INTRODUCTION TO GLOBALIZATION
Governments
Globalization Concepts, Meanings, Features,
and Dimensions
Globalization
- process in which people, ideas and goods
spread throughout the world, spurring
more interaction and integration between
the world's cultures, governments and
economies(1).
- process of interaction and integration
among the people, companies, and
governments of different nations, a process
driven by international trade and
investment and aided by information
technology.
- has effects on the environment, on culture,
on political systems, on economic
development and prosperity, and on human
physical well-being in societies around the
world
- about growing worldwide connectivity.
There were similarities in features of those
prevailing waves of globalization before the
outbreak of the First World War in 1914 to the
current wave. There is an increase in cross border-
trade, investment, and migration due to policy and
technical developments in the past few decades. It
is in the area of economic development that
observers believe the world has entered a new
phase.
- Today’s globalization is farther, faster,
cheaper, and deeper in comparison to
earlier waves of globalization.
In the years since the Second World War, and
especially during the past two decades, many
governments have adopted free-market economic
systems, vastly increasing their own productive
potential and creating myriad new opportunities
for
international trade and investment.
also have negotiated dramatic reductions in
barriers to commerce and have established
international agreements to promote trade in
goods, services, and investment. Taking advantage
of new opportunities in foreign markets,
corporations have built foreign factories and
established production and marketing
arrangements with foreign partners.
- A defining feature of globalization,
therefore, is an international industrial and
financial business structure (4).
Technology
- Principal driver of globalization.
- Economic life is dramatically transformed
by advancement in information technology.
- All sorts of individual economic actors like
consumers, investors, and businesses
which are valuable new tools for
identifying and pursuing economic
opportunities, including
1. faster and more informed analyses
of economic trends around the
world,
2. easy transfers of assets, and
3. collaboration with far-flung
partners are provided by
information technologies.
Globalization is the process of integration of
economies across the world through cross-border
flow of factors product and information (5).
According to the International Monetary Fund
(IMF) globalization is the growing economic
interdependence of countries worldwide through
increasing volume and variety of cross border
transactions in goods and services and of
international capital flows and also through the
more rapid and wide diffusion of technology (6).
Globalization is an expansion, and intensification
of social relations and consciousness across world
time and world space.
Further, globalization is considered a Covered in the process of social stretching are:
multi-dimensional process involving economic,
political, technological, cultural, religious and
ecological dimensions.
- It suggests a dynamic process of change
that results in either positive or negative
development.
- It leads to the creation of something new;
it involves the multiplication of social
connections and various activities that
transgress traditional and political,
economic, cultural and geographical lines.
Attributes, Qualities or Characteristics of
Globalization
1. It involves both the creation of new social
networks and the multiplication of existing
connections that cut across traditional, political,
economic, cultural, and geographical boundaries.
- Brazilian World Cup: Today’s media
combine conventional TV coverage with
multiple streaming feeds into digital
devices and networking sites that transcend
nationally based services.
2. Globalization is reflected in the expansion and
the stretching of social relations, activities, and
connections.
Examples:
1. Reaching of financial markets around the
globe
2. Occurrence of electronic around the clock
3. Emergence of gigantic and virtually
identical shopping malls in all continents
to cater to consumers who can afford
commodities all over the
world-including products whose various
components were manufactured in different
countries. This process is called social stretching.
1. Non-governmental organization
2. Commercial enterprises
3. Social clubs
4. Regional & global institutions and
associations (UN, EU, ASEAN, Google
and others)
3. Globalization involves the intensification and
acceleration of social exchanges and activities.
1. The worldwide web relays distant
information in real time
2. Satellites provide consumers with instant
pictures of remote events
3. Sophisticated social networking by means
of facebook or twitter has become routine
activity for more than a billion people
around the globe.
4. Globalization processes do not occur merely at
an objective, material level but they also involve
the subjective plane of human consciousness.
- Without erasing local and national
attachments, the compression of the world
into a single place has increasingly made
global the frame of reference for human
thought and action.
- Globalization involves both the
macro-structures of a global community
and the micro-structures of global
personhood.
- It extends deep into the core of the self and
its dispositions, facilitating the creation of
multiple individual and collective identities
nurtured by the intensifying relations
between the personal and the global.
- They differ from each other by acceleration
in the speed of social exchanges and
widening of geographical scopes (7).
Historical Periods of Globalization
1. The Prehistoric Period (10000 BCE-3500
BCE)
In this earliest phase of globalization, contacts
among hunters and gatherers – who were spread
around the world – were geographically limited. In
this period due to the absence of advanced forms
of technology, globalization was severely limited.
2. The Pre-modern Period (3500 BCE- 1500 CE)
In this period the invention of writing and the
wheel were great social and technological boosts
that moved globalization to a new level. The
invention of the wheel in addition to roads made
the transportation of people and goods more
efficient. On the other hand, writing facilitated the
spread of ideas and inventions.
3. The Early Modern Period (1500-1750)
It is the period between the Enlightenment and the
Renaissance. In this period, the European
Enlightenment project tried to achieve a universal
form of morality and law. This with the emergence
of European metropolitan centers and unlimited
material accumulation which led to the capitalist
world system helped to strengthen globalization.
4. The Modern Period (1750-1970)
Innovations in transportation and communication
technology, population explosion, and increase in
migration led to more cultural exchanges and
transformation in traditional social patterns.
Process of industrialization also accelerated.
5. The Contemporary Period (from 1970 to
present)
The creation, expansion, and acceleration of
worldwide interdependencies occurred in a
dramatic way and it was a kind of leap in the
history of globalization.
Dimensions of Globalization
There are six dimensions in globalization. These
include: economic, political, technological,
cultural, religious and ecological dimensions.
1. Economic Dimension
- This refers to the extensive development of
economic relations across the globe as a
result of technology and the enormous
flow of capital that has stimulated trade in
both sources and goods (8)
Major players in the current century’s global
economic order
1. Huge international corporations (General
Motors, Walmart,
Mitsubishi)
2. International Economic Institutions (IMF, World
Bank, The World Trade Organization)
3. Trading Systems
The result of these powerful forces resulted in the
wide gap between the rich and the poor countries.
Major Sources of Economic Growth across
Countries (9)
1. Property rights
2. Regulatory institutions
3. Institutions for macro-economics
4. Stabilization
5. Institutions for social influence
7. Institutions for conflict management
- Economic institutions have decisive
influence on investment in physical and
human capital, technology, and industrial
productions. It is also important for
resource distribution.
2. Political Dimension
This refers to an enlargement and
strengthening of political interrelations across the
globe (10).
Political Issues that Surface in this Dimension
1. The principle of state sovereignty
2. Increasing impact of various intergovernmental
organization
3. Future shapes of regional and global
governance
Example:
1. Global cities like New York, London,
Tokyo, and Singapore are more closely
connected with one another than they are
to various cities in their own countries.
2. European Union, United nations, NATO,
The World Trade Organization
3. Cultural Dimension
- This refers to the increase in the amount of
cultural flows across the globe. Cultural
interconnections are at the foundations of
contemporary globalization (11b).
Individualism and consumerism which are
the dominant cultural characteristics of our age
and the drive for economic success stimulated by
the internet and other technological devices
circulate much more easily than they did in earlier
periods.
- In the dissemination of popular culture,
transactional media corporations play a
major role which brought a sharp rise in
homogenized popular culture that is
manifested in the dominance of fast food
restaurants in more aspects of life
throughout the world.
Cultural diversity often results from
hybridization- a constructive interaction process
between global and local characteristics which is
often visible in food, music, dance, film, fashion,
and language. As a result there is a scarcely any
society in the world that expresses itself in its own
self-contained and authentic culture (11c).
Advertisement plays an important role in this
cultural flow by featuring various celebrities in the
television aside from transforming newscast into
entertainment shows.
4. Religious Dimension
Religion
- personal or institutionalized set of
attitudes, beliefs, and practices relating to
or manifesting faithful devotion to an
acknowledged ultimate reality or deity(12)
- It is the most important defining element of
any civilization as contrasted with race,
language, or way of life.
- As such, it is also portrayed as a defining
element in future conflicts. Whether the
root cause of a particular conflict or merely
a vehicle for the mobilization of nationalist
or ethnic passions, religion is certainly
central to much of the strife currently
taking place around the globe (13).
1. Bin Laden understands umma as a single
community of believers professing faith in
the one and only God, but at the same time
committed to destroying not only alien
invaders but also corrupt Islamic elites in
order to return power to the Muslim
masses.
2. Since one third of the world’s Muslim
population lives in non-Islamic countries,
the restoration of God’s proper reign must
be a global event. Hence, Al-Qaeda
established jihadist cells in various parts of
the world.
Roman Catholic Teaching of Globalization
There are eight (8) principles that summarize the
Roman Catholic Teachings (15).
1. Commitment to universal human rights
2. Commitment to the social nature of the human
person
3. Commitment to the common good
4. Solidarity (The principle of Solidarity affirms
that membership in the human family means that
all bear responsibility for one another.)
5. Preferential option of the poor (In the Theology
of the Incarnation- Christ God became poor for us
so as to enrich us by his poverty.
6. Subsidiary (The Catholic Church teaches that
decisions should be made at the
lowest level in order to achieve the common good.
7. Justice
8. Integral Humanism- is concerned with whole
person
Justice is divided in three (3) categories:
1. Commutative justice
- This aims at fulfilling the terms of
contracts and other promises on both
personal and social level.
2. Distributive justice
- This ensures a basic equity in how both the
burden and the goods of society are
distributed and that ensures that every
person enjoys a basically equal moral and
legal standing apart from differences in
wealth, privilege, talent and achievements.
3. 3. Social justice
This refers to the creation of the conditions in
which the first two categories of justice can be
realized and the common good identified and
defended.
According to catholic teaching, a just society is
one which these forms of justice are assured
because they are required by human dignity.
5. Ideological Dimensions
Ideology - a system of widely shared ideas,
beliefs, norms and values among a group of
people.
- It is often used to legitimize certain
political interests or to defend dominant
power structures.
- Ideology connects human actions with
some generalized claims.
Globalization is a social process of intensifying
global interdependence while globalism is an
ideology that gives the concept of neo-liberal
values and meanings to globalization.
Major Ideological Claims of Advocates of
Globalism (14b)
1. Globalization is about the liberalization and
global integration of markets.
The problem with this claim is that
liberalization and integration of markets happen
through a political project of engineering free
markets by interference of centralized state power,
and it is in contrast to the neoliberal ideal of
limited role of governments.
2. Globalization is inevitable and irreversible.
Globalists believe that spread of market
forces driven by technological innovations is
inevitable in globalization. Neoliberals use this
claim to convince people to adopt the natural
discipline of the market if they want to prosper,
which implies the elimination of government
controls over the market.
3. Nobody is in charge of globalization.
This claim seeks to depoliticize the public debate
on globalization and neutralize anti -globalist
movements.
4. Globalization benefits everyone.
Globalists talk about the benefits of market
liberalization such as rising global living
standards, economic efficiency, individual
freedom, and technological progress. But the
reality is that the opportunities of globalization are
spread unequally and power and wealth are
concentrated among a specific group of people,
regions and corporations.
5. Globalization furthers the spread of democracy
in the world.
For the globalists democracy and free markets are
synonymous.
The neoliberal explanation of globalization is
ideological because it is politically motivated and
contributes to the construction of particular
meanings of globalization which stabilize existing
power relations. Globalism tries to create
collective meaning and shape people’s identities.
THE STRUCTURES OF GLOBALIZATION
THE GLOBAL ECONOMY
Economic globalization refers to the increasing
interdependence of world economies as a result of
the growing scale of cross-border trade of
commodities and services, flow of international
capital and wide and rapid spread of technologies.
- It reflects the continuing expansion and
mutual integration of market frontiers, and
is an irreversible trend for the economic
development in the whole world at the turn
of the millennium (17).
According to the International Monetary Fund
(18) economic globalization is a historical process,
the result of human innovation and technological
progress.
- It refers to the increasing integration of
economies around the world, particularly
through the movement of goods, services,
and capital across borders. It also refers to
the movement of people (labor) and
knowledge (technology) across
international borders.
In economic terms, globalization is nothing but a
process making the world economy an organic
system by extending transnational economic
processes and economic relations to more and
more countries and by deepening the economic
interdependencies among them (19).
Two Major Driving Forces for Economic
Globalization
1. The rapid growing of information in all types of
productive activities
2. Marketization - (A restructuring process that
enables state enterprises to operate as
market-oriented firms by changing the legal
environment in which they operate (20) and can be
achieved through reduction of state subsidies,
organizational restructuring of management such
as corporatization, decentralization, and
privatization (21).
Rapid development of science and technologies
served as the basis for immediate globalization of
the world economies which in turn provided an
environment where there is a swift spreading of
market economic systems all over the world.
Dimensions of Economic Globalization
1. The globalization of trade of goods and services
2. The globalization of financial and capital
markets
3. The globalization of technology and
communication
4. The globalization of production
Difference between Economic Globalization from
Internationalization
Economic globalization is a functional integration
between internationally dispersed activities which
means that it is a qualitative transformation rather
than a quantitative change.
Internationalization is an extension of economic
activities between internationally dispersed
activities (22).
Economic globalization produces its own major
players in the form of transnational corporations
(TNCs), the main driving forces of economic
globalization of the last 100 years or roughly
two-thirds of world export (23).
Transnational corporation otherwise known as
multi -national corporation is a corporation that
has a home base, but is registered, operates and
has assets or other facilities in at least one other
country at one time (24). Examples are the
US-based General Electric (GE), the Coca-Cola
Companies of Atlanta, Georgia, US Nike and
others.
Origin of Economic Globalization
Economic globalization is a process that creates an
organic system of the world economy.
In the 16th century world system analysts
identified the origin of modernity and
globalization through long distance trade in the
16th century (25). This best known example of
archaic globalization is the Silk Road, which
started in western China, reached the boundaries
of the Parthian empire, and continued onwards
towards Rome (26). It also connected Asia, Africa,
and Europe (27).
In the 17th and 18th century the global economy
existed only in trade and exchange rather than
production as the world export to World GDP did
not reach 1 to 2 percent (28).
In the 19th century the advent of globalization
approaching its modern form was witnessed. A
short period before World War I is referred to as
the golden age of globalization characterized by
relative peace, free trade, financial and economic
stability (29). Growth in international exchange of
goods accelerated in the second quarter of the 19th
century.
Global economy in the 19th and 20th centuries
grew by an average of nearly 4 percent per annum,
which is roughly twice as high as growth in the
national incomes of the developed economies
since the late 19th century (30).
International Monetary Systems and Gold
Standard
International monetary system (IMS)
- refers to a system that forms rules and
standards for facilitating international trade
among the nations.
- helps in reallocating the capital and
investment from one nation to another.
- the global network of the government and
financial institutions that determine the
exchange rate of different currencies for
international trade.
- a governing body that sets rules and
regulations by which different nations
exchange currencies with each other (31).
- IMS as rules, customs, instruments,
facilities, and organizations for affecting
international payments with the main task
of facilitating cross-border transactions,
 especially trade and investment (32). It
also reflects economic power and interests,
as money is inherently political, an integral
part of high politics or diplomacy (33).
Evolution of the International Monetary
System
● In 1870 to 1914, with the help of gold and
silver, trade was carried without any
institutional support. Monetary system
during that time was decentralized while
market based and money played a minor
role in international trade in contrast to
gold.
Gold was believed to guarantee a non-inflationary,
stable economic environment, a means for
accelerating international trade (34) and the gold
standard functioned as a fixed exchange rate
regime, with gold as the only international reserve.
Gold Standard is a system of backing a country’s
currency with its gold reserves. Such currencies
are freely convertible into gold at a fixed price,
and the country settles all its international trade
transactions in gold (35).
● After World War I, the use of gold declined
due to increased expenditure and inflation
which were caused by war. Major
economic powers were on gold standards
but could not maintain it and failed
because of the Great depression in 1931.
● In 1944, 730 representatives of 44 nations
met at Bretton Woods, New Hampshire,
United States to create a new international
monetary system called the Bretton Woods
system, the aim of which is to create a
stabilized international currency system
and ensure monetary stability for all the
nations.
● Since the United States held most of the
world’s gold, all the nations would
determine the values of their currencies in
terms of dollars. The central banks of
nations were given the task of maintaining
fixed exchange rates with respect to the
dollar for each currency. The Bretton
Woods system ended in 1971 as the trade
deficit and growing inflation undermined
the value of the dollar in the whole world.
In 1973, the floating exchange rate
system, also known as flexible exchange
rate system was developed that was market
based (36).
To assess whether the gold standard was
successful, the following roles of a properly
designed IMS must be considered:
1. to lend order and stability to foreign
exchange markets,
2. to encourage the elimination of
balance-of-payments problems,
3. to provide access to international credits in
the event of disruptive shocks
The gold standard has never worked
satisfactorily in controlling inflation or
maintaining equilibrium in international
transactions.
European Monetary Integration
European monetary integration
- refers to a 30-year long process that began
at the end of the 1960s as a form of
monetary cooperation intended to reduce
the excessive influence of the US dollar on
domestic exchange rates, and led, through
various attempts, to the creation of a
Monetary Union and a common currency.
This Union brings many benefits to
Member States.
European Monetary System (EMS)
- on the other hand is a 1979 arrangement
between several European countries which
links their currencies in an attempt to
stabilize the exchange rate.
- the system was succeeded by the European
Economic and Monetary Union (EMU), an
institution of the European Union (EU),
which established a common currency
called the euro.
- an attempt to stabilize inflation and stop
large exchange rate fluctuations between
European countries.
- The future of EMU depends on the
willingness of member states to agree on
more fundamental changes in the
governance of the Eurozone.
European Financial Stability Mechanism
(EFSM)
- is a permanent fund created by the
European Union (EU) to provide
emergency assistance to member states
within the Union.
- raises money through the financial
markets, and is guaranteed by the
European Commission.
European Financial Stability Facility (EFSF)
- an organization created by the European
Union to provide assistance to member
states with unstable economies.
International Trade and Trade Policies
International trade
- is the exchange of goods, services and
capital across national borders.
- a multi-million dollar activity, central to
the Gross Domestic Product (GDP) of
many countries, and it is the only way for
many people in many countries to acquire
resources (41).
- the exchange of goods or services along
international borders.
- allows for a greater competition and more
competitive pricing in the market (42).
The two key concepts in the economics of
international trade are specialization and
comparative advantage.
Comparative advantage
- comes in; so long as the two countries have
different relative efficiencies, the two
countries can benefit from trade – the
country with absolute advantage will still
benefit by directing its resources to those
goods where it is most productive and
trading for the others
Specialization
- refers to this process; countries as well as
individual businesses can maximize their
welfare by specializing in the production
of those goods where they are most
efficient and enjoy the largest advantages
over rivals (43)
Global trade allows wealthy countries to use their
resources such as labor, technology, or capital
more efficiently.
● Because countries are endowed with
different assets and natural resources, some
countries may produce the same good
 more efficiently and therefore sell it more
cheaply than other countries (44).
● Specialization in international trade
happens if a country cannot efficiently
produce an item and obtain it by trading
with another country that can.
Trade policies
- refer to the regulations and agreement of
foreign countries
- defines standards, goals, rules, and
regulations that pertain to trade relations
between countries.
● Each country has specific policies
formulated by its officials. Boosting the
nation’s international trade is the aim of
each country. Taxes imposed on import and
export, inspection, regulations, tariffs and
quotas are all part of a country's trade
policy.
Focuses of Trade Policy in International Trade
Tariffs
- taxes or duties paid for a particular class of
imports or exports.
● Imposing taxes on imported and exported
goods is a right of every country. Heavy
tariffs on imported goods are levied by
some nations for the protection of their
local industries. The prices of imported
goods in local markets are inflated due to
high import taxes to ensure demand for
local products.
Trade barriers
- These are measures that governments or
public authorities introduce to make
imported goods or services less
competitive than locally produced goods
and services (47).
- state-imposed restrictions on trading a
particular product or with a specific nation.
- can be linked to the product, service like
technical requirement and it can also be
administrative in nature such as rules and
procedures of transactions.
Safety
- This ensures that imported products in the
country are of high quality. Inspection
regulations laid down by public officials
ensure the safety and quality standards of
imported products.
Types of Trade Policies
National Trade Policy
- This safeguards the best interest of its trade
and citizens.
Bilateral Trade Policy
- To regulate the trade and business relations
between two nations, this policy is formed.
- Under the trade agreement the national
trade policies of both the nations and their
negotiations are considered while bilateral
trade policy is being formulated.
International Trade Policy
- This defines the international trade policy
under their charter like the International
economic organizations, such as
Organization for Economic Co-operation
and Development (OECD), World Trade
Organization (WTO) and International
Monetary Fund (IMF).
 - The best interests of both developed and
developing nations are upheld by the
policies.
Trade Policy and International Economy
The World Trade Organization (WTO)
- deals with the global rules of trade between
nations with the main function of ensuring
that trade flows smoothly, predictably and
freely.
- only global international organization
dealing with the rules of trade between
nations with WTO agreements, negotiated
and signed by the bulk of the world’s
trading nations and ratified in their
parliaments at its heart (48).
- viewed as the means by which
industrialized countries can gain access to
the markets of developing countries (49).
Global Economy Outsourcing
Outsourcing
- is an activity that requires search for a
partner and relation-specific investments
that are governed by incomplete contracts
and the extent of international outsourcing
depends on the thickness of the domestic
and foreign market for input suppliers, the
relative cost of searching in each market,
the relative cost of customizing inputs and
the nature of the contracting environment
in each country (50).
Subcontracting
- a central element of the new economy
- is the practice of assigning part of the
obligations and tasks under a contract to
another party known as a subcontractor
and especially prevalent in areas where
complex projects are the norm like
construction and information technology
(52).
Outsourcing is a means of finding a partner with
which a firm can establish a bilateral relationship
and having the partner undertake
relationship-specific investments so that it
becomes able to produce goods and services that
fit the firm’s particular needs.
One of the most rapidly growing components of
international trade is the outsourcing of
intermediate goods and business services. There
are three essential features of a modern
outsourcing strategy.
1. Firms must search for partners with the
expertise that allows them to perform the
particular activities that are required.
2. They must convince the potential suppliers to
customize products for their own specific needs.
3. They must induce the necessary
relationship-specific investments in an
environment with incomplete contracting.
Possible Determinants of the Location of
Outsourcing
1. Size of the country can affect the “thickness” of
its markets.
2. The technology for search affects the cost and
likelihood of finding a suitable partner.
3. The technology for specializing components
determines the willingness of a partner to
undertake the needed investment in a prototype.
4. The contracting environments can impinge on a
firm’s ability to induce a partner to invest in the
relationship.