Lecture 2:

The Global Economy

GEC103: The Contemporary World
Prepared by: Ms. Jovell Nicole S. Along
Learning Objectives
Define economic globalization

Identify the actors that facilitate economic

globalization

Articulate a stance on global economic

integration

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Economic
Globalization
Subtopic 1
Economic
Globalization

• According to International
Monetary Fund (IMF) it is the
increasing integration of
economies around the world
through the movement of
goods, services, and capital
across borders.

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According to IMF,
the value of trade as
a percentage of
World GDP
increased from
42.1% in 1980’s to
62.1% in 2007

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Values and
growth rates of
world trade in
goods and
services in 2020

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Foreign Direct Investment

A type of investment in which a company established a

business in another country for the production of goods
and services and still takes part of managing of that business.

9/4/20XX Presentation Title 7

International
Trading
Systems

Subtopic 2
Silk Road
A network of trade routes
connecting China and the
Far East with the Middle East
and Europe.
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So when did full economic
globalization begin?

• According to historians Dennis Flynn and Arturo Giraldez, the age of

globalization began when,
“All important populated continents began to exchange products
continuously- both with each other directly and indirectly via other
continents – and in values sufficient to generate crucial impacts on all
trading partners.”

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Galleon Trade
• Connected Manila
and Mexico; the first
time that Americas
were directly
connected to Asian
trading routes.

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The Actors that facilitate
Economic Globalization
1. International Monetary Subtopic 3
System
2. Nation-State
3. Global Corporations
1. International
Monetary System
• The Gold Standard
- European nations and US shifted to
gold at the international monetary
conference in Paris
- It was believed to guarantee a non-
inflationary, stable economic
environment, a means for
accelerating international trade.
- A common basis for currency prices
and a fixed exchange rate system, all
based on the value of gold.
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• The Bretton Woods System
- The Bretton Woods agreement of
1944 established a new global
monetary system.
- Countries promised that their central
banks would maintain fixed
exchange rates between their
currencies and the dollar.
- In 1971, the United States suffered
from massive stagflation, thus the
collapsed of the Bretton Woods
System.
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• The Bretton Woods System
(cont.)

• Two Financial Institutions were

created:
a. International Bank for
Reconstruction and
Development (IBRD) or now
known as World Bank
b. International Monetary Fund
(IMF)

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 The challenge to neoliberalism

• Neoliberalism is rooted in the classical liberal ideals of

Adam Smith (1723–90) and David Ricardo (1772–1823),
both of whom viewed the market as a self-regulating
mechanism tending toward equilibrium of supply and
demand, thus securing the most efficient allocation of
resources.
• They also advocated the elimination of tariffs on imports
and other barriers to trade and capital flows between
nations.
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2. Nation-State

Acts as a mediator between the effects of

globalization and the national economy.

Ex: China and US Trade War

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 3. Global Corporations

These companies work to have a foothold in a large

number of countries.

A global company is generally referred to as a

multinational corporation (MNC).

-Ex: Nestle, P&G, Coca-Cola

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A. In 1 to 2 paragraphs, answer the question based
on what you were able to learn and understand on
the topics discussed. (10 points)

1. Does economic globalization unites or further

divides the world?

Activity 1

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