The Benefits of Money

- Created as an alternative to bartering;

- Increases the efficiency of an economy by
- reducing transactions costs;
- Leads to more specialization and better division of labor within the economy;
- More specialization and division of labor trades more often, produces more, and enjoys greater
economic output.

Types of Money

- Commodity Money – with intrinsic value; means it has value outside of its use as money.
Example: gold (coins).
- Representative Money – is not money itself; but something that represents money. Example:
tobacco warehouse receipt; check from a check book.
- Fiat Money – is money with absolutely no intrinsic value that is just as money; because
government say so. Example: bank notes

Functions of Money

- Money is a unit of account

- Money is a medium of exchange
- Money is a store of value
- Money is a standard deferred payment

What are financial institutions?

Depository

- Commercial banks
- Credit unions

Non-depository

- Insurance companies

Investment

- Investment banks: IPOs, mergers, share offerings, underwriting

Financial Institutions and Trade Agreements

- The World Bank (WB)

- World Trade Organization (or WTO)
- International Monetary Fund (IMF)

World Bank – history

- Established by Western powers in 1944, the World Bank was originally tasked with rebuilding the
economies of postwar Europe. More than seventy years later, it has expanded its reach into
nearly all of the world's developing countries.
World Bank - Specific Goals (Millennium Development Goals)

- To eradicate extreme poverty and hunger;

- Achieve universal primary education;
- Promote gender equality and empower women;
- Reduce child mortality;
- Improve maternal health;
- Combat HIV/AIDS, malaria, other deadly diseases;
- Ensure environmental stability; and
- Develop a global partnership for development

IMF’s - overall goals “sister organization to the World Bank, the institution’s purpose is to encourage
currency exchange with member countries in order for them to orchestrate global trade. It also provides
loans to governments and debt relief.

- Surveillance
- Technical assistance; and
- lending

WTO (World Trade Organization) - Main focuses

- is the only international organization dealing with the global rules of trade.

- to help its members use trade as a means to raise living standards, create jobs and improve people's
lives.

-Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.

Two (2) Basic Models of the Economy:

The Classical Model

-This model started just about the same time as Beethoven.

-The Classical Model was popular before the Great Depression. It says that the economy is very free-
flowing, and prices and wages freely adjust to the ups and downs of demand over time.

The Keynesian Model

- This model came about as a result of the Great Depression.

- John Maynard Keynes observed that the economy is not always at full employment.
- Main reason of unemployment is deficiency of aggregate demand. Aggregate demand can be
increased
Short History of Global Market Integration in the 20th Century

- Technological advances played a role in the creation of a true world economy in the 19th century.
- From the 1830s, the world transport has been revolutionized. Improvements in railroad
locomotive and marine steam engine took place.
- Steamships connected the world’s parts to each and from said ports, railroads ran inland,
creating new and faster world transport network.
- This resulted to a fall in freight rates since goods can be carried across the world to distant
markets and still be cheaper.
- Closely related to these changes in transport system was the electric telegraph, whose lines
often ran along the new railroad networks.
- Telegraph systems were established in most countries. The resulting international information
- network was crucial in communicating details of prices and price movements, reducing the cost
- of making deals and transactions.
- A major significant change in the infrastructure came in 1869 with the opening of the Suez
Canal, which linked the Mediterranean Sea by way of Egypt to the Red Sea.
- With this opening, ships sailing from Europe to Asia could take the new shortcut rather than sail
all the way around Africa.
- As a result, Asia was immediately some 4,000 miles closer to Europe in transport terms, and
freight costs fell.

The Rise of Free Trade

- Rise of Free Trade Lowering freight and transactions costs were not the only forces
that stimulated market integration.
- In 1846, England, the center of world’s cotton textile industry struck their first victory
for free trade by forcing the British government to abandon tariffs on all imported goods apart
from few luxury items.

The Rise of Global Corporations

- As the world emerged from the vast destructions of WW II, economic recovery and expansion
were led by American corporations until the re-entry of Japanese and European corporations.
- onto the global scene stood for what they viewed as multinational corporations (MNCs).
- This period from the end of WWII to now can be viewed as the period of transformation of the
global corporation.

The Attributes of Global Corporations

- The contemporary global corporation is commonly referred to as multinational corporation

(MNC), a transnational corporation (TNC), an international company or a global company.
Emerging Market of Global Corporations

- International companies are importers and exporters, typically without investment outside of
their home country.
- Multinational companies have investment in other countries, but do not have coordinated
product offerings in each country.
- Global Companies have invested in and are present in many countries.

History of Toyota

- Toyota Industries Corporation was founded in 1926 by Sakichi Toyoda to manufacture and sell
the automatic looms which he had invented and perfected.
- Since that time Toyota Industries has promoted diversification and expanded the scope of its
business domains to include textile machinery, automobiles (vehicles, engines, car air-
conditioning compressors, etc.), materials handling equipment, and electronics.

Lesson 3. The Global Interstate System and Contemporary Global Governance:

How globalization impacted the Local Government of each country?

How does it look from TOP-DOWN?

- countries have become more connected;

- they have needed to work together more;
- Example: (a)environment or to fight terrorism
- (b) after WW II, the United Nations
- (c) human rights; policies; laws
- (d) women’s rights to education

“Domesticating international norms”

How does it look from BIG BUSINESS?

- Sometimes globalization forces local governments to accept ideas and laws that they do not
really like.
- workers’ rights; slave wages; harm environment; remove people from their homes.

How does it look from BOTTOM-UP?

- it has created a big world government, to have a say in the world; Example: - better access to
healthcare

Nation-State defined; city-state (polis)

The Interstate System

- holds that all states are defined through their relationship to other states or through
participation in the world economy
The elements of State

4 basic elements of state:

- People
- Government
- Territory
- sovereignty

The Global governance

- to provide global public goods, particularly peace and security, justice and mediation systems for
conflict, functioning markets and unified standards for trade and industry.

History of United Nations

- an international organization founded in 1945 after the Second World War by 51 countries
committed to maintaining international peace and security, developing friendly relations among
nations and promoting social progress, better living standards and human rights.

Role of U. N.

- Maintain International Peace and Security.

- Protect Human Rights.
- Deliver Humanitarian Aid.
- Support Sustainable Development and Climate Action.
- Uphold International Law.

Structures of United Nations

- General Assembly
- Security Council
- ECOSOC (Economic and Social Council)
- International Court of Justice
- The Trustee Council
- The Secretariat

Other Institutions that govern international relations

- Selected institutions associated with the World Bank

- Reconstruction and Development (IBRD)
- the International Development Agency (IDA)
- the International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)

Other specialized international institution

• FAO: Food and Agriculture Organization of the United Nations

• ICAO: International Civil Aviation Organization
• IFAD: International Fund for Agricultural Development
 • ILO: International Labour Organization
• IMF: International Monetary Fund
• IMO: International Maritime Organization
• ITU: International Telecommunication Union
• UNESCO: United Nations Educational, Scientific and Cultural Organization
• UNIDO: United Nations Industrial Development Organization
• UNWTO: World Tourism Organization
• UPU: Universal Postal Union
• WHO: World Health Organization
• WIPO: World Intellectual Property Organization
• WMO: World Meteorological Organization
• World Bank Group

Challenges of global governance in the 21st Century

- Terrorism.
- Armed conflicts.
- Organized crime.
- Cyber threats.
- Conflict resolution.

Relevance of the State amid Globalization

- The role of the nation-state in a global world is largely a regulatory one as the chief factor in global
interdependence.