GE 5: THE CONTEMPORARY WORLD: LECTURE NOTES

LESSON 2. THE GLOBAL ECONOMY

Countries trade with each other due to the lack of resources and cannot satisfy their
own needs and wants. As the countries developed their resources and they trade it for
the resources they need. Many years ago, when the other countries travelled a distance
to trade, as it is very evident that international trade plays significant role in the
development of industrialized world. Imports of goods and services happen maybe for
better or cheaper quality, appealing goods or no alternatives exist. In this lesson, we will
begin with economic globalization and global actors that facilitate the economic
globalization.

United Nations defines Economic globalization as “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. The rapid growing significance of information in all types of productive
activities and marketization are the two major driving forces for economic globalization”

According to Dennis O. Flynn and Arturo Giráldez ,”Global trade emerged when 1)
all heavily populated continents began to exchange products continuously – both with
each other directly and indirectly via other continents – and 2) did so in values sufficient
to generate lasting impacts on all trading partners” (“Globalization Began in 1571.p2 )

GLOBAL ACTORS

Multinational Corporation
The multinational corporation is a business organization whose activities are
located in more than two countries and is the organizational form that defines foreign
direct investment. This form consists of a country location where the firm is incorporated
and of the establishment of branches or subsidiaries in foreign countries (A.A Lazarus,
2001 p. 10197)

The International Monetary Fund

The International Monetary Fund (IMF), founded at the Bretton Woods
Conference in 1944, is the official organization for securing international monetary
cooperation. It has done useful work in various fields, such as research and the
publication of statistics and the tendering of monetary advice to less-developed
countries. It has also conducted valuable consultations with the more developed
countries.
 GE 5: THE CONTEMPORARY WORLD: LECTURE NOTES

North Atlantic Treaty

NATO is based on the North Atlantic Treaty, which provides the organization a
framework. The treaty provides that an armed attack against one or more of NATO`s
member nations shall be considered an attack against them all.* NATO is
headquartered in Brussels, Belgium. The organization was formed in 1949. Many
nations joined NATO — even Iceland, the only member without a military force. The
organization was originally formed out of the fear that the Soviet Union would ally
militarily with Eastern European nations, i.e. the Warsaw Pact, and thus become a
threat to Western Europe and the United States

World Trade Organization (WTO), International Monetary Fund (IMF), and the
World Bank
The World Trade Organization (WTO), the International Monetary Fund (IMF),
and the World Bank are the three institutions that underwrite the basic rules and
regulations of economic, monetary, and trade relations between countries. Many
developing nations have loosened trade rules under pressure from the IMF and the
World Bank.

The domestic financial markets in these countries have not been developed and
do not have appropriate laws in place to enable domestic financial institutions to stand
up to foreign competition. The administrative setup, judicial systems, and law-enforcing
agencies generally cannot guarantee the social discipline and political stability that are
necessary in order to support a growth-friendly atmosphere.