services efficiently and transparently;
v. Promoting reforms to create a stable macroeconomic environment conducive to investment and
long-term planning;
vi. Focusing on social development, inclusion, governance and
vii. Institution building as key elements of poverty reduction

 The Bank is also helping countries to strength and sustain the fundamental conditions that help to
attract and retain private investment.
 They are investing in human resources, infrastructure and environment protection which enhance the
attractiveness and productivity of private investment.

INTERNATIONAL MONETARY FUND

 IMF is a cooperative institution that 182 countries have voluntarily joined because they see the
advantage of consulting with one another on this forum to maintain a stable system of buying and selling their
currencies.
 IMF lends money to members having trouble meeting financial obligations to other members, but only
on the condition that they undertake economic reforms to eliminate these difficulties for their own good and
that of the entire membership

PURPOSE OF IMF

 To promote international monetary cooperation through a permanent institution that provides the
machinery for consultation and collaboration on international monetary problems
 To facilitate the expansion and balance growth of international trade and to contribute, thereby, to the
promotion and maintenance of high levels of employment and real income and to the development of the
productive resources of all members as primary objectives of economic policy.
 To promote exchange stability, to maintain orderly exchange arrangements among members and to
avoid competitive exchange depreciation.
 To assist in the establishment of a multilateral system of payments in respect of current transactions
between members and in the elimination of foreign exchange restrictions which hamper the growth of world
trade
 To give confidence to members by making the general resources of the fund temporarily available to
them under adequate safeguards, thus providing them with opportunity to correct maladjustment in their
balance of payments without resorting to measures destructive to national or international prosperity
 In accordance with the above, to shorten the duration and lessen degree of disequilibrium in the
international balances of payments of members.