THE GLOBAL ECONOMY

The discussion will primary be guided by this question: “Why the regions around the globe are have

glaring differences when it comes to economy?”

For the past centuries, the global economy has significantly changed. In the 11th century, the long

distance trading flourished between Venice and the Netherlands. The woolen industry in the 13th century in

Flanders and in 14th century in Florence can also be an example of a sustained economic growth throughout

history. Those global changes have contributed much to the economy of the world. There was the birth of

capitalism.

Conversely, the standards of living of most of the population in the globe have remained at the

subsistence levels until in the middle of 18th century. In Gary Gereffi’s journal, The Global Economy:

Organization, Governance, and Development, he mentioned that the global changes are attributed to how

the global economy is organized and governed. He furthered that these changes give impact not only to

the flow of goods and services across national borders, but also the implications of these processes for

how a particular country move up or down in the international scene.

Nowadays, the various countries’ strategies on development are influenced by the new degree on

how industries are organized. These development strategies are manifested in a shift in theoretical

frameworks from those centered on the legacies and actors of nation-states to a greater concern with

supranational institutions and transnational organizations. Developed countries and developing countries

like the Philippines have to fully understand the impact of the contemporary global economy to improve

their position in the global system.

There is no singular academic field that can completely explain the topic of global economy

because it is inherently interdisciplinary. According to Gereffi, the global economy can be studied at different

levels of analysis.

First is at the macro level in which this includes the international organizations and regimes that

establish rules and norms for the global community. The World Bank, the International Monetary Fund, the
World Trade Organization, and the International Labor Organization are the existing international

organizations that make impact to the economy of the world. The regional integration schemes like the

European Union and the North American Free Trade Agreement are also part of these organizations. Since

these regimes blend both the rules and resources, they substantiate the widest parameters within which

the global economy operates.

Next is the meso level in which it is believed that the building blocks for the global economy are the

countries and firms. The global economy is seen as the arena in which countries compete in different

product markets.

The last is at the micro level. There is a growing literature on the resistance to globalization by

consumer groups, activists, and transnational social movements. Therborn (2000) expressed, “There are

many theories related to economic sociology incorporate the global economy in their frameworks, but they

differ in the degree to which it is conceptualized as a system that shapes the behavior and motivation of

actors inside it, or as an arena where nationally determined actors meet, interact, and influence each other.”

The development of a world trading system over a period of several centuries helped to create the

tripartite structure of core, semi peripheral, and peripheral economic areas. According to world-systems

theory, the upward or downward mobility of nations in the core, semi periphery, and periphery is determined

by a country’s mode of incorporation in the capitalist world-economy, and these shifts can only be accurately

portrayed by an in-depth analysis of the cycles of capitalist accumulation in the longue durée of history

(Wallerstein 1974, 1980, 1989; Arrighi 1994). The foundation for a process of industrialization and new

international divisions of labor on a global scale is attributed to the dynamics of the capitalist world-system.

Adam Smith, an eighteenth-century political economist, defined “division of labor” as the specialization of

workers in different parts of the production process, usually in factory setting.

Gereffi stressed that the division of labor also acquired a geographical dimension during the influx

of industrial economies as evolved. In a global scope, the “classic” international division of labor was

between the industrial countries producing manufactured goods and the non-industrialized economies that

supplied raw materials and agricultural products to the industrial nations which became a market for basic
manufacturers. Years after World War II, trade flows have become far more complex, and so have the

relationships between the developed and the developing nations of the global economy.