Module 1

GLOBALIZATION

What Is Globalization?

Globalization refers to the spread of the flow of financial products, goods, technology,
information, and jobs across national borders and cultures. In economic terms, it describes an
interdependence of nations around the globe fostered through free trade.

https://www.investopedia.com/

The Drivers of Globalization

1. Technological drivers

Technological Changes: Advances in technology

The dramatic and unprecedented change in technology after the 1980s played a major role in this
transformation of globalization.

Fast spread of latest technology globally

Development in Information Technology

Spread of internet worldwide

Transportation & logistics technologies

Rapid advancements in technology, especially in communication and transportation, have made it easier
and faster for people, goods, and information to move across borders. This has led to an increase in
international trade, investment, and cultural exchange.

The internet and digital communication have made it easier for people and businesses to connect with
each other across borders, leading to increased trade, investment, and the transfer of knowledge and
ideas. These are the technological drivers of globalization.

2. Political Drivers

Regional Integration

Regional integration is a process in which neighboring countries agree to improve cooperation through
shared institutions and rules.

Examples: European Union (EU), SAARC, NAFTA, ASEAN, EFTA, etc.

Regional integration helps to –

Increase the size of market

Increases demand

Generates employment

Increases production quantity

Cost affordability

Government policies
Governments around the world have played a role in driving globalization by adopting policies that
promote free trade, foreign investment, and economic liberalization.

Reduced Trade Barriers

This is an another important driver of globalization. Many countries have reduced tariffs and other trade
barriers, making it easier for businesses to sell goods and services across borders. Advanced countries
after world war II reduced tariffs to encourage free flow of goods & services.

Example: General Agreement on Tariffs and Trade (GATT)

These reduced trade barriers & tariffs contributed a lot in Globalization.

Declining Investment Barriers

After 1990s various countries started removing foreign investment barriers in order to encourage the
growth of international business. Companies can invest in other countries or set up operations there,
and investors can buy stocks or bonds from companies located in different countries.

3. Economic Drivers

Economic liberalization

Many countries have adopted policies that promote free markets and open economies, which has
encouraged foreign investment and trade.

Globalization of financial markets

The globalization of financial markets has made it easier for businesses to access capital from around the
world and has facilitated the flow of investment across borders.

4. Market drivers

Changing consumer preferences

Consumers are becoming more global in their tastes and preferences, and businesses are responding by
developing products and services that can be sold in multiple markets.

Access to new markets

Globalization has provided businesses with access to new markets, which has helped them to grow and
expand their operations.

Global supply chains

Companies can now source raw materials, components, and labor from different countries to create a
final product, leading to increased efficiency and cost savings.

5. Competitive Drivers

Increased competition

Globalization has led to increased competition, which has driven businesses to innovate and become
more efficient in order to remain competitive.

Reference:
https://indiaclass.com/
Multinational Enterprise

A multinational enterprise, abbreviated as MNE and sometimes also called multinational

corporation (MNC), just multinational or international corporation, is an enterprise producing
goods or delivering services in more than one country.
A multinational enterprise has its management headquarters in one (or rarely more than one)
country, the home country, while also operating in other countries, the host countries.
Reference;
https://ec.europa.eu/eurostat/statistics-explained/index.php

Module 2
Country Differences-Economic System, Political And Legal

What type of economic system is the Philippines?

The Philippines has a mixed economic system that includes a variety of private freedom,
combined with centralized economic planning and government regulation. The Philippines is a
member of the Asia-Pacific Economic Cooperation (APEC) and the Association of Southeast
Asian Nations (ASEAN).
Philippines: Introduction - globalEDGE

What is an Economic System?

An economic system is a means by which societies or governments organize and distribute

available resources, services, and goods across a geographic region or country. Economic
systems regulate the factors of production, including land, capital, labor, and physical resources.
An economic system encompasses many institutions, agencies, entities, decision-making
processes, and patterns of consumption that comprise the economic structure of a given
community.

Types of Economic Systems

There are many types of economies around the world. Each has its own distinguishing
characteristics, although they all share some basic features. Each economy functions based on
a unique set of conditions and assumptions.

1. Traditional economic system

The traditional economic system is based on goods, services, and work, all of which follow
certain established trends. It relies a lot on people, and there is very little division of labor or
specialization. In essence, the traditional economy is very basic and the most ancient of the four
types.

Some parts of the world still function with a traditional economic system. It is commonly found in
rural settings in second and third world nations, where economic activities are predominantly
farming or other traditional income-generating activities.

There are usually very few resources to share in communities with traditional economic
systems. Either few resources occur naturally in the region or access to them is restricted in
some way. Thus, the traditional system, unlike the other three, lacks the potential to generate
a surplus. Nevertheless, precisely because of its primitive nature, the traditional economic
system is highly sustainable. In addition, due to its small output, there is very little wastage
compared to the other three systems.

2. Command economic system

In a command system, there is a dominant centralized authority – usually the government – that
controls a significant portion of the economic structure. Also known as a planned system, the
command economic system is common in communist societies since production decisions are
the preserve of the government.

If an economy enjoys access to many resources, chances are that it may lean towards a
command economic structure. In such a case, the government comes in and exercises control
over the resources. Ideally, centralized control covers valuable resources such as gold or oil.
The people regulate other less important sectors of the economy, such as agriculture.

In theory, the command system works very well as long as the central authority exercises
control with the general population’s best interests in mind. However, that rarely seems to be
the case. Command economies are rigid compared to other systems. They react slowly to
change because power is centralized. That makes them vulnerable to economic crises or
emergencies, as they cannot quickly adjust to changing conditions.

3. Market economic system

Market economic systems are based on the concept of free markets. In other words, there is
very little government interference. The government exercises little control over resources, and
it does not interfere with important segments of the economy. Instead, regulation comes from
the people and the relationship between supply and demand.

The market economic system is mostly theoretical. That is to say, a pure market system doesn’t
really exist. Why? Well, all economic systems are subject to some kind of interference from a
central authority. For instance, most governments enact laws that regulate fair trade
and monopolies.

From a theoretical point of view, a market economy facilitates substantial growth. Arguably,
growth is highest under a market economic system.

A market economy’s greatest downside is that it allows private entities to amass a lot of
economic power, particularly those who own resources of great value. The distribution of
resources is not equitable because those who succeed economically control most of them.

4. Mixed system

Mixed systems combine the characteristics of the market and command economic systems. For
this reason, mixed systems are also known as dual systems. Sometimes the term is used to
describe a market system under strict regulatory control.

Many countries in the developed western hemisphere follow a mixed system. Most industries
are private, while the rest, composed primarily of public services, are under the control of the
government.

Mixed systems are the norm globally. Supposedly, a mixed system combines the best features
of market and command systems. However, practically speaking, mixed economies face the
challenge of finding the right balance between free markets and government control.
Governments tend to exert much more control than is necessary.
https://corporatefinanceinstitute.com/

Political System

According to David Easton, "A political system can be designated as the interactions through which
values are authoritatively allocated for a society".] Political system refers broadly to the process by
which laws are made and public resources allocated in a society, and to the relationships among
those involved in making these decisions. https://en.wikipedia.org/wiki/Main_
political system definition is a set of different institutions established politically,
to ensure the free and fair distribution of resources within a given society.

Types of Political System

Monarchy is a form of government or political system in which a representative (called the king
or queen or emperor) from single family rules from generation to generation is called monarchy.

The word “monarchy” is made up of the Greek words ‘monos” which means “one”, and
“arkhein”, which means “to govern, to rule”. So, the meaning of monarchy is ‘ruling of one’ or
‘government of one’.

Power in this form of government is transferred in a hereditary way, which is why political power
resides in family groups over several generations. These families are called ‘dynasties’.

Monarchy was common in preindustrial societies. But in modern-day nations, most of the
world’s monarchies are constitutional monarchies, in which the king or queen is the symbolic
head of state, and therefore, the governing (executive) power lies in the people’s elected
representative. E.g. Saudi Arabia, Norway, Kuwait, etc. have a monarchy. The territory ruled by
the monarchs is called ‘kingdom’ or ’empire’.

Democracy is the most popular form of government or political system in the modern world. It is
often said to be the best and most civilized form of the political system in which everyone has a
share.

The word ‘democracy’ is derived from two Greek words, ‘demos’ which means ‘the people, and
‘kratia’ which means ‘power’. Thus when the supreme power is in the hands of people it is called
democracy. Abraham Lincoln defined democracy as ‘government of the people by the people
for the people.’

Therefore democracy is regarded as that government where the power is vested in the people.
There are different forms of democratic government in the modern World some o the well-
known democracies are limited monarchy, republic, unitary, federal, parliamentary, and
presidential.

Authoritarian Political System

The system of government in which the state, controls and regulates people’s lives by permitting
limited political participation under strict control is called an authoritarian political system or
government. In such a rule, the power is in the hands of a military dictator. E.g. the government
of Bashar al-Assad in Syria.

Totalitarianism

The system of government in which the state, excessively controls and regulates all aspects of
the public and private lives of its citizens and where people are denied rights to select their
representatives is called totalitarianism.

In this political system, government controls everything (politics, economy, personal lives), the
government makes all political decisions, the government owns and runs all businesses, control
personal aspects of people’s lives (where they live, what they do, and what they see and hear),
and even try to control their thoughts and beliefs.

https://tyonote.com/