CHAPTER 1

THE CONTEMPORARY WORLD

Introduction to the study of globalization

THE CONTEMPORARY WORLD

- Refers to circumstances and ideas of the present age, where it deals with the problems
and issues related to environment, population, wealth, power, and conflicts.
GLOBAL AGE
- It is a period of time when there is a prevailing sense of interconnectedness of all human
beings, of a common fate for human species and of threat to its life on this Earth.
(Albrow, 2012)
GLOBALIZATION
- is the process in which people, ideas and goods spread throughout the world, spurring
more interaction and integration between the world's cultures, governments and
economies
- is a process of interaction and integration among the people, companies, and
governments of different nations, a process driven by international trade and investment
and aided by information technology. This process has effects on the environment, on
culture, on political systems, on economic development and prosperity, and on human
physical well-being in societies around the world.
One principal driver of globalization is technology.
According to the International Monetary Fund (IMF) globalization is the growing economic
interdependence of countries worldwide through increasing volume and variety of cross border
transactions in goods and services and of international capital flows and also through the more
rapid and wide diffusion of technology.
Globalization is an expansion, and intensification of social relations and consciousness across
world time and world space. It is about growing worldwide connectivity according to Steger.

Anyone who has learned the world will be haunted by the "ghost of comparisons"
Dr. Jose P. Rizal
Attributes, Qualities or Characteristics of Globalization
1. It involves both the creation of new social networks and the multiplication of existing
connections that cut across traditional, political, economic, cultural, and geographical
boundaries.
2. Globalization is reflected in the expansion and the stretching of social relations,
activities, and connections.
3. Globalization involves the intensification and acceleration of social exchanges and
activities.
4. Globalization processes do not occur merely or an objective, material level but they also
involve the subjective plane of human consciousness.
Historical Periods of Globalization
1. The Prehistoric Period (10000 BCE-3500 BCE)
- In this period due to absence of advanced forms of technology, globalization was
severely limited.
 2. The Pre-modern Period (3500 BCE- 1500 CE)
- In this period the invention of writing and the wheel were great social and
technological boosts that moved globalization to a new level
3. The Early Modern Period (1500-1750)
- It is the period between the Enlightenment and the Renaissance. In this period,
European Enlightenment project tried to achieve a universal form of morality and
law.
4. The Modern Period (1750-1970)
- Innovations in transportation and communication technology, population
explosion, and increase in migration led to more cultural exchanges and
transformation in traditional social patterns.
5. The Contemporary Period (from 1970 to present)
- The creation, expansion, and acceleration of worldwide interdependencies
occurred in a dramatic way and it was a kind of leap in the history of globalization

DIMENSIONS OF GLOBALIZATION
Globalization is considered a multi-dimensional process involving economic, political,
technological, cultural, religious and ecological dimensions. It suggests a dynamic process
of change that results in either positive or negative development.
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
Economic institutions have decisive influence on investment in physical and human capital,
technology, and industrial productions. It is also important for resource distribution.
POLITICAL DIMENSION
This refers to an enlargement and strengthening of political interrelations across the globe.
In the development of supra-national structures and associations held together by common
concerns and mutually agreed upon norms, 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
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.
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 restaurants in more aspects of life throughout the world.
Cultural diversity often results from hybridization- a constructive interaction process
between global and local characteristics which is often visible in food, music, dance, film,
fashion, and language.
 RELIGIOUS DIMENSION
It is the most important defining element of any civilization and portrayed as a defining element
in future conflicts.
Roman Catholic Teaching of Globalization
1. Commitment to universal rights
2. Commitment to the social nature of the human person
3. Commitment to the common good
4. Solidarity
5. Preferential option of the poor
6. Subsidiary
7. Justice
8. Integral Humanism
Justice is divided in three categories: Commutative Justice, Distributive Justice, and Social
Justice.
IDEOLOGICAL DIMENSION
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.
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
1. Globalization is about the liberalization and global integration of markets.
2. Globalization is inevitable and irreversible.
3. Nobody is in charge of globalization.
4. Globalization benefits everyone.
5. Globalization furthers the spread of democracy in the world

CHAPTER 2
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.
According to the International Monetary Fund economic globalization is a historical
process, the result of human innovation and technological progress.
It refers to the movement of goods, services, and capital across borders, and
movement of people (labor) and knowledge (technology) across international borders.
In economic terms, globalization is nothing but a process making the world economy
an organic system by extending transnational economic processes and economic relations to
more and more countries and by deepening the economic interdependencies among them.
Two Major Driving Forces for Economic Globalization
1. The rapid growing of information in all types of productive activities
2. Marketization
 Rapid development of science and technologies served as the basis for immediate
globalization of the world economies which in turn provided an environment where there is a
swift spreading of market economic systems all over the world.
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 quantitative change
while internationalization is an extension of economic activities between internationally
dispersed activities.
Economic globalization produces its own major players in the form of transnational
corporations.

The Contemporary World2020

the last 100 years or roughly two-thirds of world export. Transnational corporation
otherwise known as a multi -national corporation is a corporation that has a homebase, but is
registered, operates and has assets or other facilities in at least one other country at one time.
Origin of Economic Globalization
Economic globalization is a process that creates an organic system of the world
economy.

In the 16 th century world system analysts identified the origin of modernity globalization
through long distance trade in the 16 th century.
ORIGIN OF ECONOMIC GLOBALIZATION
● In the 19th century the advent of globalization approaching its modern form was
witnessed. A short period before World War I is referred to as the golden age of
globalization characterized by relative peace, free trade, financial and economic stability.
● Growth in international exchange of goods accelerated in the second quarter of the19th
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.
International Monetary Systems and Gold Standard
International monetary system (IMS) refers to a system that forms rules standards for
facilitating international trade among the nations.
● It helps in allocating 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.
International Monetary Systems and Gold Standard
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. It also reflects economic power and interests, as money is inherently
political, an integral part of high politics or diplomacy.
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 of accelerating international trade and the gold standard functioned as a fixed
exchange rate regime, with gold 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.
● 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 the Bretton Woods
system, the aim of which is to create a stabilized international currency system and
ensure 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 dollars. The central banks of nations were given
the task of maintaining fixed exchange rates with respect to the dollar for each currency.
● The Bretton Woods system ended in 1971 as the trade deficit and growing inflation
undermined the value of the 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.
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. The gold standard has never worked
satisfactorily in controlling inflation or m aintaining 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.
The European Monetary System (EMS) on the other hand is a 1979 arrangement
between several European countries that 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.
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. In
acquiring products where demand is inelastic and domestic supply is inadequate 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 greater competition and more competitive pricing in the market. The two
key concepts in the economics of international trade are specialization and comparative
advantage.
● 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.
Trade policies on the other hand refers to the regulations and agreement of foreign
countries. It defines standards, goals, rules, and regulations that pertain to trade relation
between countries.
Focuses of Trade Policy in International Trade
● Tariffs, these are taxes or duties paid for a particular class of imports or exports.
● Trade barriers, these are measures that governments or public authorities introduce to
make imported goods or services less competitive than locally produced goods and
services.
● Safety, this ensures that imported products in the country are of high quality.
TYPES OF TRADE POLICIES
1. National Trade Policy - This safeguards the best interest of its trade and citizen.
Bilateral
2. Trace Policy - To regulate the trade and business relations between two nations, this
policy is formed.
3. International Trade Policy - This defines the international trade policy under their
charter like the International economic organizations.
WORLD TRADE ORGANIZATION
The World Trade Organization (WTO) deals with the global rules of trade between
nations with the main function of ensuring that trade flows smoothly. WTO is viewed as the
means by which industrialized countries can gain access to the markets of developing countries.
Global Economy Outsourcing
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.
 MARKET INTEGRATION
refers to how easily two or more markets can trade with each other. Groups of prices
often move proportionally to each other and when this relation is very clear among different
markets it is said that the markets are integrated.
Market integration exists when there are exerted effects that prompt similar changes or
shifts in other markets that focus on related goods on events occurring within two or more
markets.
TYPES OF MARKET INTEGRATION
● Horizontal Integration
- In this type of integration, some marketing agencies combine to form a union to reduce
their effective number and the extent of actual competition in the market.
● Vertical Integration
- It occurs when a firm performs more than one activity in the sequence of the
marketing process. It is the linking together of two or more functions in the
marketing process within a single firm or under a single ownership. There are two
kinds of vertical integration, forward integration and backward integration.
● Conglomeration
- A combination of agencies or activities not directly related to each other may
operate under a unified management.
TYPES OF RELATED MARKETS WHERE MARKET INTEGRATION OCCURS
Stock Market Integration
- This is a condition in which stock markets in different countries trend together and depict
the same expected risk-adjusted returns.
Financial Market Integration
- It is an open market economy between countries facilitated by a common currency and
the elimination of technical, regulatory, and tax differences to encourage the free flow of
capital and investment across borders.
GLOBAL CORPORATION
● A global corporation is a business that operates in two or more countries. It also goes by
the name "multinational company".
● Several advantages are offered by the global expansion of business over running a
strictly domestic company.
● Success in different types of economies is achieved by means of multiple countries'
operations while it also causes logistic and cultural challenges.
● Expanding revenue opportunities and diversifying business risk are the purposes of
becoming a global corporation.
● Access to more customers and capital is obtained through a model that works
domestically well and translates foreign markets well.
HISTORICAL PERIODS OF THE GLOBAL CORPORATION
In early historical periods as both cities and countries expanded their reach beyond
their own borders, a form of globalization was initiated which then followed complex patterns of
interactive engagements organized through trade and industry directly influenced by the
emergent and subsequently dominant technologies, especially in shipping and navigation.
 A combination of invention and social organization resulting in to increase in worldwide
capital and wealth of a nation is allowed by the modern nation-state system that emerged in the
period prior to the end of World War II. American Corporations led the economic recovery and
expansion after the World War II destruction. This period up to the reentry of Japanese and
European corporations to the global scene is viewed as multinational corporations (MNCs).
From the end of World War II to the present is considered the period of transformation of
global corporations.
THE FINANCE FUNCTION IN A GLOBAL CORPORATION
As corporations go global, capital markets open up within them, giving companies a
powerful mechanism for arbitrage across national financial markets. Chief financial officers
(CFOs) must balance the opportunities with the challenges of operating in multiple
environments in managing their internal markets in building an advantage. These three
functions can be created by CFOs through exploiting their internal capital markets.
● Financing
- A group’s tax bill can be reduced by the CFO like borrowing in countries with high
tax rates and lending to operations in countries with lower rates.
● Risk Management
- Global firms can offset natural currency exposures through worldwide operations
instead of managing currency exposures through financial markets.
● Capital budgeting
- Getting smarter on valuing investment opportunities CFOs can add value.
BRICS ECONOMIES
BRICS is an acronym for the combined economies of Brazil, Russia, India, China, and
South Africa. BRIC, without South Africa, was originally coined in 2003 by Goldman Sachs,
which speculates that by 2050 these four economies will be the most dominant. South Africa
was added to the list on April 13, 2011, creating "BRICS". These five countries were among the
fastest growing emerging markets as of 2011.
Further, Brazil, Russia, India, and China (BRIC) refer to the idea that China and India
will, by 2050, become the world's dominant suppliers of manufactured goods and services,
respectively, while Brazil and Russia will become similarly dominant as suppliers of raw
materials. Due to lower labor and production costs in these countries now including a fifth
nation, South Africa, many companies have also cited BRIC as a source of foreign expansion
opportunity i.e. promising economies in which to invest.
GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)
● The General Agreement on Trade in Services (GATS) is the first multilateral agreement
covering trade in services which was negotiated during the last round of multilateral
trade negotiations, called the Uruguay Round, and came into force in 1995.
● The GATS provides a framework of rules governing services trade, establishes a
mechanism for countries to make commitments to liberalize trade in services, and
provides a mechanism for resolving disputes between countries.
● The two primary objectives of GATS are to ensure that all signatories are treated
equitably when accessing foreign markets; and second, to promote progressive
liberalization of trade and services.
 THE CONTEMPORARY GLOBAL GOVERNANCE
Global governance or world governance is a product of neo-liberal paradigm shifts in
international political and economic relations. It is a movement towards political integration of
transnational actors aimed at negotiating responses to problems that affect more than one state
or region. It tends to involve institutionalization.
Global governance is a tool to identify solutions to problems created by neo-liberal
globalization. Humanitarian crises, military conflicts between and within states, climate change,
and economic volatility pose serious threats to human security in all societies; therefore, a
variety of actors and expertise is necessary to properly frame threats, devise pertinent policy,
implement effectively and evaluate results accurately to alleviate such threats.
Global governance can be thus understood as the sum of laws, norms, policies, and
institutions that define, constitute, and mediate trans-border relations between states, cultures,
citizens, intergovernmental and nongovernmental organizations, and the market.
As an intergovernmental organization, the United Nations is tasked to promote
international cooperation and to create and maintain international order. It is the largest, most
familiar, most internationally represented, and most powerful intergovernmental organization in
the world.
THE ROLES AND FUNCTIONS OF THE UNITED NATIONS
The United Nations (UN) in the world of politics has the roles of:
● preventing and managing conflicts,
● regulating armaments, championing human rights and international humanitarian law
● liberating the colonized, providing economic and technical aid in newly liberated
countries, organizing elections
● empowering women
● educating children
● feeding the hungry
● sheltering the disposed and displaced
● housing the refugees
● tending to the sick and coordinating disaster relief and assistance
Four Main Purposes of the UN Charter:
1. Maintaining worldwide peace and security
2. Developing relations among nations
3. Fostering cooperation between nations in order to solve economic, social, cultural, or
humanitarian international problems
4. Providing a forum for bringing countries together to meet the UN's purposes and goals
There were five stages or main gaps met by the UN in the 21st century. These are
knowledge, norms, policy, institutions, and compliance. A critical hole in any of the five
stages can cause efforts at problem-solving to collapse.
CHALLENGES OF GLOBAL GOVERNANCE IN THE 21ST CENTURY
Global governance can be understood as the sum of laws, norms, policies, and
institutions that define, constitute, and mediate trans-border relations between states, cultures,
citizens, intergovernmental and nongovernmental organizations, and the market. It is a process
which allows interconnectivity across different borders and sovereign territories.
 Global governance governing, without sovereign authority, relationships that transcend
national frontiers. It evolved as one of the most influencing tools for globalization which has led
to the foundation of sustainable development projects around the globe.
ROLES OF NATION-STATE IN GLOBALIZATION
Nation-state role in globalization is complex. Since nation-states are divided by physical
and economic boundaries, reduced barriers in international commerce and communication are
considered their potential threat. Sovereignty of individual nations is not abolished by expanded
trade among countries, instead, globalization is a force that changed the way nation-states deal
with one another, particularly in the area of international commerce
Basic Elements of a State
1. Territory
2. People
3. Sovereign Power
Factors that lead to the increase and acceleration of movement of people, information,
commodities and capital.
1. Lifting of trade barriers
2. Liberalization of world capital markets
3. Swift technological progress (information technology, transportation and communication
Problems afflicting the world today are increasingly transnational in nature- those that
cannot be solved at the national level or State-to-state negotiations
1. Poverty
2. Environmental pollution
3. Economic crisis
4. Organized crime and terrorism
Effects of greater economic and social interdependence to national decision- making
processes.
1. It calls for a transfer of decisions to the international level.
2. It requires many decisions to be transferred to local levels of government due to an
increase in the demand for participation.