TCW Global Economy

UNIT TITLE: THE
STRUCTURES OF
GLOBALIZATION
Title of the Lesson:
The Global Economy
The Global Economy
Prepared by:
EDUARDO G. MANGALILE, JR. RL, MLIS, LPT
INTRODUCTION
This lesson will primarily discuss the

concept of economic globalization, how does it
form, the elements that facilitate its formation and
examine who benefits from it and who is left out.
Objectives / Competencies
At the end of the lesson, the students are expected to:
➢ To define economic globalization.

➢ To explain the attributes of economic globalization.
➢ To articulate a stance on global
economic integration.
What is Economic Globalization?
Economic globalization according to

International Monetary Fund or IMF (2008) is a
historical process demonstrating the result of
technological progress and human innovation.
It is distinguished by the increasing

integration of economies around the world
through the movement of goods, services, and
capital across borders. These changes are all
products of people, organizations, institutions,
and technologies.
But this definition of IMF

according to Benczes (2014) is not
substantive as it only reflects
quantitative change than qualitative
transformation.
Economic globalization is not only

about extending and increasing economic
activities (e.g production, trade etc.) but more
of creating a functional integration among the
said activities across borders.
Stiglitz (2008) believes that
''the great hope of economic globalization is

that it will help to raise the living standards all
over the world by the opportunity to give the
poor countries access to foreign markets in
order to sell their products;
Stiglitz (2008) …
Examples:
• by inviting foreign investments, in order to facilitate

the emergence of new products at lower prices;
• open borders that allow easy movement of people all

over the world, in order to train, to work, to build new
businesses'',
Elements of Economic
Globalization
• According to Stiglitz (2003), the growth in cross-border

economic activities takes five principal forms:
(1) international trade;

(2) foreign direct investment;
(3) capital market flows;
(4) migration (movement of labor); and
(5) diffusion of technology
Elements of Economic Globalization
1. International trade
- is the economic transactions made between countries. Every day, a network of planes, trucks, and
ships moves huge quantities of goods around the world.
Examples: Your TV might come from China (TCL), your T- shirt from Bangladesh (H & M) and your lunch from South Korea
(Samgyeopsal).
Trade transactions include both

goods (tangible products) and services
(intangible commodities). The
production chains of goods and services
is getting more and more complex and
global (Ospina, 2018).
It allows products to be sourced, assembled, packaged, and sold in different areas

of the world. The materials for your TV or shirt or the marinade for the pork you had for
lunch might have been produced in one country, processed in another country, assembled
in a third country, and packaged somewhere else, all before getting to your local store or
even to your table. How does this make sense? Why can‗t countries just make their own
TV, shirt, or food and provide more jobs and business domestically?
Before the 19th century, most European countries tried to do prioritize self- sufficiency in a system called mercantilism.
The Mercantilism aimed to

minimize imports and maximize
exports while increasing the
supply of gold in the country.
Mercantilism
formed barriers to
international trade, where
countries aimed to
produce everything on
their own.
In the late 18thcentury, the so-called classical

economists, led by David Ricardo, contested
these long-held beliefs by campaigning the idea
that societies should trade with one another to
be more successful because of comparative
advantage.
• It follows the idea that

countries should only
export the goods that
they are able to produce
more efficiently than
others and import the
goods that other
countries are able to
produce more efficiently
than them
• Thus, when countries focus on making

things they are reasonably good at and
import the rest that they can’t do efficiently,
everyone benefits. This process is known as
specialization, so that countries don‗t have
to spend time and resources producing cloth
or wine, for example, there‗s more room for
them to innovate and develop entirely new
products.
Protectionism vs. Free Trade

2. Foreign Direct Investment (FDI):
According to Organization for Economic

Cooperation and Development (OECD), FDI is a
category of cross-border investment in which an
investor resident in one economy establishes a
lasting interest in and a significant degree of
influence over an enterprise resident in another
economy.
FDI is a key element in international economic integration

because it creates stable and long-term connections between
economies. It is also an important network for the transfer of
technology between countries, stimulates international trade through
access to foreign markets, and serves as an important vehicle for
economic development.
FDI- increase and helped to

develop economies during the
last decade. Areas such as
agriculture, education,
infrastructure, health, etc., give
the country, where the
investment is made, the desired
standard of living and also a
strong economic recovery.
In global economic level, Foreign Direct

Investment is leaning mainly towards developed
countries, but developing countries also have
great interest in this type of investments due to ;
• foreign capital inflows

• innovative experience
• knowledge and access to markets.
• Examples of FDI - include mergers,

acquisitions, retail, services, logistics, and
manufacturing, among others. In 2017, for
example, U.S.- based Apple announced a
$507.1 million investment to boost its
research and development work in China,
Apple's third-largest market after the
Americas and Europe.
3. Capital market flows:
- To define international financial

integration, you have to look at the
amount of cross-border capital flows
(Stiglitz, 2003).
The term 'capital flows' refers to the

movement of capital (money for
investment) from one country to another
as a consequence of investment flows.
In this case, the money being referred to is not the money that flows
between countries to purchase each other‗s goods and services, but
rather referring to the money flowing into and out across the the world
such as stock and bond, as well as factors such as real estate and
crossborder mergers and acquisitions.
Example:
Capital flows refer to transactions in financial assets between U.S. residents

and residents of foreign countries. Financial assets include loans, bank
deposits, drafts, acceptances, notes, government and private debt and equity
securities, and intracompany accounts for the financing of direct investments.
Elements of Economic
Globalization
• 4. Migration (movement of labor):

Migration is the movement of people from
one country to another. In economics, it is
in consonant to the movement of labor.
4. Migration (movement of labor):

Migration is the movement of
people from one country to another.
In economics, it is in consonant to
the movement of labor.
Whether it is physicians or
nurse who emigrate from
Philippines to Great Britain or
seasonal farm workers
emigrating from Mexico to the
United States, labor is
increasingly mobile. For
sending countries, the short-
term economic advantage of
emigration (moving abroad) is
located in remittances.
Remittances are funds that emigrants

earn abroad and send back to their
home countries, mainly in order to
support families left behind.
According to the World Bank,
remittances totaled $689 billion
worldwide in 2018, with $529 billion of
that money flowing into developing
nations (World Bank, 2019).
•Magnifying it locally, Philippines is also on the map of those

countries with higher remittances. According to World Bank‗s
Report, in 2018, Philippines ranked fourth among the top
remittance-receiving countries in the world with a total of $33.8
billion.
Figure 3: The
World‗s Top Remittance
Recipients
• 5. Diffusion of technology
- Technology plays a vital role in expediting the

process of globalization. It is considered as a
major facilitator and a driving force in the
globalization processes. Technological
improvement has allowed companies to rapidly
globalize their products.
• The creation of personal computers

and internet formed electronic
business (E-Business) and electronic
commerce (E-Commerce), which are
used as a validation of recent techno-
globalism.
• Technological globalization is speeded

significantly by technological diffusion,
defined as the spread of technology
among countries. There has been rapid
advancement in the spread of
technology to semi-peripheral and
peripheral nations for the past two
decades, and World Bank in 2008
reported the benefits and challenges of
technological diffusion.
• Furthermore, technological
advances like in mobile phones
can lead to competition lowering
the prices and parallel
developments in related areas
such as mobile banking and
information sharing.
• Innovations in
telecommunications, information
technology, and computing have
lowered communication costs and
facilitated the cross-border flow of
ideas, including technical knowledge
as well as more fundamental concepts
such as democracy and free markets
(Stiglitz, 2003).
Conclusion:
The formation of economic globalization would not be possible
without the elements of trade, flows of capital, foreign direct
investment, migration or the movement of labor, and
technology. They attributed rapid transformation to the world
economy. They have created difficult challenges, and countries
will continue to struggle to increase growth and productivity,
while reducing inequality and creating jobs and more
opportunities. However, drawbacks will always be part of the
picture. Turning back the clock to restore the old frameworks is
impossible. The challenge is to build new ones that work.
Announcement!
Be ready next meeting…
Quiz
Class discussion
Announcement of midterm examination (coverage)

TCW Global Economy

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UNIT TITLE: THE

This lesson will primarily discuss the

➢ To define economic globalization.

Economic globalization according to

It is distinguished by the increasing

But this definition of IMF

Economic globalization is not only

Stiglitz (2008) believes that

''the great hope of economic globalization is

• by inviting foreign investments, in order to facilitate

• open borders that allow easy movement of people all

• According to Stiglitz (2003), the growth in cross-border

(1) international trade;

Trade transactions include both

It allows products to be sourced, assembled, packaged, and sold in different areas

The Mercantilism aimed to

In the late 18thcentury, the so-called classical

• It follows the idea that

• Thus, when countries focus on making

Protectionism vs. Free Trade

2. Foreign Direct Investment (FDI):

According to Organization for Economic

FDI is a key element in international economic integration

FDI- increase and helped to

In global economic level, Foreign Direct

• foreign capital inflows

• Examples of FDI - include mergers,

3. Capital market flows:

- To define international financial

The term 'capital flows' refers to the

Capital flows refer to transactions in financial assets between U.S. residents

• 4. Migration (movement of labor):

4. Migration (movement of labor):

Remittances are funds that emigrants

•Magnifying it locally, Philippines is also on the map of those

- Technology plays a vital role in expediting the

• The creation of personal computers

• Technological globalization is speeded

Be ready next meeting…

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