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LESSON #2: STRUCTURES OF GLOBALIZATION Economies can’t have an equaled exchange rate
Core of globalization – economy, business because if the money is at surplus there would be
Policies made by government is circulating upon inflation AND prices will go up. Hence, countries with
economy low economy might suffer
Life of citizens is anchored on how companies run
their business WORLD BANK
Consumers are dependent on big businesses It provides capital for underdeveloped
Big companies don’t just own one business it nations. During 1944 bretton wood system it is made.
is MONOPOLYZED Developed countries (USA) can easily win policies and
SERVICES AND PRODUCTS ARE assigning of officials and leaders in world bank org.
CONCENTRATED ON FEW CERTAIN OWNERS USA have stronger voice in this institution.
Causing the population to be
dependent on them IMF
Globalization is composed of different voices, loud Monitor exchange rate
and soft voices If nalulugi yung isang bansa and the exchange
MARKET INTEGRATION rate are inflating they monitor
Process of economic transformation within a
region CORE REGIONS
Merging the market Engaged in innovation, capital intensive
GLOBAL COOPERATION production that requires higher and specialized labor
Company operates in a number of countries Innovation such as technology and medicinal
Build their brands on field
LENDER OF LAST RESORT
whoever you turn to when you urgently PERIPHERAL REGIONS
need funds and you've exhausted all your other Take part in labor intensive production that
options requires lower level of skllls
3 FACTORS THAT AFFECT GLOBALIZATION
1. GOVERNMENT GLOBAL CORPORATIONS
Policy makers Market integration cannot be achieved
2. GLOBAL INSTITUTIONS without global corporation
Funded by governments INCIPIENT GLOBALIZATION
3. GLOBAL CORPORATIONS Colonial powers freely expropriated
Capitalist the finite resources of colonies
Sells the products Ex: exploitation of Spaniards on
MONETARY SYSTEM resources from the Philippines then after it is
1800s the western countries adopted gold taken to their country
standard. Michael Bordo notes in an explanatory ROLE OF INTERNATIONAL FINANCIAL INSTITUTIONS
article that the gold standard was a commitment by IN TH ECREATION OF GLOBAL ECONOMY
participating countries to fix the prices of their WORLD BANK GROUP
domestic currencies in terms of a specified amount of 2 goals
gold End extreme poverty
Promote shared prosperity in
TECHNOLOGICAL INNOVATION a sustainable way
Production and transportation accelerated WBG 5 entities
industrialization IBRD – AIMS TO REDUCE POVERTY BY
PROVIDING LOANS AND GRANTS
- IMPROVES LIVING CONDITION integration. In 1944, 44 capitalist countries led by the
IDA – international development US met at the Bretton Woods, a town in New
corporation Hampshire, resulting in agreements that created an
Same with IBRD AIMS their international basis for exchanging one currency for
differences is that IBRD helps middle income country another. It also led to the creation of the International
middle income – have the Monetary Fund (IMF) and the International Bank for
ability to pay while IDA doesn’t choose Reconstruction and Development, now known as the
IFC – private sector on developing World Bank (WB).
countries IMF was designed to monitor exchange rates and lend
Have low interest charge reserve currencies to nations with trade deficits, the
Ex: big company in the WB to provide underdeveloped nations with needed
Philippines can seek help from them capital with the member nations contributing a
MIGA – help developing countries to membership fee, of sorts, to find these institutions;
have investors The amount of each contribution designated a
ICSID – settle problems in investments country's economic ability and dictated its number of
The Global Economy and Market Integration moods.
Under globalization, the global economies operation
is shaped and influenced by governments, global or Global Corporations and Globalization
multinational corporations, and global institutions -- Global market integration cannot be achieved without
the very same sectors that laid the foundations of the growth of global corporations. Modern-day global
contemporary market integration. corporations can trace their lineage to the ear of
Governments function as leading policymakers and colonialism when colonizers exploited colonies as
implementers of globalization's tenets. Global cheap sources of raw materials and, oftentimes, slave
institutions are also partly managed and funded by labor; Or as markets for surplus goods.
governments and their representatives. Global To their credit, bold ventures of global corporations
corporations ensure a leading role in making the cogs into research and development and investments in
of capitalist globalization operate as smoothly, new products and services have done much to
efficiently, and profitably as possible. facilitate the growth of trade between countries, and
Contemporary economic globalization has its roots in consequently, in the further spread of globalization.
the institutionalization of International Monetary Global corporations engage in resource extraction,
systems or the means of international payments commodity production, communication, or
(payment made by a country to another, or an entity transportation such as Toyota Motor Corporation,
of on country to another entity of another country). To Royal Dutch Shell, Boeing Co, are still among Fortune’s
some extent, silver, gold, another precious metals 2017 Global 500 list of firms, proving that global
were already used as de facto currency in many parts corporations have changed so little through centuries.
of the world even before the modern times. With the widening control of global corporations over
In the 1800s, the United Kingdom, the United States the world's wealth and resources, critics
of America, and Europe adopted the gold standard understandably point out that there is a need to
Michael Bordo notes in an explanatory article that the regulate rather than deregulate these entities. Walden
gold standard was a commitment by participating Bello's analysis retains potency as it stresses the
countries to fix the prices of their domestic currencies reluctance of public authorities to regulate the activity
in terms of a specified amount of gold. National of capital in the new global economy is among the
money and other forms of money were freely culprits behind capitalism's failure to swiftly lift
converted into gold at the fixed price. countries from recession, further remarking that with
Technological innovations in production and corporate-driven market forces unchecked, structural
transportation accelerated industrialization and imbalances built up.
facilitated swifter trade. International trade aided by
the global standard led to market integration.
The devastation caused by World War 1 in World War
2 helped lay the rationale for the founding of what
came to be known as the Bretton Woods system which
replaced the gold standard and aided capitalist
countries toward achieving closer economic
LESSON 3: ROLES OF INTERNATIONAL FINANCIAL
INSTITUTIONS LESSON 4: A WORLD OF REGIONS
IMF is known as the twin institution of World Bank
IMF is known as the twin institution of WB. IMF As economic globalization -- free trade -- is essentially
identifies that its primary purpose is to ensure the a zero-sum game, global divides are observable under
stability of the International Monetary system -- the the current setup where one side wins at the expense
system of exchange rates and international payments of another; a country’s gains (for example, increase
that enables countries and their citizens to transact exports) is another nation’s loss such as in the form of
with each other. increased imports. Indeed, globalization failed to
Original aims of IMF: drastically bridge the gap between and within
Promote International Monetary countries. The promise of shared prosperity remains
cooperation unfulfilled for hundreds of millions of citizens in the
Facilitate the expansion and balance Third World countries. As of 2013, the number of poor
growth of international trade citizens (people who live on less than USD 1.90 a day)
Promote exchanges stability worldwide reach 767 million.
Assist in the establishment of multilateral
system of payments In the human development index HDI for 2015 – UN's
Make resources available to members ranking of countries based on levels of holistic human
experiencing balance of payments development that encompasses data on health,
difficultie education, and income -- Norway is ranked first with
an almost perfect score of 0.949, compared with the
The IMF’s last original aim means it functions as a De last among 188 countries, the Central African
Facto lender of last resort. Simply put, the IMF is Republic, with a measly score of 0.352. The Philippines
obliged to provide liquidity in the form of loans to is at rank 116 with a score of 0.68 two period
those countries facing an economic downturn and inequality's within nations are also evident period
unable to stimulate aggregate demand with their own from 1960s to 2010, then income shares of the
resources. poorest and richest in the Philippines are almost
o Obliged to give loans to countries that stagnant.
experiences economic downturns
o IMF played a huge role in the The contrast between the slums of Metro Manila and
revitalization of economy of Paris its posh gated subdivision such as Forbes Park and
Dasmariñas, and the extravagant corporate towers in
The debt trap refers to the developing countries’ financial centers such as Makati and Taguig, is very
inability the free themselves from debts acquired clear. At the outset, it seems that these economic
from the First World-dominated multilateral financial divides are parallel with geographical groupings, but a
institutions and private banks, due to the onerous closer look makes it a little bit more complicated in
nature of most loans which structurally bind debtor reality, as this chapter intends to tackle.
countries to economic policies that maintain and
expand economic dependency such as privatization,
deregulation, premature trade liberalization, and Global Divides: The North and the South, First and
lifting of other protectionist schemes; and hence, Third World's
hampered the capability of their governments to pay
their debts in the long run and provide social services Among development studies researchers, the term
to their citizens at the same time. Global North and Global South are commonly used to
refer to the two halves of the current global system.
The Global North countries such as the US, Canada,
Europe, Japan, Singapore, South Korea, Australia, and
New Zealand; while the Global South refers to Africa, Authors William Thompson and Rafael Reuveny
Latin America, and developing countries of Asia acknowledged that despite the promises of a so-called
(including Southwest Asia or Middle East). borderless world under globalization, significant gaps
between the Global North in the Global South are still
Hence, economically, the Global North refers to the observable, specially and technological diffusion or
rich and developed parts of the world, while the the spread of technological innovation through
Global South covers the poor and developing half of it. research and development, and debts.
Most countries of the Global North have a GDP per
capita that is above the world's GDP per capita, while In other words, present and future innovations that
most nations of the Global South of a GDP per capita improve production and promote efficiency do little to
below the roads GDP per capita. change the status quo where the Global South is
condemned to economic dependency with cause the
Differentiate and assess the Global South from the global North still monopolizes such technological
Third World advances which give the latter enormous and
advantages over the former.
Politically, the Global North is also more powerful as
an entity, if its collective strength at the SC will be The vulnerability of Third World countries to recurring
taken into consideration -- as it holds the said council's crises, which constitute these cyclical roadblocks to
at least three out of the five permanent seats. their holistic development, can be traced to their
Culturally, diversity reigns in both of the Global North integration into the global economic system
and the Global South, through the rapid spread of dominated by that technologically advanced and
technology and the increasing accessibility to industrialized First World country that also control
mainstream popular media have done much to multilateral financial institutions and big private
multiply and strengthen cultural linkages within the banks. These financial institutions, in turn, entice third
context of a multilingual and multicultural world. world governments to acquire high-interest loans,
which eventually dropped the latter into perpetual
The terms global North in global South, and 1st world debt slavery. Economic liberation and redemption of
and third world are used interchangeably in common countries in the Global South is hinged upon their
conversation. Though these two set of concepts are prospects of catching up with the Global North
related, they're actually different. The labels first through innovation and industrialization maximizing
world intelligible came into popular use during the their resources for their own development.
Cold War between the capital is camp led by the US,
UK and their allies; and the socialist side led by the An economist’s historical study of capitalism
Soviet Union otherwise known as the Union of Soviet globalization remarks that such process is a difficult
Socialist Republics or USSR and its allies mostly path to take, considering that developed countries
Eastern European countries. The capitalist camp was have been kicking away the ladder which they have
dubbed as the First World, while the socialist side was used to climb to the top, to prevent developing
labeled as the Second World. The other countries of countries from adopting protectionist economic
the world comprising much of Asia Africa and Latin policies aimed at shielding local industries from stiff
America were called as the Third World. These foreign competition under free trade. For example, a
countries were mostly former colonies of Western few years ago, the agriculture secretaries of Burkina
powers, but were nevertheless reluctant to be overtly Faso and Georgia criticized wealthy countries in
included in either camp. Europe that are still subsidizing their farmers at the
expense of developing nations, undermining market
Currently, many countries labeled as part of the First access for some of the world's poorest producers,
and Second Worlds during the Cold War are now part thereby artificially lowering the production costs of
of the Global North while most of the Third World Europe's agricultural outputs.
countries still belong to the Global South.
Meanwhile, Third World countries are either unable to
Whatever labels are used, it is clear that the existence afford financing or are hindered from implementing
of considerable gaps between the developing such policy of subsidizing the agricultural sector. They
countries in the developed countries is undeniable. are also discouraged from adopting policies that will
lead to industrialization, despite the fact that most
developed countries achieved their current status certain countries is conditioned by the development
partly because of industrialization. Hence, no and expansion of another economy to reach the
multilateral financial institutions will ever loan money former is subjected, categorizes colonial dependency
for a Philippine company that intends to produce or financial industrial dependency.
Philippine-made cars from Philippine steel, something
that will compare with existing established brands He notes that aside from influencing the international
from industrialized countries. affairs of the subordinated country, dependency also
covers their internal structures: orientation of
Latin America and the Philippines under Globalization production, the forms of capital accumulation, the
reproduction of the economy, and simultaneously,
Partly because of their inability to catch up with the their social and political structure. Simply put,
Global North’s twin policies of innovation dependency theory scholars assert that industrialized
industrialization, the Philippines and most countries in countries exploit countries through economic and
Latin America and other regions formerly colonized by political neocolonialism which perpetuate the latter's
Western powers are still relatively poorer than the pre-industrial or semi-industrial status -- majority of
countries that colonized them. Hence, these countries which are former colonies of developed countries.
are still labeled as Third World nations. Wealth gaps
between the poorest and the riches are also The inflow of capital from the developed countries is
observable in these regions. Radical theorists trace the prerequisite for the establishment of economic
such disparities in the long decades, and even dependence. This inflow takes various forms: loans
centuries of economic colonialism -- and later granted and onerous terms; investments that plays a
neocolonialism. Eduardo Galeano describes Latin given country in the power of the investors; almost
America's open veins which the colonizers seemingly total technological subordination of the dependent
bled dry through colonial plunder, replaced only with country to the developed country; control of a
neocolonial economic relations after the region's country’s foreign trade by the big international
independence from Western conquerors. monopolies; and in extreme cases, the use of force as
an economic weapon in support of the other forms of
The Philippines is comparable with Latin America for exploitation.
the latter is a region that still works as a menial. It
continues to exist at the service of others needs, as a Depending on its geographical size and a variety of its
source and reserve of oil and iron, of copper and exports, the underdeveloped economy may appear as
meat, of fruit and coffee, the raw materials and foods being made of several atoms of this type. These atoms
destined for rich countries which profit more from refer to industries and businesses which prop up the
consuming them than Latin America does from import-dependent, export-oriented economy of many
producing them. Latin America is the region of open developing countries, designed to suit the needs of
veins. Everything, from the discovery until our times, developed and capital-rich countries. Such description
as always been transmuted into European -- or later of developing countries mirrors the Philippine
United States -- capital, and such has accumulated in situation: the economy is composed of atoms of
distant centers of power. Our defeat was always industries of semi-manufactured goods and service-
implicit in the victory of others; our wealth has always oriented businesses (malls, fast-food chains, call
generated our poverty by nourishing the prosperity of centers) that trap it into being one of the world's
others -- the empires and their native overseers. repositories of cheap labor, and subject it to other
forms of exploitation.
The ideas of Galeano and Constantino were part of
the Dependency Theory school of thought (Teoria de
la Dependencia) which originated in Latin America, a
continent where nationalists and left-wing leaders and
revolutionaries strive and still strive to steer a path
away from western-oriented capitalism and forward
varying levels of economic nationalism and socialism,
or combination of both. Theotonio Dos Santos, one of
Dependency Theory’s eminent scholars, defines
dependency as a situation in which the economy of
The following table shows how low reinvested Foreign
Direct Investments (FDI) earnings are, as a percentage
of the primary income on FDI in the Philippines.