THE CONTEMPORARY WORLD

CHAPTER 1:

DEFINITION OF GLOBALIZATION
Globalization is a term used to describe the changes in societies and the world economy that are the result of
dramatically increased trade and cultural exchange. In specific economic contexts.
it refers almost exclusively to the effects of trade, particularly trade liberalization or "free trade".

NATURES OF GLOBALIZATION
1. Liberalization: It stands for the freedom of the entrepreneurs to establish any industry or trade or business
venture, within their own countries or abroad.
2. Free trade: It stands for free flow of trade relations among all the nations. Each state grants MFN (most
favored nation) status to other states and keeps its business and trade away from excessive and hard
regulatory and protective regimes.
3. Globalization of Economic Activity: Economic activities are governed both by the domestic market and
also the world market. It stands for the process of integrating the domestic economy with world economies.
4. Liberalization of Import-Export System: It stands for liberating the import- export activity and securing a
free flow of goods and services across borders.
5. Privatization: Keeping the state away from ownership of means of production and distribution and letting
the free flow of industrial, trade and economic activity across borders.
6. Increased Collaborations: Encouraging the process of collaborations among the entrepreneurs with a
view to secure rapid modernization, development and technological advancement.
7. Economic Reforms: Encouraging fiscal and financial reforms with a view to give strength to free world
trade, free enterprise, and market forces.
Globalization accepts and advocates the value of free world trade, freedom of access to world markets and a
free flow of investments across borders. It stands for integration and democratization of the world’s culture,
economy and infrastructure through global investments.
GLOBALIZATION can mean:
The formation of a global village - closer contact between different parts of the world, with increasing
possibilities of personal exchange, mutual understanding and friendship between "world citizens",
Economic globalization - "free trade" and increasing relations among members of an industry in different
parts of the world (globalization of an industry), with a corresponding erosion of National Sovereignty in the
economic sphere.

SIGNS OF GLOBALIZATION
1. Increase in international trade at a faster rate than the growth in the world economy.
2. Increase in international flow of capital including foreign direct investment.
3. Greater trans-border data flow, using such technologies such as the Internet, communication satellites and
telephones
4. Greater international cultural exchange, for example through the export of Hollywood and Bollywood
movies.
5. Some argue that even terrorism has undergone globalization. Terrorists now have attacked places all over
the world.
6. Spreading of multiculturalism and better individual access to cultural diversity, with on the other hand, some
reduction in diversity through assimilation, hybridization, Westernization, Americanization or Sinicization of
cultures.
7. Erosion of national sovereignty and national borders through international agreements leading to
organizations like the WTO and OPEC.
8. Greater international travel and tourism.
9. Greater immigration, including illegal immigration.
10.Development of global telecommunications infrastructure.
11.Development of a global financial system.
12.Increase in the share of the world economy controlled by multinational corporations. 13.Increased role of
international organizations such as WTO, WIPO, IMF that deal with international transactions.
14.Increase in the number of standards applied globally; e.g. copyright laws.

Anti-Globalization
• Many anti-globalism activists see globalization as the promotion of a Corporatist agenda, which is intent on
constricting the freedoms of individuals in the name of profit. They also claim that increasing autonomy and
strength of corporate entities increasingly shape the political policy of nation-states.
• Globalization imposes credit based economics, resulting in unsustainable growth of debt and debt crises.

Pro-Globalization
• Supporters of free trade point out that economic theories such as comparative advantage suggest that free
trade leads to a more efficient allocation of resources, with all those involved in the trade benefitting. In
general, they claim that this leads to lower prices, more employment and better allocation of resources.

ADVANTAGES OF GLOBALIZATION
Peaceful Relations - Most of the countries have resorted to trade relations with each other in order to boost
their economy, leaving behind any bitter past experiences if any.
Employment - Considered as one of the most crucial advantages, globalization has led to the generation of
numerous employment opportunities. Companies are moving towards developing countries to acquire a labor
force.
Education - A very critical advantage that has aided the population is the spread of education. With numerous
educational institutions around the globe, one can move out from the home country for better opportunities
elsewhere.
Product Quality - The product quality has been enhanced so as to retain the customers. Today the customers
may compromise with the price range but not with the quality of the product. Low or poor quality can adversely
affect consumer satisfaction.
Cheaper Prices - Globalization has brought in fierce competition in the markets.
Communication - Every single information is easily accessible from almost every corner of the world.
Circulation of information is no longer a tedious task, and can happen in seconds. The Internet has
significantly affected the global economy, thereby providing direct access to information and products.
Transportation - Considered as the wheel of every business organization, connectivity to various parts of the
world is no more a serious problem. Today with various modes of transportation available, one can
conveniently deliver the products to a customer located at any part of the world.
GDP Increase - Gross Domestic Product, commonly known as GDP, is the money value of the final goods and
services produced within the domestic territory of the country during an accounting year.
Free Trade - Free trade is a policy in which a country does not levy taxes, duties, subsidies or quota on the
import/export of goods or services from other countries. There are countries which have resolved to free trade
in specific regions. This allows consumers to buy goods and services, comparatively at a lower cost.
Travel and Tourism - Globalization has promoted tourism to great heights. International trade among different
countries also helps in increasing the number of tourists that visit different places around the world.
External Borrowing - With the help of globalization, there is opportunity for corporate, national, and
sub-national borrowers to have better access to external finance, with facilities such as external commercial
borrowing and syndicated loans.

DISADVANTAGES OF GLOBALIZATION
Health Issues. Globalization has given rise to more health risks and presents new threats and challenges for
epidemics. The dawn of HIV/AIDS. Having its origin in the wilderness of Africa, the virus has spread like
wildfire throughout the globe in no time. Food items are also transported to various countries, and this is a
matter of concern, especially in case of perishable items.
Loss of Culture. With a large number of people moving into and out of a country, the culture takes a
backseat. People may adapt to the culture of the resident country. They tend to follow the foreign culture more,
forgetting their own roots. This can give rise to cultural conflicts.
Uneven Wealth Distribution. It is said that the rich are getting richer while the poor are getting poorer. In the
real sense, globalization has not been able to reduce poverty.
Environment Degradation. The industrial revolution has changed the outlook of the economy. Industries are
using natural resources by means of mining, drilling, etc. which puts a burden on the environment.
Disparity. Though globalization has opened new avenues like wider markets and employment, there still
exists a disparity in the development of the economies. Structural unemployment owes to the disparity created.
Developed countries are moving their factories to foreign countries where labor is cheaply available.
Conflicts. It has given rise to terrorism and other forms of violence. Such acts not only cause loss of human
life but also huge economic losses.
Cut-throat Competition. Opening the doors of international trade has given birth to intense competition. This
has affected the local markets dramatically. The local players thereby suffer huge losses as they lack the
potential to advertise or export their products on a large scale. Therefore, the domestic markets shrink.
Globalization can be:
1. Cultural
2. Economic
3. Political
4. Social
5. Industrial
6. Technological
7. Ecological
8. Geographical

Cultural globalization - is the transmission of ideas, meanings, and values around the world in such a way as
to extend and intensify social relations. This process is marked by the common consumption of cultures that
have been diffused by the Internet, popular culture media, and international travel.
Economic globalization refers to the increasing interdependence of world economies as a result of growing
scale of cross-border trade of commodities and services, flow of international capital and wide and rapid
spread of technologies (Shangquan, 2000).
Industrial Globalization
Every country in the world is moving towards specialization. Specialization may be referred to as the
phenomenon of producing only that product in which the country has competitive advantage in terms of cost.
For example, Singapore specializes in pharmaceuticals while the US specializes in military equipment.
Therefore, the countries exchange their industrial products, which is known as trade, and fulfill the
requirements of their people. Every country of the world today is involved in trade and is dependent on some
other country one way or the other. The US is the biggest economy in the world and even that is dependent on
other countries for many of its needs. Hence the industries
of the world today are considered to be working not for their native countries but for the world as a whole.
Financial Globalization
It may be defined as the emergence of worldwide financial markets and better access to external financing for
corporate, national and sub-national borrowers. Some projects in the Philippines were sponsored by foreign
investors. They may be in the form of international organizations or independent investors.
The IMF and the World Bank today give funds to various countries for developmental projects. We may say
that today the financial markets of the world have united in such a way that finances are easily available
throughout the world.
Informational Globalization
This aspect of Globalization has perhaps had the greatest impact on the world today. Sitting at one end of the
world, you can have access to the information available in any other part of the world with just the push of a
button. Internet, television, telephone, fax, etc. are some of the inventions that may be considered as a part of
the informational Globalization process where the information flow has dramatically increased between
geographically remote areas of the world.
Social globalization refers to the sharing of ideas and information between and through different countries.
In today’s world, the Internet and social media is at the heart of this. Good examples of social globalization
could include internationally popular films, books and TV series. The Harry Potter/ Twilight films and books
have been successful all over the world, making the characters featured globally recognizable. However, this
cultural flow tends to flow from the center (i.e. from developed countries such as the USA to less developed
countries). Social globalization is often criticized for eroding cultural differences.
Ecological globalization.
The effects of globalization in ecology are still not completely identified, though some studies suggest that the
process of globalization has many consequences in our ecology.
Globalization and Politics.
Through globalization, political issues such as the rights of women and children are now currently discussed,
many laws are now already implemented regarding the issues on the rights of women and children.
Globalization with technology
Technology really plays a huge part in the life of every individual. Also through the advancement of technology
we can now already communicate with others despite the distance that separates us. And through our
technology today, the process of globalization is now taking place much faster.
Geographical.
Globalization is moving towards the trend of a borderless world. We can now explore different countries
without having any dangers.

Qualities and Characteristics of Globalization

Creation and Multiplication - involves creation of new and multiplication of existing social networks and
cultural activities thus, breaking the traditional norms and practices in the political, economic, and cultural
realms of most communities.

Expansion and Stretching - globalization is very evident in the expansion and stretching of social operations
and connections, on how the financial markets and trading operate around the globe like the (WTO) World
Trade Organization, ASEAN Economic Community, World Economic Forum and European Union brought to
the expansion of local economies through opening their economies to the other parts of the world.
Consciousness and Awareness - globalization involves the human consciousness and awareness. People,
as the primary actors of globalization are the frontliners as reflected in their experiences. The human
consciousness is critical on how they impact the growing outcomes and markers of globalization. Their daily
actions such as global interdependence provide large
scale implications to the norms and practices of the borderless world.

GLOBALIZATION OR WESTERNIZATION?
For westerners’ conception of the term globalization, scholars attributed it as part of the growing imperialist
mechanism of America and Western powers, which they considered as the building blocks of technological
and economic innovations.
Such phases of developments were interpreted as “westernization” in which they strongly linked the global
events to American imperialism.
The idea of Westernization is deeply rooted in the Western World where it is often associated with the
Western culture and values.
The World Wide Web (www) for example, is the hallmark for the integration of western and eastern culture.
 CHAPTER 2: THE CONTEMPORARY WORLD

TWO TYPES OF ECONOMIES IN ECONOMIC GLOBALIZATION

1. Protectionism - a policy of protecting domestic industries against foreign competition

2. Trade Liberalization - is the removal or reduction of restrictions or barriers on the free

exchange of goods between nations.
∙ Globalization made countries gain more in the global economy at the expense of other nations.
There are various ways.
∙ Free Trade - is a trade policy that does not restrict imports or exports
∙ Fair Trade - concern for the social, economic, and environmental well being of marginalized small
producers
Example: American coffee chains such as Starbucks and Dunkin’ Donuts.

Economic Globalization and Sustainable Development

∙ Economic Globalization
– is a historical process of an increasing integration of economies around the world, particularly
through trade and financial flows.
– is a worldwide phenomenon wherein countries' economic situations can depend significantly
on other countries.
∙ Sustainable Development
– is a development of our world today by using the Earth's resources and the preservation of
such sources for the future.
– is development that meets needs in the present without compromising the ability of future
generations to meet their needs. The improvement of trade had affected the environment as
well.

Environmental Degradation
- is the deterioration (causing degenerative harm) of the environment through exhaustion of
natural assets such as water, soil, and air including the ecosystem, habitat intrusion, wildlife
extermination, and environmental pollution.

CAUSES OF ENVIRONMENTAL DEGRADATION

Global Climate Change - This phenomenon is a result of the unintended consequences of

burning fossil fuels and releasing staggering amounts of carbon dioxide into the atmosphere.
Industrialization - The industrial revolution increased human life expectancy and gave us the
affordable luxuries of the modern world.
 Overconsumption - As countries become wealthier, they consume more resources per capita. ∙
Overfishing - Improvements in fishing techniques allowed humans to fully exploit or deplete over
90 percent of the fish in the ocean. While fishing companies made excellent profits for years,
those same companies have collapsed as fish stocks have disappeared.
Deforestation - Another case of humans becoming too successful in their ability to harvest
resources, deforestation has destroyed various habitats, erasing those resources from the world
forever.

EFFECTS OF ENVIRONMENTAL DEGRADATION

∙ Increased Poverty - The depletion of natural resources leads to a loss of livelihood, leaving
communities in poverty.
∙ Weather Extremes - The increasing frequency and intensity of tropical storms, and the
increasing intensity and duration of droughts, has been attributed to climate change. These
weather extremes increase soil erosion, affect food production and can have devastating
effects on cities and towns.
∙ Species Loss - Species have already gone extinct due to the habitat destruction caused by the
destruction of the Amazon rainforest, and many others are now endangered.
∙ Disease - The World Health Organization estimates that thirteen million people die every year as
a result of preventable environmental causes. Asthma rates are rising as a result of increasing
air pollution and rises in malaria and cholera have been blamed on deteriorating ecosystems.

Food Security

Economic Globalization, Poverty, and Inequality

∙ Economic and trade globalization is the result of companies trying to outmaneuver their
competitors.
∙ The result is that labor-intensive products like shoes are often produced in countries with the
lowest wages and the weakest regulations.
∙ This process creates winners (corporations, stockholders, consumers) and losers (high wage
workers). ∙

Multiplier Effect (John Maynard Keynes)

∙ – An increase in one economic activity can lead to an increase in other
activities.
∙ – One person’s spending becomes another person’s income.

∙ Muhammad Yunus - is a Bangladeshi social entrepreneur, banker, economist, and civil society
leader who was awarded the Nobel Peace Prize for founding the Grameen Bank and
pioneering the concepts of microcredit and microfinance.
Global Income Inequality

The Third World and the Global South

∙ First World Problem - a relatively trivial or minor problem or frustration (implying a contrast with
serious problems such as those that may be experienced in the developing world).

What are the implications of talking about countries as First or Third World?

∙ Let us begin by deconstructing the idea of the First, Second, and Third World by looking at their
origins and implications.
∙ The date then back to the cold war when policy maker began talking about the world as three
distinct political and economic blocs (Tomlinson, 2003).
∙ The terms "First World," "Second World," and "Third World" countries were used to differentiate
between democratic countries, communist countries, and those countries that did not align
with democratic or communist countries.
∙ After World War ll, the world was divided into three sides:
Capitalist bloc - The First World countries are those countries which were democratic,
capitalist, and industrialized and in the capitalist bloc. The First World included most of
North America and Western Europe, Japan, and Australia.
Communist bloc - The Second World countries are those countries which were in the
communist bloc. The Second world included the Soviet Union, Eastern Europe, Russia and
China.
Neutral / Non-aligned countries - The Third World countries are those countries which
were not in the capitalist bloc as well as the communist bloc, Africa , Latin America etc.
∙ Second World Countries - described the communist-socialist states. These countries were, like
First World countries, industrialized.

These areas share common problem and issues having to do with economy and politics:

∙ The term "Global North" and "Global South" are away in the south to make a stand about the
common issues, problems and even causes in order to have equality all throughout the world.

This distinction points largely to racial inequality, specifically between the Black and White.

According to Ritzer (2015), "At the global level, Whites are disproportionately in the dominant
North, While Blacks are primarily in the south.

The differences between the "Global North" and "Global South" are shaped by migration and
globalization.
o The economic differences between the wealthy Global North and poor Global South.
According to (Winant,2001) "have always possessed a racial character".
The Global City
– it is a city generally considered to be an important node in the global economic
system
– it is where the rural-urban differentiation has a significant relationship to
globalization.

Rural - a geographic area that is located outside towns and cities

Urban - is the region surrounding a city

Globalization has deeply altered North-South relations.

Global cities best to describe the three urban centers:

1. Economic centers that exert control over the world’s political economy.
2. Cities can be seen as important nodes in a variety of global networks.
3. Although cities are major beneficiaries of globalization, they are also the most severely
affected by global problems.

Theories of Global Stratification

People in countries around the world experience different access to resources and opportunities and
different standards of living, based on their position in the global hierarchy.

THEORY OF DEVELOPMENT AND MODERNIZATION

∙ Dependency Theory - It blames colonialism and neocolonialism (continuing economic

dependence on former colonial countries) for global poverty. Countries have developed at an
uneven rate because wealthy countries have exploited poor countries in the past and today
through foreign debt and transnational corporations (TNCs).

According to dependency theory, wealthy countries would not be as rich as they are today if they
did not have these materials, and the key to reversing inequality is to relieve former colonies of
their debts so that they can benefit from their own industry and resources.

∙ World System Theory - It suggests that all countries are divided into a three-tier hierarchy based
on their relationship to the global economy, and that a country’s position in this hierarchy
determines its own economic development.
∙ Core Countries - Own most of the world’s capital and technology, and have great control over
world trade and economic agreements.
∙ Semi-peripheral Countries - Generally provide labor and materials to core countries, which
benefits core countries but also increases income within the semi-peripheral country.
∙ Peripheral Countries - Generally indebted to wealthy nations, and their land and populations are
often exploited for the gain of other countries.
Modernization Theory
- One of the two main explanations for global stratification is the modernization theory.
- This theory frames global stratification as a function of technological and cultural differences
between nations.

2 HISTORICAL EVENT OF MODERNIZATION THEORY

1. Columbian Exchange - This refers to the spread of goods, technology, education, and diseases.

o This exchange worked out well for the European countries. They gained agricultural
staples, like potatoes and tomatoes, which contributed to population growth and
provided new opportunities for trade, while also strengthening the power of the
merchant class. The Columbian Exchange worked out much less well, however, for
Native Americans whose populations were ravaged by the diseases brought from
Europe. It is estimated that in the 15 years following Columbus's first trip, over 80% of
the Native American population died due to diseases such as smallpox and measles.

2. Industrial Revolution - This is when new technologies, like steam power and
mechanization, allowed countries to replace human labor with machines and increase
productivity.

o The Industrial Revolution, at first, only benefited the wealthy in Western countries,
Industrial technology was so productive that it gradually began to improve standards of
living for everyone. Countries that industrialized in the eighteenth and nineteenth
centuries saw massive improvements in their standards of living and countries that did
not industrialize lag behind.
Modernization theory rests on the idea that affluence could be attained by anyone. But
why did the Industrial Revolution not take hold everywhere? Modernization theory
argues that the tension between tradition and technological change is the biggest
barrier to growth. A society that is more steeped in family systems and traditions may be
less willing to adopt new technologies and the new social systems that often
accompany them.

Walt Rostow’s Four Stages of Modernization

∙ Walt Whitman Rostow - was an American economist, professor and political theorist who
published The Four Stages of Modernization.

THE FOUR STAGES OF MODERNIZATION:

1. Traditional Society - refers to societies that are structured around small, local communities
with production typically being done in family settings.

2. Take-off - is a short period of intensive growth, in which industrialization begins to occur, and
workers and institutions become concentrated around a new industry.
 3. Drive to Technological Maturity - technological growth of the earlier periods begins to bear
fruit in the form of population growth, reduction of poverty levels, and more diverse job opportunities.

4. High Mass Consumption - it is when your country is big enough that production become
more wanted than needed.

Capitalism - an economic system characterized by private or corporate ownership of capital

goods.

Eurocentric - reflecting a tendency to interpret the world in terms of European or Anglo-American

values and experiences.

Dependency Theory and the Latin American Experience

∙ Dependency is the condition in which the development of the nation-states of the South
contributed to a decline in their independence and to an increase in economic development of
the countries of the North (Cardoso and Faletto, 1979).
∙ Dependency theory was initially developed by Hans Singer and Raul Prebisch in the 1950s
and has been improved since then.
∙ Core nations and Periphery nations are the heart of dependency theory.
∙ 1500s, European explorers spread throughout the Americas, Africa, and Asia, claiming
lands for Europe. At one point, the British Empire covered about one-fourth of the
world.
∙ Transatlantic slaves are slaves that are transported across the atlantic for slavery.

Triangular Route
- route that transatlantic slaves or cycle.
- Europe for Guns and Factories made goods sent to Africa for exchange of slaves to
Colonies for Tobacco and cottons then sent back to Europe.

The Modern World System

The History of Colonialism inspired American Sociologist Immanuel Wallerstein model of what
he called the “Capitalist World Economy”.

∙ Low-income countries (Wallerstein called the Periphery) - whose natural resources and labor
support the wealthier countries, first as colonies and now by working for multinational
corporations under neocolonialism.
∙ Core - Wallerstein described high-income nations of the world economy.

∙ In the Wallerstein model, the periphery remains economically dependent on the core in a
number of ways, which tend to reinforce each other.
∙ Poor countries are also more likely to lack industrial capacity, so they have to import
expensive manufactured goods from richer nations.
 ∙ Just as modernization theory had its critics, so does Dependency Theory.
∙ Innovation and technological growth can spill over to the other countries, improving all
nations’ well being and not just the rich.
∙ Also, Colonialism certainly left scars, but it is not enough, on its own, to explain today’s
economic disparities.
∙ In direct contrast to what dependency theory predicts, most evidence suggests that, nowadays,
foreign investment by richer nations helps and does not hurt poorer countries.

The Contemporary World: MARKET INTEGRATION

ECONOMY
• Institution that has big impact on society
• Three parts: production, distribution, and consumption
• Composed of people
• Economic systems shape the lives of people
• This chapter aims to show the contributions of different financial and economic
institutions that helped in the growth of the global economy.
SECTORS OF THE ECONOMY
• Primary Sector
–Extract raw materials from the environment (i.e. miners, farmers, loggers,
fishermen)
• Secondary Sector
–Make the raw materials from the primary sector into goods (i.e. artisans, craftsmen,
industrialists)
• Tertiary Sector
–Offers services rather than goods (i.e. barbers, manicurist, pedicurist, dentists,
teachers, etc.)

CONTEMPORARY GLOBAL ECONOMY

• Characterized with high interdependence
• Brought closer by globalization
• “when the American economy sneezes, the rest of the of the world catches a cold”
• So when the American economy catches a fever, let us prepare for our own funeral
• Weaker economies have less impact on other countries.

INTERNATIONAL FINANCIAL INSTITUTIONS AND ECONOMIC ORGANIZATIONS

BRETTON WOODS SYSTEM
• World War 1, Great Depression, World War 2
• The global economy is characterized with high protectionism and the principle of mercantilism that
hinders trade.
• To promote Free Trade on the global arena, the US believed that it is necessary to create a
TRANSNATIONAL AGENCY which would assist nations suffering with deficits in their international
trade account

• A nation suffering with ACCOUNT DEFICIT is forced to control and limit imports.
• These agencies would give temporary assistance to nations suffering with deficits so that they will
not be forced to limit their imports and close their markets.

• BRETTON WOOD TWINS: WORLD BANK (International Bank for Reconstruction and Development
[ICRB] and INTERNATIONAL MONETARY FUND)
• The World Bank and IMF are basically banks started by different countries.

BRETTON WOODS SYSTEM 5 ELEMENTS

1. Expression of currency in terms of gold or gold value to establish a par value.
2. Official monetary authority in each country (i.e. Bangko Sentral ng Pilipinas)
3. Establishment of an overseer to these exchange rates through the IMF
4. Eliminating restrictions on currencies of members states in the international trade
5. US dollar as the global currency
– (we do not pay our utang to the World Bank in Philippine peso but in US dollars. That is why
remittances of our OFWs are very important because we are suffering from ACCOUNT DEFICITS

INTERNATIONAL MONETARY FUND

• The IMF and World Bank complement each other.
• Provides temporary relief to member countries suffering from a shortage of international
currency due to trade
• Lender of countries who needed financial assistance because of economic problems
• Primary function: to secure the freedom in terms of international flow of goods and
commodities
• Strings attached (structural adjustments [SAP])

WORLD BANK
• Long-term approach
• Goals involved the eradication of poverty and it funded specific projects that helped in the
realization of such goals especially in poor countries
• Primary function: secure freedom in the international movement of investment capital

GATT and WTO

• General Agreements on Tariffs and Trade
• Tariff – taxes imposed on imported materials.
 • GATT (1947) – was a forum for the meeting of representatives from 23 member
countries. Focuses on trade goods through multinational trade agreements conducted in
many “rounds” of negotiations
• It was in the Uruguay Round (1986-1993) of the GATT that an agreement to create the WTO
was reached.
• GATT is just an agreement; WTO is an organization
• It was GATT that gave birth to the WTO though

WTO
• World Trade Organization
• members (2008) with headquarters in Geneva, Switzerland
• Independent multilateral organizations that became responsible for trade in services,
non-tariff-related barriers to trade, and other broader areas of trade liberalization
• Neoliberalism is the idea behind the WTO.
● It was based on the assumption that by reducing or eliminating barriers, all nations will
eventually benefit.
• Criticism is that the trade barriers imposed by developed countries cannot be countered
enough by the organization.
ORGANIZATION FOR ECONOMIC COOPERATION AND
DEVELOPMENT (OECD)
• Most encompassing club of the richest countries in the world
• 35 member-states as of 2016
• Latvia is a latest member
• Highly influential organization

ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC)

• Organization of major oil exporters in the world
• Originally composed of Saudi Arabia, Iraq, Kuwait, Iran, and Venezuela
• Was formed because they want to increase the price of oil
• United Arab Emirates, Algeria, Libya, Qatar, Nigeria, and Indonesia are now
members

EUROPEAN UNION (EU)

• Made up of 28 member-states
• Most members adopted the euro as the basic currency while some nations like Britain,
Sweden, and Denmark did not.
• Brexit issue

NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

• Trade pact between United States, Mexico, and Canada
• Originally created with US and Canada only in 1989
• Aims to increase cooperation for improving working conditions in the region by reducing trade
barriers
• Leads to the outsourcing of manufacturing jobs to Mexico due to cheaper labor and relatively
lower government regulations
• Has both negative and positive consequences

THE POSITIVE AND NEGATIVE EFFECTS

• POSITIVE (reduced prices by removing tariffs, opportunity for small and medium businesses,
quadrupled trade, created jobs)
• NEGATIVE (pollution, exploitation of Mexican workers, Mexican farmers running out of business.

HISTORY OF GLOBAL MARKET INTEGRATION

• Agricultural Revolution
– Domestication of plants and animals leading to permanent settlements
– Creation of surpluses and trade networks
• Industrial Revolution
– Rise of industries and new technologies (steam engines)
– From manual labor to mechanization
– From family enterprise to factories and mass production
– Because of mass production, more surpluses
– Criticized by Karl Marx (The Father of Communism)

COMPETING ECONOMIC MODELS: CAPITALISM AND SOCIALISM CAPITALISM

• System in which all natural resources and means of production are privately owned
(private ownership)
• Profit maximization and competition as the drivers of efficiency
• Adam Smith (Wealth of Nations; emphasis of the invisible hand)
• The market has its own invisible hand that regulated itself, thus state intervention is discouraged
• Monopoly (form of market failure)
• Capitalism= MARKET over STATE
• There should be minimal intervention from the state.

SOCIALISM
• Production is under collective ownership
• Rejects capitalism’s private property and hands-off approaches
• Property is owned by the government and allocated to all citizens
• Collective goal. Meeting everyone’s basic needs rather than profit
• Marx viewed it as the stepping stone towards communism
• Socialism= STATE over MARKET
• Government should intervene. The state should have a role.

INFORMATION REVOLUTION
• Technology has reduced the role of human labor (same as in the Industrial Revolution)
• Computers and technologies already replaced jobs through automation and
outsourcing
• Primary labor market
–Jobs that provide many benefits to workers like high incomes, job security, insurance, and
retirement packages. White collared professions (i.e. Engineers, accountants, etc.)
• Secondary labor market
–Provides fewer benefits and includes low-skilled jobs, tends to pay less, unpredictable
schedules, and less job security.

• Corporations
– organizations that exist as legal entities and have liabilities that are separate from its
members.

GLOBAL CORPORATIONS
• Multinational or Transnational Corporations (MNCs or TNCs)
– Companies that extend beyond the borders of one’s country
• Intentionally surpass national borders to take advantage to the opportunities in different
countries to manufacture, distribute, and market their products
• Coca-Cola, General Electric, McDonald, Starbucks, Ford • Has wide political influence

GLOBAL CORPORATIONS
● Often locate their operations into countries with the cheapest labor to save expenses
● States on the other hand offers tax-free trade, cheap labor to attract these
corporations
● International trade and global trade accelerate the process of globalization

Diffusion
– the process where cultural practices and expressions are passed between nations,
spreading group to group.

CHAPTER 4

The Global Interstate System is the whole system of human interactions.

The Modern World-System Is structured politically as an interstate system
– a system of competing and allying states.
Political Scientists commonly call this the international system, and;
It is the main focus of the field of International Relations.
All world-systems are composed of multiple interacting polities.

What is the purpose of the global interstate system?

● To contribute to peace and security by promoting international collaboration

through educational, scientific, and cultural reforms in order to increase universal
respect for justice, the rule of law, and human rights along with fundamental freedom.

What is the international system?

- The term international system may refer to: In politics, international relations. It is the
global constellation of states. The term is commonly applied to the international systems of
the Twentieth century and can equally be applied to pre industrial international state
systems.

United Nations
-This is the one who will intervene, hear and resolve disputes among its member nations. The
Philippines is one of the members.

There are 193 member states of the United Nations (UN). The United Nation was founded
in 1945, just after the Second World War. The main organs of the UN are the General Assembly,
the Security Council, the Economic and Social Council, the Trusteeship Council, the
International Court of Justice, and the UN Secretariat.
 The General Assembly is the main deliberative, policymaking and representative organ
of the UN. All 193 Member States of the UN are represented in the General Assembly, making it
the only UN body with universal representation.
The Security Council has primary responsibility, under the UN Charter, for the
maintenance of international peace and security. It has 15 Members (5 permanent and 10
non-permanent members). Each Member has one vote. Under the Charter, all Member States
are obligated to comply with Council decisions.
The Security Council takes the lead in determining the existence of a threat to the peace
or act of aggression. It calls upon the parties to a dispute to settle it by peaceful means and
recommends methods of adjustment or terms of settlement.

Subsidiary Organs in the UN Security Council

Under Article 29 of the Charter of the United Nations, the Security Council “may establish
such subsidiary organs as it deems necessary for the performance of its functions”. Here are the
following Commissions and Investigative Bodies.

∙Sanctions and Other Committees

∙Standing and Ad hoc Committees
∙Groups and Panels
∙International Tribunals
∙Missions of the Security Council and the Secretary-General
∙The Peacebuilding Commission
∙Peacekeeping Missions
∙Political Missions and Offices
∙Representatives, Mediators, Coordinators, and Good Offices
∙Working Groups
∙Subsidiary Organs Proposed but Not Established
∙Other Material on Subsidiary Organs

The Economic and Social Council is the principal body for coordination, policy review,
policy dialogue and recommendations on economic, social and environmental issues, as well as
implementation of internationally agreed development goals. It serves as the central mechanism
for activities of the UN system and its specialized agencies in the economic, social and
environmental fields, supervising subsidiary and expert bodies.

● It has 54 Members, elected by the General Assembly for overlapping three-year terms. It
is the United Nations’ central platform for reflection, debate, and innovative thinking on
sustainable development.
 ● The Trusteeship Council was established in 1945 by the UN Charter, under Chapter XIII,
to provide international supervision for 11 Trust Territories that had been placed under the
administration of seven Member States, and ensure that adequate steps were taken to
prepare the Territories for self government and independence. By 1994, all Trust Territories
had attained self-government or independence.

● The International Court of Justice is the principal judicial organ of the United Nations. Its
seat is at the Peace Palace in the Hague (Netherlands). It is the only one of the six
principal organs of the United Nations not located in New York (United States of America).

● The Secretariat comprises the Secretary-General and tens of thousands of international

UN staff members who carry out the day-to-day work of the UN as mandated by the
General Assembly and the Organization's other principal organs.
● The Secretary-General is chief administrative officer of the Organization, appointed by the
General Assembly on the recommendation of the Security Council for a five-year,
renewable term.

2.2. UNDERTAKINGS OF UNITED NATIONS DOES

Since its establishment in 1945, the United Nations has been active in extensive areas
including peace-keeping, arms control, the North-South problem, social and human rights
issues.

2.2.1. Maintain International Peace and Security

The United Nations came into being in 1945, following the devastation of the Second
World War, with one central mission: the maintenance of international peace and security. The
UN does this by working to prevent conflict; helping parties in conflict make peace;
peacekeeping; and creating the conditions to allow peace to hold and flourish. These activities
often overlap and should reinforce one another, to be effective.

2.2.2. Protect Human Rights

The term “human rights” was mentioned seven times in the UN's founding Charter, making
the promotion and protection of human rights a key purpose and guiding principle of the
Organization. In 1948, the Universal Declaration of Human Rights brought human rights into the
realm of international law.

2.2.3. Deliver Humanitarian Aid

One of the purposes of the United Nations, as stated in its Charter, is "to achieve
international cooperation in solving international problems of an economic, social, cultural, or
humanitarian character."
2.2.4. Promote Sustainable Development

From the start in 1945, one of the main priorities of the United Nations was to “achieve
international co-operation in solving international problems of an economic, social, cultural, or
humanitarian character and in promoting and encouraging respect for human rights and for
fundamental freedoms for all without distinction as to race, sex, language, or religion.” Improving
people’s well-being continues to be one of the main focuses of the UN.

2.2.5. Uphold International Law

The UN Charter, in its Preamble, set an objective: "to establish conditions under which
justice and respect for the obligations arising from treaties and other sources of international law
can be maintained". Ever since, the development of, and respect for international law has been
a key part of the work of the Organization.

2.3.1. The Organization for Economic Cooperation and Development (OECD)

The OECD is an organization providing a forum for developed countries which
share fundamental values and principles of politics and economy to freely discuss a
broad range of topics other than politics and military affairs. Serving as the world
opinion leader, the OECD has been searching for ways to ensure sustainable
development of the world by identifying and analyzing potential problems which may
confront the international community in the future.
Thus, Japan has played a leading role matching its international presence.

2.3.2. International Monetary Fund (IMF)

The IMF has been serving as the central pillar of the international financial system
and playing an important part in promoting policy coordination among developed
countries and dealing with the accumulated debt problem. In the future, it is expected
to play an active role in assisting in reforms in Eastern Europe and promoting the
"New Debt Strategy ".

2.4. WORLD BANK (WB) AND THE INTERNATIONAL MONETARY FUND (IMF)

The International Monetary Fund (IMF) and the World Bank (WB) are institutions in the
United Nations system. They share the same goal of raising living standards in their member
countries.

Their approaches to this goal are complementary, with the IMF focusing on
macroeconomic and financial stability issues and the World Bank concentrating on long-term
economic development and poverty reduction.
 The International Monetary Fund and the World Bank were both created at an
international conference convened in Bretton Woods, New Hampshire, United States in July
1944. The goal of the conference was to establish a framework for economic cooperation and
development that would lead to a more stable and prosperous global economy.

The IMF’s mandate

The IMF promotes international monetary cooperation and provides policy advice and capacity
development support to help countries build and maintain strong economies.

The IMF also provides medium-term loans.

IMF loans are short and medium term and funded mainly by the pool of quota contributions that
its members provide. IMF staff are primarily economists with wide experience in macroeconomic
and financial policies.

The World Bank’s mandate

The World Bank promotes long-term economic development and poverty reduction by
providing technical and financial support to help countries reform certain sectors or implement
specific projects— such as building schools and health centers, providing water and electricity,
fighting disease, and protecting the environment.

World Bank assistance is generally long term and is funded both by member country
contributions and through bond issuance. World Bank staff are often specialists on particular
issues, sectors, or techniques.

Reducing debt burdens

The IMF and World Bank have worked together to reduce the external debt burdens of
the most heavily indebted poor countries under the Heavily Indebted Poor Countries (HIPC)
Initiative and the Multilateral Debt Relief Initiative (MDRI).

To date, debt reduction packages under the HIPC Initiative have been approved for 36
countries out of 39 eligible countries providing $76 billion in debt-service relief over time.

● MF and Bank staff jointly prepare country debt sustainability analyses under the Debt
Sustainability Framework (DSF) developed by the two institutions.

Assessing financial stability

The IMF and the World Bank are also working together to make financial sectors in
member countries resilient and well regulated. The Financial Sector Assessment Program
(FSAP) was introduced in 1999 to identify the strengths and vulnerabilities of a country's
financial system and recommend appropriate policy responses.
● The United Nations (UN) and the World Bank Group (WBG) have been discussing
cooperation since the founding of the two organizations (1944 and 1945, respectively)
which focuses on economic and social areas of mutual concern, such as reducing poverty,
promoting sustainable development, and investing in people.