SESSION 2.

Market integration- it refers to how easily two or more markets can trade with each other. It
occurs when prices among different locations or related goods follow similar patterns over a
long period of time. 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. It exists
when there are exerted effects that prompt similar changes or shifts in other markets that focus
on related goods on events occurring within two or more markets.

Types of Related Markets where Market Integration Occurs

STOCK MARKET INTEGRATION

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

FINANCIAL MARKET INTEGRATION

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

Global Corporation- A global corporation is a business that operates in two or more countries.
It also goes by the name "multinational company.” Success in different types of economies is
achieved by means of multiple countries' operation while it also causes logistic and cultural
challenges. Expanding revenue opportunities and diversifying business risk are the purposes of
becoming a global corporation.

Historical Periods of Global Corporation

An approach to the study of globalization that locates the phenomenon itself in early
patterns of trade and exchange is known as historical globalization. In early historical periods as
both cities and countries expanded their reach beyond their own borders, a form of globalization
was initiated which then followed complex patterns of interactive engagements organized
through trade and industry directly influenced by the emergent and subsequently dominant
technologies especially in shipping and navigation. Combination of invention and social
organization resulting in an increase in worldwide capital and wealth of a nation is allowed by
the modern nation state system that emerged in the period prior to the end of World War II.
The Finance Function in a Global Corporation
1. Financing- A group’s tax bill can be reduced by the CFO like borrowing in countries with
high tax rates and lending to operations in countries with lower rates.
2. Risk Management- Global firms can offset natural currency exposures through
worldwide operations instead of managing currency exposures through financial
markets.
3. Capital Budgeting- Getting smarter on valuing investment opportunities CFOs can add
value.

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

BRICS Economies
Brazil, Russia, India, China and South Africa (BRICS) is an acronym for the combined
economies of Brazil, Russia, India, China and South Africa. BRIC, without South Africa, was
originally coined in 2003 by Goldman Sachs, which speculates that by 2050 these four
economies will be the most dominant. Due to lower labor and production costs in these
countries now including a fifth nation, South Africa, many companies have also cited BRIC as a
source of foreign expansion opportunity i.e. promising economies in which to invest.

General Agreement on Trade in Services (GATS)

The General Agreement on Trade in Services (GATS) is the first multilateral agreement
covering trade in services which was negotiated during the last round of multilateral trade
negotiations, called the Uruguay Round, and came into force in 1995GATS has similar principle
with the General Agreement on Tariffs and Trade (GATT) that deals with trade in goods. The
two primary objectives of GATTS are to ensure that all signatories are treated equitably when
accessing foreign markets; and second, to promote progressive liberalization of trade and
services.
SESSION 2.3

THE GLOBAL INTERSTATE SYSTEM

Globalization and the Nation- States

Globalization in the early years of the 21st century has not displaced the state. Max
Weber, a German social theorist defines state as a compulsory political organization with a
centralized government that maintains a monopoly of the legitimate use of force within a certain
territory.
Nation on the other hand is an imagined political community and imagined as both
inherently limited and sovereign.

● It is imagined because the members of even the smallest nation will never know most of
their fellow- members, meet them, or even hear of them, yet in the minds of each lives
the image of their communion.
● The nation is imagined as limited because even the largest of them, encompassing
perhaps a billion human beings, has finite, if elastic, boundaries, beyond which lie other
nations.
● It is imagined as sovereign because the concept was born in an age in which
Enlightenment and Revolution were destroying the legitimacy of the divinely ordained,
hierarchical dynastic realm…nations dream of being free, and if under God, directly so.
The gauge and emblem of this freedom is the sovereign state.
● It is imagined as a community, because regardless of actual inequality and exploitation
that may prevail in each, the nation is always conceived as a deep horizontal
comradeship.

The State and the Economic Interdependence

The rising momentum of global free-market capitalism in the final decades of the 20th
century, the accompanying rise in transnational enterprises, and the resulting disparities
between easy flows of money and commodities across international boarders and the legal
barriers and logistical hurdles that keep most workers tied to their home communities are
associated with globalization. There are two things that will happen if a country is in Golden
Straitjacket: the economy grows and politics shrinks. It is a straitjacket because it narrows the
political and economic policy choices of those in power to relatively tight parameters. This is the
reason for the difficulty of finding any real differences today between ruling and opposition
parties in those countries that have put on the Golden Staitjacket.

Neoliberalism and Economic Sovereignty

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

Economic sovereignty- is the power or national governments to make decisions

independently of those made by other governments. Globalization as an increase in the
international integration of markets for goods, services, capital and labor, is also a counterpoint
of national sovereignty. In a globalized world economy, governments have no alternative but to
adopt neoliberal economic policies of privatization, deregulations, and reductions in public
expenditures.

Four different concepts of sovereignty

1. International Legal Sovereignty- It refers to the acceptance of a given state as a member
of the international community.
2. Westphalian Sovereignty- It is based on the principle that one sovereign state should not
interfere in the domestic arrangements of another.
3. Interdependence Sovereignty- It is the capacity and willingness to control flows of
people, goods and capital into and out of the country.
4. Domestic Sovereignty- It is the capacity of a state to choose and implement policies
within the territory.

Economic and Political Integration (European Integration)

European integration is the process of industrial, political, legal, economic, social and
cultural integration of states wholly or partially in Europe. European integration has primarily
come about through the European Union and its policies.

European Union (EU), is an international organization comprising 28 European countries

and governing common economic, social, and security policies. In the early 21 st century EU
expanded into central and eastern Europe with the following members: Austria, Belgium,
Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland,
Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United
 Economic integration can be described as a process and a means by which a group of
countries strives to increase their level of welfare. It is an arrangement between different regions
that often includes the reduction or elimination of trade barriers, and the coordination of
monetary and fiscal policies. Reducing costs for both consumers and producers and increasing
trade between the countries involved in the agreement are the aims of economic integration.

Seven Stages of Economic Integration

1. Preferential trading area (PTA)- happens when there’s an agreement on reducing or

eliminating tariff (tax or duty to be paid on a particular class of imports or exports) barriers on
selected goods imported from other members of countries within the geographical region or
areas.

2. Free trade area- or Preferential Trade Tgreements (PTAs) eliminate import tariffs as well as
import quotas between signatory countries. These agreements can be limited to a few sectors
or can encompass all aspects of international trade.

3. Customs union- Removal of tariff barriers between members, together with the acceptance
of a common or unified external tariff against non-members is involved in the Custom Union.

4. Common market- All barriers to the mobility of people, capital and other resources within the
area in question, as well as eliminating non-tariff barriers to trade, such as the regulatory
treatment of product standards are removed by CM aside from containing the provisions of a
customs union.

5. Economic union- It requires coordinated monetary and fiscal policies as well as labor
market, regional development, transportation and industrial policies. In economic union the use
of a common currency and a unified monetary policy is considered. The best example of an
Economic union is the European Union (EU).

6. Economic and monetary union- involves a single economic market, a common trade policy,
a single currency and a common monetary policy. It represents a major step in the integration of
EU economies. EMU involves the coordination of economic and fiscal policies, a common
monetary policy and a common currency, the euro. EMU is a means to provide stability and for
stronger, more sustainable and inclusive growth across the euro area and the EU as a whole for
the sake of improving the lives of EU citizens.

7. Complete economic integration- Complete Economic Integration is the final stage of

economic integration in which member states completely forego independence of both monetary
and fiscal policies. States that participate in complete economic integration have no control of
economic policy including economic trade rules.
POLITICAL INTEGRATION
refers to the integration of components within political systems; the integration of political
systems with economic, social, and other human systems; and the political processes by which
social, economic, and political systems become integrated.

THEORIES OF EUROPEAN INTEGRATION

Neo-functionalism
It is a theory of regional integration, building on the work of Ernst B. Haas, an American
political scientist and Leon Lindberg, also an American political scientist. Jean Monnet's
approach to European integration, which aimed at integrating individual sectors in hopes of
achieving spill-over effects. The core of neo-functionalism is the use of the concept ‘spill –over’,
situations when an initial decision by governments to place a certain sector under the authority
of central institutions creates pressures to extend the authority of the institutions into
neighboring areas of policy, such as currency exchange rates, taxation, and wages. This core
claim meant that European integration is self- sustaining: ‘spill-over’ triggers the economic and
political dynamics driving further cooperation.

Intergovernmentalism
This theory provides a conceptual explanation of the European integration process. The
main concept of Intergovernmentalism emphasizes the role of national states in European
integration; in other words it argues that "European integration is driven by the interest and
actions of nation states.”

Liberal Intergovernmentalism
This is a dominant political theory developed by Andrew Moravsik in 1993 to explain
European integration. Application of rational institutionalism to the field of European integration
is the aim of this theory.

New Institutionalism
This theory emphasized the importance of institutions in the process of European
integration. Its three key strands are: rational choice, sociological and historical.

Multi-level Governance (MLG)

This is a new theory of European integration. Writers Liesbet Hooghe and Gary Marks
defined MLG as dispersion of authority across multiple levels of political governance. They
stated that over the last fifty years, authority and sovereignty has moved away from national
governments in Europe, not just to the supranational level with the EU, but also to subnational
levels such as regional assemblies and local authorities.

TRANSNATIONAL ACTIVISM IN STATES

Transnational activism can be defined as the mobilization of collective claims by actors

located in more than one country and/or addressing more than one national government and/or
international governmental organization or another international actor.

A social movement is a type of group action. It refers to the organizational structures and
strategies that may empower oppressed populations to mount effective challenges and resist
the more powerful and advantaged elites". They are large, sometimes informal, groupings of
individuals or organizations which focus on specific political or social issues. They carry out,
resist, or undo a social change. They provide a way of social change from the bottom within
nations.
The global justice movement describes the loose collection of individuals and groups
often referred to as a “movement of movements”, who advocate fair trade rules and are
negative to current institutions of global economics such as the World Trade Organization.The
movement is often labeled the anti-globalization movement by the mainstream media.
The new transnational activism is as multifaceted as internationalism. Although
globalization and global neo-liberalism are frames around which many activists mobilize, the
protests and organizations are not the product of a global imaginary but of domestically rooted
activists who are the connective tissue of the global and the local, working as activators, brokers
and advocates for claims both domestic and international.

SOCIAL MEDIA AND THE STATE

Social media is a computer-based technology that facilitates the sharing of ideas and
information and the building of virtual networks and communities. By design, social media is
internet based and offers users easy electronic communication of personal information and
other content, such as videos and photos. Users engage with social media via computer, tablet
or smartphone via web-based software or web application, often utilizing it for messaging. It
“empowers” individuals to have a voice.
New forms of digital media are accompanied by globalization in bringing to light the
possibilities for merging new kinds of communities via networks and creating new arenas for
political interaction, identity and belonging. The concept of network society affirms that citizens
and civil society organizations can increasingly use networks to gain power relative states by
generating alternative discourses that have the potential to overwhelm the disciplinary
discursive capacity of the state as a necessary step to neutralizing its use of violence.
SESSION 2.4

The Contemporary Global Governance

Global governance or world governance- is a product of neo-liberal paradigm shifts in

international political and economic relations. It is a movement towards political integration of
transnational actors aimed at negotiating responses to problems that affect more than one state
or region. It tends to involve institutionalization. These institutions of global governance – the
United Nations, the International Criminal Court, the World Bank, etc. – tend to have limited or
demarcated power to enforce compliance.
Global governance is a tool to identify solutions to problems created by neoliberal
globalization. Global governance can be thus understood as the sum of laws, norms, policies,
and institutions that define, constitute, and mediate trans-border relations between states,
cultures, citizens, intergovernmental and nongovernmental organizations, and the market.
Global governance is viewed as the sum of governance processes operating in the
absence of world government. Both the international organizations (lOs) and the United Nations
(UN) being the only universal membership and general-purpose international organization, are
essential to the understanding of contemporary globa governance The two types of International
Organizations are those with universal membership and those with limited membership

The Roles and Functions of the United Nations

● The United Nation is tasked to promote international cooperation and to create and
maintain international order. It is the largest, most familiar, most internationally
represented and most powerful intergovernmental organization in the world.
● The United Nations (UN) in the world of politics has the roles of preventing and
managing conflicts, regulating armaments, championing human rights and international
humanitarian law, liberating the colonized, providing economic and technical aid in newly
liberated countries, organizing elections, empowering women, educating children,
feeding the hungry, sheltering the disposed and displaced, housing the refugees tending
the sick and coordinating disaster relief and assistance. In policy motivation,
peacekeeping is the most important feature of UN activity in peace and security.
● The UN aims to save succeeding generations from the scourge of war; to reaffirm faith in
fundamental human rights; to establish conditions under which justice and respect for
the obligations arising from treaties and other sources of international law can be
maintained; and to promote social progress and better standards of life in larger
freedom.
Four Main Purposes of the UN Charter
1. Maintaining worldwide peace and security.
2. Developing relations among nations.
3. Fostering cooperation between nations in order to solve economic, social, cultural, or
humanitarian international problems.
4. Providing a forum for bringing countries together to meet the UN's purposes and goals.

Five stages or main gaps meet by UN in the 21st century

1. Knowledge
2. Norms
3. Policy
4. Institutions
5. Compliance

Challenges of Global Governance in the Twenty-first Century

Issues that involve interwoven domestic and foreign challenges include threats at the
beginning of the century which include ethnic conflicts, infectious diseases, and terrorism as
well as a new generation of global challenges including climate change, energy security, food
and water scarcity, international migration flows and new technologies. The multiple links
among climate change and resources issues, the economic crisis, and state fragility – ‘hubs’ of
risks for the future – illustrate the interconnected nature of the challenges on the international
agenda today. Domestic politics creates tight constraints on international cooperation and
reduces the scope for compromise. Diverse perspectives on and suspicions about global
governance, which is seen as a Western concept, add to the difficulties of effectively mastering
the growing number of challenges.

Basic Elements of a State

1. Territory
2. People
3. Sovereign Power

The Role of the Nation-State in Globalization

These include favoring Westernization which means that other nation-states are at a
disadvantage when dealing with the Americas and Europe, most especially in the agricultural
industry, in which second- and third-world nations face competition from Western companies
and another is that nation-states are forced to examine their economic policies in light of the
many challenges and opportunities that multinational corporations and other entities of
international commerce present.
Nation-states are challenged by multinational corporations to address the issue of
foreign direct investments to force nation-states to ascertain the allowable international
influence in their economies. A sense of interdependence is created by globalization among
nations to create among nations of differing economic strengths an imbalance of power.
The role of the nation-state in a global world is largely a regulatory one as the chief
factor in global interdependence. In setting international commerce policies, isolated states are
forced to engage one another, while the nation-state's domestic role is unchanged. Roles of
some states were diminished while others have exalted roles due
to interactions of various economic imbalances.

Globalization’s Impact on the State

Factors which lead to the increase and acceleration of movement of people, information,
commodities and capital.
1. Lifting of trade barriers
2. Liberalization of world capital markets
3. Swift technological progress (information technology, transportation and communication)

Problems afflicting the world today which are increasingly transnational in nature those that
cannot be solved at the national level or State to State negotiations.

1. Poverty
2. Environmental pollution
3. Economic crisis
4. Organized crime and terroris

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

The following can be guaranteed only by the States through independent courts:
1. Respect of human rights and justice
2. Promote the national welfare
3. Protect the general

The State has the roles in operating the intricate web of multi-lateral arrangements and
inter-governmental regimes, enter into agreements with other States, make policies which
shape national and global activities, agenda of integration by clearly pronouncing the problem of
capacity inadequacy of individual States.This indicates political leverage of some States in
shaping the international agenda while developing countries have less active roles. Though the
State is required by globalization to imrove its capacity to deal with greater openness, it must
remain central to the well-being of its citizens and to the proper management of social and
economic development. It should also be responsible for adopting policies, which are conducive
to greater economic integration not forgetting that further global integration can be reversed by
state policies inimical to openness, as occurred between the two World Wars which means that
globalization does not reduce the role of the nation-State, but redefines it given the pressures
and responses it must give at the local, national and international levels.