UNIT I STRUCTURE OF GLOBALIZATION
interrelations across the
Dimensions of Globalization
There are six dimensions in globalization. These include: economic,
political, technological, cultural, religious and ecological dimensions.
1. Economic Dimension
This refers to the extensive development of economic relations
across the globe as a result of technology and the enormous flow of
capital that has stimulated trade in both
sources and goods (8).
 Major players in the current century’s global economic order
1. Huge international corporations (General Motors, Walmart,
Mitsubishi)
 International Economic Institutions (IMF, World Bank, The
WorldTrade Organization)
 Trading Systems
The result of these powerful forces resulted in the wide gap
between the rich and the poor countries.
Major Sources of Economic Growth across Countries (9)
1. Property rights
2. Regulatory institutions
3. Institutions for macro-economics
4. Stabilization
5. Institutions for social influence
7. Institutions for conflict management
Economic institutions have decisive influence on investment in
physical and human capital, technology, and industrial productions.
It is also important for resource distribution.
2. Political Dimension
This refers to an enlargement and strengthening of political
globe (10).
Political Issues that Surface in this Dimension
1. The principle of state sovereignty
2. Increasing impact of various intergovernmental organization
3. Future shapes of regional and global governance
The globalization rendered almost powerless any political efforts to
introduce
restrictive policies affecting individual states, with the results that
the world in many ways
turned into a borderless world. Governments often seek to restrict
the migration of peoples,
especially those coming from the poor countries in the global South
(11 a).
In the development of supra-national structures and associations
held together by common concerns and mutually agreed upon
norm, the most obvious is political globalization.
On the part of the involved parties, informal structures which are
considered binding, bring together world power centers due to
common interests.
Example:
 Global cities like New York, London, Tokyo, and Singapore are
closely
connected with one another than they are to various cities in their
own countries.
 European Union, United nations, NATO, The World Trade
Organization
3. Cultural Dimension
This refers to the increase in the amount of cultural flows across the
globe. Cultural interconnections are at the foundations of
contemporary globalization (11b).
Individualism and consumerism which are the dominant cultural
characteristics of our age and the drive for economic success
stimulated by the internet and other technological devices circulate
much more easily than they did in earlier periods. In the
dissemination of popular culture, transactional media corporations
play a major role which brought a sharp rise in homogenized
popular culture that is manifested in the dominance of fast food
restaurant on more aspects of life throughout the world.
Cultural diversity often results hybridization- a constructive
interaction process between global and local characteristics which
is often visible in food, music, dance, film, fashion, and language.
As a result there is a scarcely any society in the world that
expresses itself in its own self-contained and authentic culture
(11c).
Media empires generated and directed the extensive flow of culture.
Examples of these are Yahoo, Google, Microsoft, and Disney.
Advertisement plays an important role in this cultural flow by
featuring various celebrities in the television aside from
transforming newscast into entertainment shows.
4. Religious Dimension
Religion is a personal or institutionalized set of attitudes, beliefs,
and practices relating to or manifesting faithful devotion to an
acknowledged ultimate reality or deity
(12). It is the most important defining element of any civilization as
contrasted with race, language, or way of life. As such, it is also
portrayed as a defining element in future conflicts. Whether the root
cause of a particular conflict or merely a vehicle for the mobilization
of nationalist or ethnic passions, religion is certainly central to much
of the strife currently taking place around the globe (13).
Jihadist globalism is a religious response to the materialist assault
by the ungodly West in the rest of the world. Coming out of what
they consider a pure form of Islam, its disciples seek to destroy all
those alien influences that have been imposed on Muslim people. It
applies to those extremely violent strains of religion that convert the
global
imaginary into very concrete political agendas and terrorist tactics. It
is also applied to those violent fundamentalists in the West who
seek to transform the world into aChristian Empire (14).
Example:
 Bin Ladin understands umma as a single community of believers
professing faith in the one and only God, but at the same time
committedto destroying not only alien invaders but also corrupt
Islamic elites in order to return power to the Muslim masses.
 Since one third of the world’s Muslim population lives in non-
Islamic countries, the restoration of God’s proper reign must be a
global event. Hence, Al-Qaeda established jihadist cells in various
parts of the world.
Roman Catholic Teaching of Globalization
There are eight (8) principles that summarize the Roman Catholic
Teachings (15).
1. Commitment to universal human rights
2. Commitment to the social nature of the human person
3. Commitment to the common good
4. Solidarity (The principle of Solidarity affirms that membership in
the human family means that all bear responsibility for one
another.)
5. Preferential option of the poor (In the Theology of the
Incarnation- Christ God became poor for us so as to enrich us by
his poverty. The poor are susceptible to the effects of environmental
irresponsibility because they live in countries where cheap building
materials and cheap labor are readily available. They regularly work
in farming, fishing, and forestry, areas which suffer environmental
damage).
6. Subsidiary (The Catholic Church teaches that decisions should
be made at the lowest level in order to achieve the common good.
7. Justice
8. Integral Humanism- is concerned with whole personJustice is
divided in three (3) categories:
1. Commutative justice
This aims at fulfilling the terms of contracts and other promises on
both personal and social level.
2. Distributive justice
This ensures a basic equity in how both the burden and the
goods of society are distributed and that ensures that every person
enjoys a basically equal moral and legal standing apart from
differences in wealth, privilege, talent and achievements
3. Social justice
This refers to the creation of the conditions in which the first
two categories of justice can be realized and the common good
identified and defended.
According to catholic teaching, a just society is one which these
forms of justice are assured because they are required by human
dignity.
5. Ideological Dimensions
Ideology is a system of widely shared ideas, beliefs, norms and
values among a group of people. It is often used to legitimize
certain political interests or to defend dominant power structures.
Ideology connects human actions with some generalized claims
(14a). Globalization is a social process of intensifying global
interdependence while globalism is an ideology that gives the
concept of neo-liberal values and meanings to globalization.
Major Ideological Claims of Advocates of Globalism (14b)
1. Globalization is about the liberalization and global integration of
markets.
The problem with this claim is that liberalization and integration of
markets happen through political project of engineering free
markets by interference of centralized state power, and it is in
contrast to the neoliberal ideal of limited role of governments.
2. Globalization is inevitable and irreversible.
Globalists believe that spread of market forces driven by
technological innovations is inevitable in globalization. Neoliberals
use this claim to convince people to adopt the natural discipline of
the market if they want to prosper, which implies the elimination of
government controls over the market.
3. Nobody is in charge of globalization.
This claim seeks to depoliticize the public debate on globalization
and neutralizing anti -globalist movements.
4. Globalization benefits everyone.
Globalists talk about the benefits of market liberalization such as
rising global living standards, economic efficiency, individual
freedom, and technological progress. But the reality is that the
opportunities of globalization are spread unequally and power and
wealth are concentrated among a specific group of people, regions
and corporations.
5. Globalization furthers the spread of democracy in the world.
For the globalists democracy and free markets are synonymous.
The neoliberal explanation of globalization is ideological because it
is politically motivated and contributes to the construction of
particular meanings of globalization which stabilize existing power
relations. Globalism tries to create collective meaning and shape
people’s identities.
UNIT II THE STRUCTURES OF GLOBALIZATION
THE GLOBAL ECONOMY
Economic globalization refers to the increasing interdependence of
world economies as a result of the growing scale of cross-border
trade of commodities and services, flow of international capital and
wide and rapid spread of technologies. It reflects the continuing
expansion and mutual integration of market frontiers, and is an
irreversible trend for the economic development in the whole world
at the turn of the millennium(17).
According to the International Monetary Fund (18) economic
globalization is a historical process, the result of human innovation
and technological progress. It refers tothe increasing integration of
economies around the world, particularly through the movement of
goods, services, and capital across borders. It also refers to
themovement of people (labor) and knowledge (technology) across
international borders.
In economic terms, globalization is nothing but a process making
the worldeconomy an organic system by extending transnational
economic processes and economic relations to more and more
countries and by deepening the economic interdependencies
among them (19).
Two Major Driving Forces for Economic Globalization
1. The rapid growing of information in all types of productive
activities
2. Marketization (A restructuring process that enables state
enterprises to operate as market-oriented firms by changing the
legal environment in which they operate (20) and can be achieved
through reduction of state subsidies, organizational restructuring of
management such as corporatization, decentralization, and
privatization (21).
Rapid development of science and technologies served as basis for
immediate globalization of the world economies which in turn
provided an environment where there is a swift spreading of market
economic system all over the world. It is also developed based on
the increasing cross-border division of labor which penetrates within
the enterprises of different countries on the level of production
chains.
Dimensions of Economic 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
4. The globalization of production
Difference between Economic Globalization from
Internationalization
Economic globalization is a functional integration between
internationally dispersed activities which means that it is a
qualitative transformation rather than a quantitative change while
internationalization is an extension of economic activities between
internationally dispersed activities (22).
Economic globalization produces its own major players in the form
oftransnational corporations (TNCs), the main driving forces of
economic globalization of the last 100 years or roughly two-thirds of
world export (23). Transnational corporation otherwise known as
multi -national corporation is a corporation that has a home base,
but is registered, operates and has assets or other facilities in at
least one other country at one time (24). Examples are the US-
based General Electric (GE), the Coca-Cola Company of Atlanta,
Georgia, US Nike and others.
Origin of Economic Globalization
Economic globalization is a process that creates an organic system
of the world economy. In the 16th century world system analysts
identify the origin of modernity and globalization through long
distance trade in the 16th century (25). This best known example of
archaic globalization is the Silk Road, which started in western
China, reached the boundaries of the Parthian empire, and
continued onwards towards Rome (26). It also connected Asia,
Africa, and Europe (27).
In the 17th and 18th century global economy exists only in trade
and exchange rather than production as the world export to World
GDP did not reached 1 to 2 percent (28).
In the 19th century the advent of globalization approaching its
modern form is witnessed. A short period before World War I is
referred to as golden age of globalization characterized by relative
peace, free trade, financial and economic stability (29). Growth in
international exchange of goods accelerated in the second quarter
of the 19th century. Global economy in the 19th and 20th centuries
grew by an average of nearly 4 percent per annum, which is roughly
twice as high as growth in the national incomes of the developed
economies since the late 19th century (30).
International Monetary Systems and Gold Standard
International monetary system (IMS) refers to a system that
forms rules and standards for facilitating international trade among
the nations. It helps in reallocating the capital and investment from
one nation to another. It is the global network of the government
and financial institutions that determine the exchange rate of
different currencies for international trade. It is a governing body
that sets rules and regulations by which different nations exchange
currencies with each other (31).
IMS as rules, customs, instruments, facilities, and organizations for
effecting international payments with the main task of facilitating
cross-border transactions, especially trade and investment (32). It
also reflects economic power and interests, asmoney is inherently
political, an integral part of high politics or diplomacy (33).
Evolution of the International Monetary System
In 1870 to 1914, with the help of gold and silver, trade was carried
without any institutional support. Monetary system during that time
was decentralized while market based and money played a minor
role in international trade in contrast to gold.
Gold was believed to guarantee a non-inflationary, stable economic
environment, a means for accelerating international trade (34) and
the gold standard functioned as a fixed exchange rate regime, with
gold as the only international reserve.
Gold Standard is a system of backing a country’s currency with its
gold reserves. Such currencies are freely convertible into gold at a
fixed price, and the country settles all its international trade
transactions in gold (35)
After World War I, the use of gold declined due to increased
expenditure and inflation which were caused by war. Major
economic powers were on gold standards but could not maintain it
and failed because of the Great depression in 1931.
In 1944, 730 representatives of 44 nations met at Bretton Woods,
New Hampshire, United States to create a new international
monetary system called as the Bretton Woods system, the aim of
which is to create a stabilized international currency system and
ensure a monetary stability for all the nations.
Since the United States held most of the world’s gold, all the
nations would determine the values of their currencies in terms of
dollar. The central banks of nations were given the task of
maintaining fixed exchange rates with respect to dollar for each
currency. The Bretton Woods system ended in 1971 as the trade
deficit and growing inflation undermined the value of dollar in the
whole world. In 1973, the floating exchange rate system, also
known as flexible exchange rate system was developed that was
market based (36).
To assess whether the gold standard was successful, the following
roles of a properly designed IMS must be considered: to lend order
and stability to foreign exchange markets, to encourage the
elimination of balance-of-payments problems, and to provide
access to international credits in the event of disruptive
shocks (37). The gold standard has never worked satisfactorily in
controlling inflation or maintaining equilibrium in international
transactions.
European Monetary Integration
European monetary integration refers to a 30-year long process
that began at the end of the 1960s as a form of monetary
cooperation intended to reduce the excessive influence of the US
dollar on domestic exchange rates, and led, through various
attempts, to the creation of a Monetary Union and a common
currency. This Union brings many benefits to Member States.
However, over the past decade, the build-up of macroeconomic
imbalances, and the imprudent fiscal policies of some Member
States, resulted in the continuing double crisis in banking and
sovereign. As a result of this crisis, many individual Member States
face difficult re-adjustment processes, and Members States
collectively must reappraise the governance architecture of
Monetary Union and adopt new mechanisms to detect, prevent, and
correct problematic economic trends (38).
The European Monetary System (EMS) on the other hand is a
1979 arrangement between several European countries which links
their currencies in an attempt to stabilize the exchange rate. This
system
was succeeded by the European Economic and Monetary Union
(EMU), an institution of the European Union (EU), which
established a common currency called the euro.
The European Monetary System originated in an attempt to
stabilize inflation and stop large exchange rate fluctuations between
European countries. Then, in June 1998, the European Central
Bank
was established and, in January 1999, a unified currency, the euro,
was born and came to be used by most
EU member countries (39).
According to the European Commission in 2008, the first ten years
of the EMU were an evident success for participating countries in
terms of increased trade and capital transactions, more integrated
economies, restored macroeconomic stability and the utilization of
Euro as the second most widely used reserve currency. But in 2008
to 2009 the European Union (EU) is presented with dramatic
challenges brought by global financial and economic crisis.
The EU in 2010 in response to the crisis enacted the three- pillar
financial rescue program which includes: the European Financial
Stability Mechanism, the European Financial Stability Facility, the
financial assistance of International Monetary Fund (IMF). Since the
three -pillar system is temporary EU in 2013 activated its own
permanent European Stability Mechanism. The future of EMU
depends on the willingness of member states to agree on more
fundamental changes in the governance of Eurozone.
The European Financial Stability Mechanism (EFSM) is a
permanent fund created by the European Union (EU) to provide
emergency assistance to member states within the Union. It raises
money through the financial markets, and is guaranteed by the
European Commission. Fund raised through the markets, use the
budget of the European Union as collateral. The European
Financial Stability Facility (EFSF) on the other hand, is an
organization created by the European Union to provide assistance
to member states with unstable economies. The EFSF is a special
purpose vehicle (SPV) managed by the European Investment Bank,
a lending institution. The fund raises money by issuing debt, and
distributes the funds to eurozone countries whose lending
institutions need to be recapitalized who need help managing
theirsovereign debt or who
need financial stabilization (40).
International Trade and Trade Policies
International trade is the exchange of goods, services and capital
across national borders. It is a multi-million dollar activity, central to
the Gross Domestic Product (GDP) of many countries, and it is the
only way for many people in many countries to acquire resources
(41). In acquiring products where demand is inelastic and domestic
supply is inadequate absent traders, consumers and suppliers are
forced to either develop substitute goods or devote a large
percentage of their income.
International trade is the exchange of goods or services along
international borders. This type of trade allows for a greater
competition and more competitive pricing in the market (42). The
two key concepts in the economics of international trade are
specialization and comparative advantage. Comparative advantage
comes in; so longas the two countries have different relative
efficiencies, the two countries can benefit from trade – the country
with absolute advantage will still benefit by directing its resources to
those goods where it is most productive and trading for the others
while specialization refers to this process; countries as well as
individual businesses can maximize their welfare by specializing in
the production of those goods where they are most efficient and
enjoy the largest advantages over rivals (43).
More affordable products for the consumer is also the result of
competition. The economy of the world is also affected by the
exchange of goods as dictated by supply and demand, making
goods and services obtainable which may not be available globally
to consumers. Trading globally gives consumers and countries the
opportunity to be exposed to goods and services not available in
their own countries. Almost every kind of products can be found on
the international market aside from services being traded like
banking, tourism, etc. Global trade allows wealthy countries to use
their resources such as labor, technology, or capital more
efficiently. Because countries are endowed with different assets and
natural
resources, some countries may produce the same good more
efficiently and therefore sell it more cheaply than other countries
(44). Specialization in international trade happens if a country
cannot efficiently produce an item and obtain it by trading with
another country that can.
Trade policies on the other hand refer to the regulations and
agreement of foreign countries (45). It defines standards, goals,
rules, and regulations that pertain to trade relation between
countries (46). Each country has specific policies formulated by its
officials. Boosting the nation’s international trade is the aim of each
country. Taxes imposes on import and export, inspection,
regulations, tariffs and quotas are all part of country’s trade policy.
Focuses of Trade Policy in International Trade
Tariffs
These are taxes or duties paid for a particular class of imports or
exports. Imposing taxes on imported and exported goods is a right
of every country. Heavy tariffs on imported goods are levied by
some nations for the protection of their local industries. The prices
of imported goods in local markets are inflated due to high imported
taxes to ensure demand of local products.
Trade barriers
Theses are measures that governments or public authorities
introduce to make imported goods or services less competitive than
locally produced goods and services (47). They are state- imposed
restrictions on trading a particular product or with a specific nation.
It can be linked to the product, service like technical requirement
and it can also be administrative in nature such as rulesand
procedures of transactions. Tariffs, duties, subsidies, embargoes
and quotas are the most common trade barriers.
Safety
This ensures that imported products in the country are of high
quality. Inspection regulations laid down by public officials ensure
the safety and quality standards of imported products.
Types of Trade Policies
National Trade Policy
This safeguards the best interest of its trade and citizen.
Bilateral Trade Policy
To regulate the trade and business relations between two nations,
this policy is formed. Under the trade agreement the national trade
policies of boththe nations and their negotiations are considered
while bilateral trade policy is being formulated.
International Trade Policy
This defines the international trade policy under their charter like the
International economic organizations, such as Organization for
Economic Co- operation and Development (OECD), World Trade
Organization (WTO) and International Monetary Fund (IMF).The
best
interests of both developed anddeveloping nations are upheld by
the policies.
Trade Policy and International Economy
In most developed countries where open market economy prevails,
the international economic organizations support free trade policies.
In the case of developing nations partially-shielded trade practices
are preferred to protect their local trade industries. The following are
dependent on globalization: sound trade policies for market
changes, establishment of free and fair trade practices and
expansion of possibilities for booming international trade.
The World Trade Organization (WTO)
The World Trade Organization (WTO) deals with the global rules of
trade between nations with the main function of ensuring that trade
flows smoothly, predictably and freely. It is the only global
international organization dealing with therules of trade between
nations with WTO agreements, negotiated and signed by thebulk of
the world’s trading nations and ratified in their parliaments at its
heart (48). WTOis viewed as the means by which industrialized
countries can gain access to the markets of developing countries
(49).
Global Economy Outsourcing
Outsourcing is an activity that requires search for a partner and
relation-specific investments that are governed by incomplete
contracts and the extent of international outsourcing depends on
the thickness of the domestic and foreign market for input suppliers,
the relative cost of searching in each market, the
relative cost of customizing inputs and the nature of the contracting
environment in each country (50). Subcontracting is a central
element of the new economy (51). It is the practice of assigning part
of the obligations and tasks under a contract to another party known
as a subcontractor and especially prevalent in areas where complex
projects are the norm like construction andinformation technology
(52).
Outsourcing is a means of finding a partner with which a firm can
establish a bilateral relationship and having the partner undertake
relationship-specific investments so that it becomes able to produce
goods and services that fit the firm’s particular needs.Often, the
bilateral relationship is governed by a contract, but even in those
cases the legal document does not ensure that the partners will
conduct the promised activities with the same care that the firm
would use itself if it were to perform the tasks (53).
One of the most rapidly growing components of international trade
is the outsourcing of intermediate goods and business services.
There are three essential features of a modern outsourcing
strategy.
1. Firms must search for partners with the expertise that allows
them to performthe particular activities that are required.
2. They must convince the potential suppliers to customize products
for theirown specific needs.
3. They must induce the necessary relationship-specific
investments in anenvironment with incomplete contracting.

Possible Determinants of the Location of Outsourcing

1. Size of the country can affect the “thickness” of its markets.
2. The technology for search affects the cost and likelihood of
finding a suitable partner.
3. The technology for specializing components determines the
willingness of apartner to undertake the needed investment in a
prototype.
4. The contracting environments can impinge on a firm’s ability to
induce apartner to invest in the relationship.