GLOBALIZATION

OF WORLD
ECONOMICS
DEFINING ECONOMIC GLOBALIZATION
• A historical process representing the result of human innovation and
technological process.
• It is characterized by the increasing integration of economies around the
world through movement of goods, services and capital across borders.

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INTERNATIONAL TRADING SYSTEMS
• The oldest known international trade route was the Silk Road.

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INTERNATIONAL TRADING SYSTEMS
• According to historians, Dennis O. Flynn and Arturo Giraldez, the age of
globalization began can be traced back to 1571 with the establishment
of the galleon trade and connected Manila and Acapulco.

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INTERNATIONAL TRADING SYSTEMS
• The galleon trade was part of the age of mercantilism.

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INTERNATIONAL TRADING SYSTEMS
• Gold Standard is generally used to describe any commodity-based
monetary regime that does not rely on un-backed fiat money, or money
that is only valuable because the government forces people to use it.
(Investopedia)

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BRETTON WOODS SYSTEM
• Under the agreement, currencies were
pegged to the price of gold, and the U.S.
dollar was seen as a reserve
currency linked to the price of gold.
(Investopedia)

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BRETTON WOODS SYSTEM
• Inaugurated in 1944 during the United Nations Monetary and Financial
Conference to prevent the early decades of the century from recurring
and affecting economic ties.
• This is largely influenced by the ideas of British economist, John
Maynard Keynes who believed that economic crises occur not when a
country does not have enough money, but when money is not being
spent, and thereby not moving.

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BRETTON WOODS SYSTEM
• When economies slow down, governments have to reinvigorate markets
with infusions of capital. This is active role of governments in managing
spending as the anchor for what would be called a system of global
Keynesianism.
• Delegates at Bretton Woods agreed to create two financial institution –
International Bank for Reconstruction and Development (IBRD, or
World Bank) and International Monetary Fund (IMF).

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BRETTON WOODS SYSTEM
• International Bank for Reconstruction and Development (IBRD, or
World Bank) responsible for funding postwar reconstruction projects.
• International Monetary Fund (IMF) is the global lender of last resort
to prevent individual countries from spiraling into credit crises.

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BRETTON WOODS SYSTEM
• After the Bretton Woods, various countries also committed themselves
to further global economic integration through the General Agreement
on Tariffs and Trade (GATT) in 1947 whose main purpose was to
reduce tariffs and other barriers to free trade.

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NEOLIBERALISM
• Neoliberalism is a policy model of social studies and economics that
transfers control of economic factors to the private sector from the
public sector. It takes from the basic principles of neoclassical
economics, suggesting that governments must limit subsidies, make
reforms to tax laws in order to expand the tax base, reduce deficit
spending, limit protectionism and open markets up to trade.
(Investopedia)

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NEOLIBERALISM
• The Washington Consensus dominated the global economic policies
from the 1980s until the 2000s.
• Its advocates pushed for
1. minimal government spending to reduce government debt;
2. privatization of government-controlled services like water, power,
communications and transport, believing that the free market can produce the
best results; and
3. pressured governments, particularly in the developing world, to reduce tariffs and
open up their economies, arguing that it is the quickest way to progress.

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NEOLIBERALISM
• Challenges:
1. Russia’s case
2. Global Financial Crisis (2007-2008)

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ECONOMIC GLOBALIZATION TODAY
• Change in export between developed and developing countries
• Increase of the global GDP (gross domestic product)
• Trade imbalances between developed and developing countries
• Benefits the transnational corporations (TNCs) and not governments

ECarilla | LPU Cavite College of Arts and Sciences