GLOBALIZATION

It involves the broadening and deepening of interdependence among people and states.
It is a multidimensional phenomenon comprised of political, economic and cultural features.
While state does not remain as the sole unit of analysis, non-sate actors such as international
corporations play significant roles in the international economic processes.

Economic Globalization
- It is a process making the world economy an "organic system" by extending transnational economic
processes and economic relations to more countries and by deepening the economic
interdependencies among them.

THE POST-WORLD WAR II ECONOMIC SYSTEM

THE BRETTON WOODS CONFERENCE (JULY 1944) Delegates from 44 countries convened in Bretton
Woods, New Hampshire, USA and agreed on the creation of two international organizations:

 International Monetary Fund (IMF)

 World Bank

THE POST-WORLD WAR II ECONOMIC SYSTEM

General Agreement of Tariffs and Trade (GATT, 1947)
3rd entity; Served as the primary global trade organization
Was created to address the problems that occured during the interwar period, trade protectionism
and exchange controls which led to Great Depression and the World War II.
Bretton Woods Institutions
、
GAT
Were Keystone International Economic Organizations (KEIOs) due to their central role in trade,
development, and monetary relations.

International Monetary Fund (IMF)

Primary purpose: to promote global monetary cooperation and international financial stability.
Created in 1945 designed to monitor the system of pegged or fixed exchange rates (related to gold
and US dollar)
It was designed to prevent the trade wars occured during the interwar period due to competitive
devaluations of states of their currencies.
Role: To provide short-term loans to prevent devaluation and retain the state's fixed exchange rate

BALANCE OF PAYMENTS DEFICIT

The country imports more goods. services & capital than it exports.
It must borrow from other countries to pay for its imports.
In the short-term, this fuels economic growth In the long-term, it will have to go into debt to pay for
consumption

BALANCE OF PAYMENTS SURPLUS

-The country exports more than it imports.
-Country provides enough capital to pay for all domestic production.
-A surplus boosts economic growth in the short term
-In the long run, it becomes too dependent on export-driven growth.

BALANCE-OF-PAYMENT DEFICIT - occurs when a country spends more than it takes.

An institution based on quotas which determine the maximum amount of financial resources that a
state is obliged to provide to the fund.
The quota of states reflects their relative position is the global economy and determines the voting
power of states in IMF decisions.
(CRITIQUE)Dominated by the West; criticized for marginalizing the South and failing to include
emerging economies in its decision-making.
Global Financial Crisis (2007-2009) prompted the IMF to reform:
1. IMF resource expansion to enhance capacity for financial crisis management
2. Increase quota and voting power of emerging economies within the institution

2010 reform structure:

1.Doubling of the IMF quota
2. Shifting quota shares
3. Preserved quota and voting shares of poorest member states

Criticism: The status quo of power relations remain intact as the USA remains to vote shares
constituting its veto power but not in the case of the BRIC countries as a bloc (Brazil, Russia, India &
China)

World Bank
Was created to grant long-term loans of the economic development of less developed countries and
the reconstruction of war- torn countries in Europe.
Made up of two institutions: 1. IBRD (International Bank for Reconstruction and Development)
- provides lending to middle-income and credit-worthy low-income countries.
2. IDA (International Development Association)
- grants credits and loans to lowest-income
countries

Renewed role in the modern economy: To reduce extreme poverty while addressing the
imperfections of global capital markets
■ Critique:
4
B Severe macroeconomic distortions suffered by loan recipients and no statistical evidence of per
capital growth improving from increased structural adjustment lending.
.
• Programs have been accused of
worsening the state of poverty and underdevelopment of recipient countries.

General Agreement Tarriffs and Trade (GATT) and the World Trade (WTO)
GATT's purpose:
To avoid trade wars by raising protectionist barriers
(protectionism - economic policy restricting imports from other countries through methods such as
tarrifs on imported goods, import quotas, and other gov'tal regulations)
Effective in: liberalizing trade
Unable to:
⚫ address the expansion of trade in services, investment and intellectual property
⚫ Incapable of providing a strong and efficient system for dispute settlement
Superseded by World Trade Organization (WTO, 1995)

International Monetary System

= Is defined as a set of general rules, legal norms, instruments and institutions shaping payment
conditions in foreign trade
Gold Standard
adopted by England in 1816
the first international monetary system later joined by European countries and United States
⚫ functioned as a fixed exchange rate regime where countries determined the gold content of their
national currencies which would define the fixed exchange rates

International Monetary System

Bretton Woods System
(1944)
An adjustable-peg system that is also known as the dollar-gold standar or gold-exchange standard,
with US dollar as the only convertible currency that is considered to be good as gold. Lasted from
1959-1968
1960s (When US began to suffer from its balnce-of-payments deficits)
BRETTON WOODS
4

From Keynesianism to Neoliberalism

During the Great Depression in the 1930s, the ideas of JOHN MAYNARD KEYNES a prominent British
economist, have been influential in shaping the economic policies of developed countries
He argued that market generated equilibrium results in unemployment which causes a decrease in
demand. This is related in decrease in investment and production.

He argues that government spending is a solution to revive the economy by bolstering aggregate
demand through fiscal and monetary policies.
Influenced states to invest in big governments and shaped the post-war global economic order that
is grounded on the Keynesian compromise of promoting open markets without undermining the
protection of the society and the domestic market.

From Keynesianism to Neoliberalism

Neoliberalism
Grounded in the ideas of FRIEDRICH
HAYEK and MILTON FRIEDMAN
Neoliberal solution: to have an
unregulated market with as little state intervention as possible
Involved having the market take over tasks and services that ought to be provided by the
government
Privatization
• Deregulation
• Lesser public spending - Reduced corporate taxes
NOKIA

Neoliberalism economic paradigm would expand through British Prime Minister Margaret Thatcher
and US President Ronald Raegan later followed by emerging economies of East Asia and Southeast
Asia They would promote globalization and integration into the global economy with the promise
that capitalism would lead to economic prosperity alongside democratization.

With the expansion of globalization came the

reaction from the civil society in the form of transnational and national resistance due to the
widening gap between the North and the South.
"Global Justice Movement" - fights against inequality and the concentration of wealth among the
wealthy minority • Spanish Indignados Movement
• Arab Spring
Occupy Movement

"Our inequality materializes our upper class, vulgarizes our middle class, brutalizes our lower class."
Matthew Arnold