GLOBALIZATION OF

WORLD ECONOMICS
Vibeli A. Hermano, MDP
 “Economic Globalization” is a historical process representing the
result of human innovation and technological progress. It is
characterized by the increasing integration of economies around the
world through the movement of goods, services and capital across
borders. These changes are the products of people, organizations,
institutions and technologies.

International Monetary Fund (IMF)

International Trading Systems
SILK ROAD - oldest international trade route
Network of pathways in the ancient world that spanned from China- to- Middle
East - Europe.
The most profitable products traded was SILK - highly prized in the Middle
East and Europe.
It was regularly used from 130 BCE - 1453 BCE

However, the Silk Road was considered international but not “global”. Why?
No ocean routed that could reach the American continent.
So, when did the full economic globalization started?
“All important populated continents began to exchange
products continuously - both with each other directly
and indirectly via other continents - and in values
sufficient to generate crucial impacts on all trading
partners.”
Dennis O. Flynn and Arturo Giraldez
1571 - establishment of Galleon Trade
Manila, Philippines -to- Acapulco, Mexico
First-time that the Americas was connected to Asian trading routes

MERCANTILISM - galleon trade

16h to 18th century (Europe)
Competition of selling goods to boost country’s income.
Imposition of high tariffs, forbade colonies to trade with other
nations, restriction of trade routes and export subsidy.
Therefore, multiple restrictions
2. GOLD STANDARD SYSTEM - 1867
UK, US and other European nations adopted the gold standard in an
international monetary conference in Paris.
OBJECTIVE: create common system to allow efficient trade and prevent
isolationism during the mercantilist era.
Establishment of common currency prices and fixed exchange rate - value
of gold based.
However, it was still RESTRICTIVE:
Compelled their countries with fixed gold reserves.
Countries depleted their gold reserves during WW I to fund their armies.
Thus, gold standard was abandoned.
 GLOBAL DEPRESSION - 1920 to 1930, making it difficult to return to the gold
standard.

Some economists argued that it was caused by the gold standard since it limited
the circulation of money reduced demand and consumption.

3. FIAT CURRENCIES - currencies not backed by metals but values are

determined by their cost relative to other currencies.

Allows governments to freely manage their economies by increasing or

decreasing the amount of money circulation.
THE BRETTON WOODS SYSTEM - inaugurated in 1944 during the UN
Monetary and Financial Conference.
OBJECTIVE: Create financial institutions to promote economic
interdependence and prosperity.
Influenced by economist John Maynard Keynes: “ economic crises occur
not when a country does not have enough money but when money is not
being spent and not moving.” (Global Keynesianism).
2 FINANCIAL INSTITUTIONS:
International Bank for Reconstruction and Development (IBRD or World
Bank) - funding postwar reconstruction projects.
International Monetary Fund (IMF) - global lender
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) - established in 1947
-1995

Purpose is to reduce tariffs and other hindrances to free trade.

Replaced by World Trade Organization (WTO)

ASIAN DEVELOPMENT BANK (ADB) - established in 1966

Promote social and economic development

ASIAN INFRASTRUCTURE INVESTMENT BANK (AIIB) -
established in 2016
● Finance infrastructure
● Located in Beijing, China