Alhambra, Vincent Leonard V.

AC102

THE CONTEMPORARY WORLD:

ON ECONOMIC GLOBALIZATION

1. What is economic globalization and why is it important?

According to Heywood (2011), economic globalization is the undertaking that

unites all national economies into one global reach. However, it isn’t mere

internationalization. In contrast, internationalization lacks depth when establishing state

interdependence (see the expansion of businesses). Meanwhile, economic globalization

is a more thorough integration of state interdependence—specifically directed at

establishing a unified economic jurisdiction and market between nations. For example,

free trade agreements, the establishment of global economic policies and terms, and

international financial institutions such as the World Bank and the International

Monetary Fund (IMF), are some of the scopes of economic globalization.

Economic globalization was first put into the discourse through the establishment

of the Bretton Woods agreement. This system refers to the agreements and institutions

under an international economic jurisdiction that aimed to diminish and prohibit a

nationwide economic collapse due to the aftermath of the Second World War. Some

examples of institutions established under the Bretton Woods system are the
aforementioned IMF and the World Bank, but even the World Trade Organization (WTO,

formerly known as the General Agreement of Tariffs and Trade or GATT) was a

concoction of the Bretton Woods system (although this was refuted when it was made

known that the United Nations is responsible for this institution’s establishment).

Exchange rates were also first introduced during this time—and so is a new monetary

system that oversight the international arena. GATT also pushed for the establishment

of free trade: a trading system between nations that abandons the ideas of

protectionism. However, while the Bretton Woods agreement may seem like a

multilateralist event, it was dominated by the United States. While the Bretton Woods

system emanated a triumphant impact postwar, it met its end due to inflation and when

different currencies started contending with each other, causing a major devaluation of

exchange rates. While the reformation of the Bretton Woods agreement is still in

question, there’s no doubt that the cultivation of international economic unity and

interdependence is still being practiced in today’s society. After the demise of the

Bretton Woods system, internationalization became an engrossing key factor in the

refurbishing of national economies—creating a new interconnected web design among

them. The idea of skeptics that our world does not undertake a borderless global

economy has long been subdued because the existence and continuous practice of

international trade, production, labor division, and economic system proves otherwise.

Economic globalization is crucial to national and transnational development in

many cases. Heywood illustrates three key reasons: market and network, access to

opportunities, and its influences on social and political mobility. Since economic
globalization and internationalization are two correlating concepts, the market and

network entailed by these concepts allow people to gain income abundance and latitude

expansion—especially businesses when they transcend beyond local borders.

However, even the less fortunate are able to garner something out of economic

globalization. Since countries are driven to produce products that are to their advantage

(e.g. farming tropical crops in the Philippines that are less abundant in humid countries),

more job opportunities open up to people (as long as their local government is of honest

nature). Lastly, since economic globalization opens up more opportunities for everyone,

social harmony can be easily assuaged. The continuous yearning for a progressive

economic dispatch on nations can also lead to the practice of democracy.

 2. What are the five (5) components of economic globalization? Explain

further.

According to Peterson Institute for International Economics (2018), economic

globalization is a type of causation brought upon by investment flows and transnational

exchanges—which accounts for an example of a component. Since I once took up a

degree in International Studies, I would personally assess that economic

globalization—based on what I have learned—-is composed of nation-states as

actors, its intended economic scope or jurisdiction, the market, production, and

trading web, a multilateral consensus, and limitations. We cannot connotate the

terms “global” and “economic” in economic globalization if there is no shared scope or

jurisdiction between our primary actors, the nation-states—and if it’s not of economic

essence. However, states aren’t the only actors to be considered in economic

globalization, such as non-governmental organizations… and since our economy

revolves around the production of goods and services and its deliberated market, we

must also consider them as the primary building blocks of economic globalization. Let’s

not forget that there must be a consensus or an agreement between participating

states. Coercion and violence are some of the affairs economic unification is trying to

steer away from (see the concoction of Bretton Woods vis-a-vis World War II), so an

agreement is a viable component. Lastly, some limitations and barriers must be

considered so that state interdependence can be triumphantly carried out without any

impediments (e.g. market limitations, devaluations, the nature of consumerism, etc.).

 However, economic globalization can be in multitudinous shapes and forms that

also account for its components. According to Stiglitz (2003), economic globalization

actively morphs into international trade, foreign direct investment, capital market

flows, migration, and diffusion of technology. Most of the aforementioned are forms

that can also contribute to the utmost quintessence of economic globalization.

Essentially, international trade is when we transcend local production of goods and

services beyond borders. This form can be considered a component of economic

globalization because the exchange between participating nations promotes

internationalization and interdependence on the goods being exchanged. Meanwhile,

foreign direct investments are forms of expenditure that occur and function outside their

local originator. Since economic globalization is a perpetual occurrence, capital market

flows are bound to happen—these are the movements of income transpiring between

economic entities. However, income isn’t the only moving facet between nation-states.

On a smaller scale, citizens are moving between participating nation-states to expand

their opportunities and options—which we often refer to as migration. Lastly, since we

are moving up on a new streamline of technology, an advancement diffusion between

states is bound to happen.

Essentially, I’ve given ten (10) economic globalization components. I digress on

the idea that economic globalization only has five components because this form of

globalization has long been cross-disciplinary, especially when relating this to global

politics and the elucidation of our local economy in a transcending-beyond-borders

image. We can limit its components lest Bretton Woods gets reformed and has offered
an official rundown of its facets, but until then, here are some of my personal and

researched answers to this question.

References:

Gualerzi, D. (2007). Globalization Reconsidered: Foreign Direct Investment and Global

Governance. International Journal of Political Economy, 36 (1), 3–29.
http://www.jstor.org/stable/40470986

Heywood, A. (2011). Global politics. Palgrave Macmillan.

Stiglitz, J. (2003). Globalization and the Growth in Emerging Markets and the New
Economy. Journal of Policy Modeling 25, 2003, 505-524.

What is globalization? PIIE. (2022, October 24). Retrieved October 24, 2022, from
https://www.piie.com/microsites/globalization/what-is-globalization#:~:text=Global
ization%20is%20the%20word%20used,investment%2C%20people%2C%20and
%20information.