Globalization - It refers to the integration of
the national markets to a wider global market.
Globalize - Develop or be developed so as to
make international influence or operation
possible.
Global - Affecting or including the whole world.
Contemporary - Living or occurring at the
same time.
Contemporary World. - The circumstances
and ideas of the present age; "in modern times
like these" modern times, modern world,
present times.
Definition of Globalization
a. It is the increasing interaction of people,
states, or countries through the growth of the
international flow of money, ideas and culture.
Thus, globalization is primarily focused on
economic process of integration that has social
and cultural aspects.
b. it is the interconnectedness of people and
business across the world that eventually lead
to global, cultural, political, and economic
integration.
c. it is the ability to move and communicate
easily with others all over the world in order to
conduct business internationally.
d. it is the free movement of goods, services
and people across the world seamless and
integrated manner.
e. It is the liberalization of countries of their
impact protocols and welcome foreign
investment into sectors that are the mainstays
of economy.
f. it refers to countries acting like magnets
attracting global capital by opening up their
economies to multinational corporations.
2. Historical Foundation of the term
“Globalization”
Though many scholars place the origins
of globalization in modern times, others trace
its history long before the European Agee of
Discovery and voyaged to the New World,
some even to the third millennium BC. Large-
scale globalization began in the 1820’s. In the
late 19th century and early 20th, the connectivity
of the world’s economies and cultures grew
very quickly.
In 1897, Charles Taze Russell (of the
Watch Tower Bible and Tract Society) coined a
related term, corporate giants. This term refers
to the largely national trusts and other large
enterprises of the time.
In 1930, the word “globalize” as a noun
appeared in a publication entitled Towards
New Education where it denoted a holistic view
of human experience in education.
In the late 1970’s the word
“globalization” was coined. In 2013, this term
was used to mean “borderless society”
referring to international migration.
In the early part of 1981, the term
“globalization” had been used in its economic
sense. However, in the late half of the 1980’s
Theodore Levitt popularized the term
“globalization” by bringing it into the
mainstream business audience.
Lately in 2000, The International
Monetary Fund (IMF) identified four (4) basic
aspects of globalization:
(1) trade and transactions
(2) capital and investment
(3) migration of knowledge
(4) dissemination
It is only in 2017 when the word
“globalization” was often used in teaching, in
discussion, in meetings and conferences, in
lectures and so on.
This time 2018, the phenomenon of
globalization is now on full swing in all
academic disciplines.
 Indicators of Globalization
The jet engine, the internet, e-banking, e-
books, e-bike, the LRT, MRT and other
inventions of science and technology are
attributable to the spread of globalization.
These are some of the modern offspring of
development in our infrastructure system.
These improvements that people enjoy today in
this contemporary world have been major
factors in globalization which have generated
further interdependence in economic and
cultural activities among nations.
Likewise, environmental challenges such as
global warming, cross-boundary water, air
pollution, and over-fishing of the ocean are
linked with globalization. Globalizing processes
affect and are affected by business and work
organization, economics, socio-cultural
resources, and the natural into three major
areas: economic globalization, cultural
globalization, and political globalization.
Nature of Globalization
Globalization is a conglomerate of various
multiple units located in the different parts of
the globe which are linked by common
ownership. The multiple limits draw on parts of
the globe but all linked by common ownership.
Multiple units draw on a common pool of
resources, such as money, credit, information,
patents, trade names and control systems. The
markets of the world. Human resources are
highly diverse. Transactions involving
intellectual properties such as copyrights,
patents, trademarks, and process technologies
are across the globe.
Dimensions of Globalization
The following are the dimensions
globalization:
a) Planning to expand the business on a
worldwide scope.
b) Giving up the distinction between
domestic and foreign market and
instead developing a global outlook of
such business.
c) Locating the production and the physical
facilities of the business by considering
global business dynamics irrespective of
national consideration.
d) Creating product development and
production planning on a global market
sphere.
e) Global sourcing of the factors of
production such as raw materials
components, machinery, technology,
finance, and others that are obtained
from the best source anywhere in the
world.
f) Global orientation or organization
structure and management culture.
Reasons for Globalization
A. Rapid shrinking of time and distance
across the globe. One can easily cross
the bridge going to the other side of the
market place due to advance tools of
technology than before.
B. Domestic markets are no longer rich as
a consequence of many interlocking
factors.
C. Companies and institutions go global to
find political and economic stability
whish is relatively good in other
countries than the country of origin.
D. To get technological and managerial
know-how of other countries due to their
advancement in science, technology,
of education, health and other fields of
discipline.
E. To reduce high transportation costs if
one goes globally using the advance
tools of communication and information.
 F. To be close to raw materials and to
markets for their finished products which
are not available in the country of origin.
G. The creation of the World Trade
Organization (WTO) had made it
possible in stimulating increased cross
border trade. There are other world
bodies like the UN and several
arbitration bodies where countries
agree.
Stages of Globalization
Stage 1: The first stage is the arm’s length
service activity of an essentially domestic
company/institution which moves into new
market overseas by linking up with local
dealers and distributors.
Stage 2: In this stage, the company/institution
takes over these activities on its own.
Stage 3: In this stage, the domestic-based
company institution begins to carry out its own
manufacturing marketing and sales in key
foreign markets.
Stage 4: In this stage, the company/institution
moves to a full insider position in these markets
supported by a complete business system
including Research and Development (R&D)
and engineering. However, the headquarters
mentality continues to dominate.
Stage 5: In this stage, the company/institution
moves towards a genuinely global mode of
operation. In this stage, global localization
happens, that is, the company/institution
serves local customers in markets around the
globe responding to their needs. This requires
an organizational transition i.e the company
must denationalize its operational and create a
system of values shared by global managers.
Merits of Globalization
1. Global competition and imports keep a
lid on prices such that inflation is less
likely to derail economic growth.
2. An open economy spur fast innovation
with fresh ideas from abroad.
3. Export jobs often pay more than other
jobs.
4. Unfettered capital flow keeps interest
rates low.
5. Living standards go up faster.
6. Productivity grows more quickly when
countries produce goods and services in
which they are of comparative
advantage.
7. Countries liberalize their visa rules and
procedures so as to permit the full flow
of people from country to country.
8. It results in freeing up the unproductive
sector to investment and the productive
sector to export related activities
resulting in a win-win situation for the
world economy.
Demerits of Globalization
 Several people lose their jobs when
companies import cheap labor or
materials or shift production abroad.
 Workers face pay cut demands from
employers who often threatens to export
jobs.
 Unregulated globalization can cause
serious problems to poor and
developing countries in term of labor
force, wages, benefits, job, termination,
and others.
 High foreign stake on industries where it
is not necessarily needed could affect
the economic growth of domestic
enterprise.
 Sovereignty of a country and company/
institution may be at stake.
Importance of Studying Globalization
  There is a greater demand in business
and industry, health, engineering and
technology to have people who can
work with people of other nations and
cultures.
 There is greater demand of promoting
the local business and industry to other
countries and if need be, owners travel
independently and internationally for a
better promotion.
 The contemporary world face global
challenges that will take interdisciplinary
groups to solve these challenges: these
challenges are: how to provide access
to clean water, clean environment, clean
renewable energy that is affordable to
everyone and how to deal with the
unpredictable climate change just to
name a few. These global challenges
need to be solve as soon as possible
through the gathering and sharing of
information across disciplines,
institutions, and other entities in a global
scale.
 Creating meaningful, harmonious and
workable relationship that link globally is
an important aspect of the merits of
globalization, especially if one wished to
be the President of the future
generation.
 Knowledge of the merits, demerits and
reasons for globalization will enable the
students to work as model of
collaborative international team in the
near future along the areas of business,
education, health, science, arts,
engineering, hotel industries, etc. and
discuss best products in these areas.
The Importance of Globalization for
Everyone
According to Neil Kokemuller, a writer,
globalization is the expansion of local
economies and business into a broader
international marketplace. Even small business
had gotten active in the global environment as
the Internet and mobile technology have
enabled communication across continents and
countries. It has become important for a
number of reasons including the overall need
for business to compete.
The internet revolutionized the business
arena, because it created a whole new virtual
marketplace that expands beyond physical and
geographical boundaries. Companies in foreign
countries can now compete for customers in
the United States by leveraging their own
country’s resources, lower costs of labor and
affordable distribution processes. In the same
way, US companies have the opportunity to
appeal to customers in the Philippines and
other countries by promoting their goods and
services.
The development of business, industry and
income levels in several large population
centers has also contributed to the importance
of globalization. China, India and Brazil are
prominent examples of thriving economies as
of 2013. Nearly two billion people reside in
these countries. As customers gain revenue
dollars can provide. Partnership opportunities
with businesses in these countries can aid
growth.
Competition
Even if you want to avoid the globalization
movement, you often have no choice but to
compete. The influx of foreign competitors in
the US limits the number of companies in some
industries that can succeed domestically. In the
same way, if your competitors expand globally,
you have to consider following suit. Any money
other companies make in foreign markets, they
products and services domestically.
Diverse Population
Business trends often mirror broader
societal trends. The United States and the
world in general, has become very diverse. The
United States is home to immigrants from
many countries around the world. As people
move to different parts of the world, they
spread different ideas, perspective and
customs. Foreign-born citizens who work for
and buy from US companies often want to see
them get involved in doing business in other
parts of world.
The Theory of Comparative Advantages
Globalization is grounded on the Theory of
Comparative Advantage. This theory states
that countries that are good of producing
particular good are better off exporting it to
countries that are less efficient at producing
that good. Conversely, the latter country can
then export the goods that it produces in an
efficient manner to the former country which
might be deficient in the same. The underlying
assumption here is that not all countries are
good at producing all sorts of goods and hence
they benefit by trading with each other. Further,
because of the wage differential and the way in
which different countries are endowed with
different resources, countries stand to gain by
trading with each other.
Philosophy Underlying Globalization
Globalization is one of the most widely
spread recent cultural, social, economic and
political phenomenon which has strongly
marked the discourse of the humanities and
social sciences. This new, not-yet constituted
era poses multiple challenges in which there is
room for novel theoretical paradigm in this new
emerging world.
The concept of globalization has only
recently been widely accepted and adapted-
words like global, globality, globalization,
globalism as well as the concepts of global
market, global ecology, global citizen, its more
truly unknown up to the very end of 20 th
century.
Discussion of world issues used the
derivatives of “international” rather than “global”
relations because of the recent popularized
new concept of “globalization” has resulted in
innumerable contradicting definitions of the
same.
While normatively speaking, some
people associate globalization with progress,
prosperity and peace, some others consider it
to be retrogression, disaster and decay.
The common and indisputable
characteristics of all it definitions is the view
that globalization is “a process of economic,
social, culture, and political activity, which
transcends nation-state borders and that it
pertains to the world as a whole”. It is within
this context that the multidimensionality of the
globalization process comes to the force.
Globalization is a complex and
controversial process of the building of the
world as a whole due to the creation of global
institutional structures and global cultural forms
like a free market (economic unification of the
world with uniform patterns of production and
consumption; democratic integration of the
world based on common interest of humankind,
such as equality, human rights protection, rule
of law, peace and security, and moral
integration of the world based on humanistic
values-instead of nation state particularism.
Various ideological movements of
resistance to globalization have been emerging
in response to globalization such as the violent
and destructive mass denominations staged in
various countries are a manifestation of
resistance.
Finally, based on the above
philosophical dimensions underlying
globalization is the free movement of goods,
services, and people across the world in a
seamless and integrated manner. Globalization
can be thought of to be the result of the
opening up of the global economy and the
concomitant increase in trade between nations
in this contemporary world.
The point here is that, globalization has
had positive and negative effects and
therefore, a deep approach is needed when
discussing the concept. What is undeniable is
that GLOBALIZATION is here to stay hence it
is better for the countries in the global economy
to embrace the concept and live with it in this
contemporary world.
 CHAPTER 2
 Neoliberalism. Antithetical to the
protection of group - rather than
individual – interests.
 International Trade. The exchange of
capital, goods, and
servicesacross international borders or
territories because there is a need or
want of goods or services.
 Mercantilism. Belief in the benefits of
profitable trading.
 economy. Economic freedom to purchase and
 Global Economy. World economy
Global Economy
Global economy is also referred to as
world economy. This term refers to the
international exchange of goods and services
that is expressed in monetary units of money. It
may also mean as the free movement of
goods, capital, services, technology and
information.
In some context “global” or
“International” economy is distinguished and
measured separately from national economies
while the “world economy” is simply an
aggregate of the separate country’s
measurements.
World economy is exclusively limited to
human economic activity and is typically judged
in monetary terms. Typical examples are illegal
drugs and other black market goods which by
any standard are part of the world economy,
but for which these is by definition no legal
market of any kind.
Global economy or economic
globalization is concerned on the globalization
of production, finance, markets, technology,
organizational regimes, institutions,
corporations and labor. While economic
globalization has been expanding since the
emergence of trans-national trade, it has grown
at an increased rate due to an increase in
communication and technological advances
under the framework of General Agreement on
Tariffs and Trade and World Trade
Organization, which made countries gradually
cut down trade barriers and open up their
current accounts and capital accounts. This
recent boom has been largely supported by
developed economies integrating with majority
world through foreign direct investment and
lowering costs of doing business, the reduction
of trade barriers and in many cases cross
border migration.
Economic Systems
Market Economy – decision making of private
individuals is a determinant of a pure market
sell products, services, and properties is a key
characteristics of an economy under the will
and interest of the individuals. Economics
activities like production and distribution of
goods and commodities are based on the
interaction of supply and demand. This
condition is not planned by a single person or
group that has the ability to manipulate or
direct the economy solely. There is a very
close economic engagement between
producers and consumers. Supply in the
market is based on the consumer behavior,
price and the resource availability in the
economy.
Command Economy- a central economic
body handles the entire decision-making in the
operation of an economy. The quality and
quantity of goods and services produces in the
market is based on the decision of the
government. Production quantity is dictated,
consumer behavior is directed, and market
operation is controlled by a single authority.
During the height of communism, many
countries move its economy to state planning
and government ownership. However,
economic problems hampered the economy
like limited production, faulty decisions, and
weak domestic investments.
The objective of command system is to
mobilize resources for the common good of
the public and for the interest of the nation.
Private individuals have no say in the economic
operation as this includes the abolition of
private of economic competition and
innovation.
Mixed Economy - market-driven economies
like United States, Great Britain and France
had experienced mixed economic system. This
practice is a combination of market and
command systems of economic planning and
decision-making. Some sectors are under the
direction of the private individuals while others
aspects of the economy are left within the
interest and guidance of the government.
There are times that the state has to take over
the ownership and operation of a particular
troubled private firm for the purpose of
maintaining the interest of the nation. When the
American market was hit by the 2008-2009
financial markets, its government resorted to
take over some collapsing financial
corporations.
International Trade
The conclusion of World War II signaled
the beginning of trade facilitation around the
globe. Economies set rules and guidelines for
international trade which led to formation of
General Agreement on Tariffs and Trade
(GATT). These trade rules were developed
through series of rounds or meetings of
member economies. Exchanges of good and
commodities become more accessible, trade
barriers were reduced, unprecedented
increased of specialization and product
innovation, and competitive prices were offered
in major industries. These development
resulted to a more open and free flow of goods
and services where exchanges were seen
between developed and less developed
economies.
International Trade (IT) is the process and
system when goods commodities, services
cross national economy, and boundaries in
exchange for money or goods of another
country (Balaam and Vesth, 2008). Global
trade has grown dramatically since the post-
cold war era as result of increasing demand of
goods and services of countries. This global
norm is are flection of growing practice of
internationalizing and globalizing local products
and services.
Trade Theories
There are two types of trade theories
explaining international trade:
Descriptive Theory. It deals with the natural
order and movement of trade. It describes the
pattern of trade under the idea of laissez faire,
a French term which means “leave alone”. It
refers to the notion that individuals are the best
economic agents to solve the problems through
invisible hand rather than the government
policies. Descriptive theory addresses the
questions of which product to trade, how much
product to offer and produce, and which
country to trade in the absence of government
restrictions.
Prescriptive Theory. This prescribes whether
government, an important economic institution,
should interfere and restrict with the movement
of goods and services. This theory views
government to have participation in deciding
which countries to alter the amount,
composition and direction of goods. The
pressing question describing descriptive theory
is “Should the government control trade?”
Three Perspective on International Trade
Economic Liberals
David Ricardo and Adam Smith were
known critics of late 18th century on the abuses
of mercantilism in England. Their liberal ideas
and contribution in understanding global trade
are still relevant until today. For Ricardo, his
influential work Law of Comparative Advantage
explains that free trade efficiency is attainable if
two countries can produce more goods and
trade products separately. The advantage of
this theory in international trade is deriving from
the principle of specialization and division of
labor (Nau,2009). Countries have different
resources and talents; they are better in
performing in that economic activity than other
economic activities.
Economic liberals explain the
importance of free trade and the role of
individual’s preference in choosing economic
activity. It includes making decision and
choices on comparing the costs of products to
be produced and traded, the availability of the
product and the efficiency of producing and
buying the products.
Mercantilists
Mercantilism is an economic theory
emerged from about 1500-1800.This period
was the emerging eras of nations-states and
the formation of more central governments.
This system flourished due to the following
reasons:
 Higher export than import. Governments
imposed restrictions and policies
requiring economy and its market to
produce higher that products and
services purchased outside the country
or import. Countries used this
mechanism to support their trade
objectives and strengthen their colonial
rule and possessions.
Export less high valued product and import
less high valued product. It prevented and
monopolized the production and manufacturing
operation of the colonies.
The benefits of colonial powers.
Mercantilism was adopted to increase and
sustain the colonial power and its authority to
direct and control the economic activity of the
colony.
Alexander Hamilton and Friedrich List are
known critics of economic liberalism. They
stressed the need of government and an
economic body controlling and overseeing the
operation of economy.
Structuralists
The earliest wave of mercantilism was
described as classical imperialism. The drive of
European countries to explore and colonized
underdeveloped countries originated from the
aggressive mercantilist behavior of European
economies. This idea was extended to the
practice of modern capitalist-imperialist
approach by countries and economies that
have the immense resource through the use of
hard power over developing and less
developed countries.
The Modern World System (MWS)
theory developed by Immanuel Wallerstein,
explains the contact of economies between
core, semi-peripheral and peripheral countries
in the world. The core states have the absolute
advantage over the other through unequal
exchange and extraction of raw materials from
periphery and semi-periphery. This system as
part on the structure of global capitalism,
involves exploitation, and transformation in
some ways. The 16th century core states of
northwest Europe moved agricultural sector to
higher –skilled industries. Eastern Europe
became the periphery economy where it
heavily exported agricultural products to the
core. While Mediterranean Europe served as
intermediary between the core and periphery
through using its labor-intensive industry.
The economic globalization and market
integration of the 21st century are extensions of
the same economic motives of imperial powers
of the 19th and 20th centuries (Balaam and
Veseth,2008).
Why Countries Engage in International
Trade?
Use of Excess Capacity in Demand.
The inadequate domestic demand pushes
business organizations to expand their market
base outside the national territory. This is
usually done by firms and companies that have
the resources and capital to operate in a
transnational market. Giant brands like Nestle,
Pepsi, McDonald’s, Toyota, and Starbucks are
known for expanding their operations outside
their home country.

Cost Reduction and Increase of Profit. A
market leader for a particular good or service
may garner a lower production cost by
increasing its market in global rather than
domestic. This enables a firm to increase its
profit while reducing its operating costs.
Cheaper Supplies. A country imports
goods from other countries because of
inexpensive raw materials and supplies used
for production. The availability of buying
cheaper materials from other countries lowers
the cost in production which might result to an
increase in the profit of businesses.
Addition to Product Line. Economies
usually aim for a variety of products and
services available in the market. It offers
consumer to choose and buy products that are
of competitive prices, degree of importance,
and will offer higher satisfaction.
Reduction Risk. Importing products is
seen as an alternative to countries that are
vulnerable to supply shortage. These countries
that have high volume of imported goods are
economies that confront the demand and
supply condition of the local market.
Foreign Policy Tool. The membership of a
country to regional market integration and
economic relationships is part of its foreign
policy. Enhancing the economic and political
affiliation of a country is very important in
sustaining its international status in a global
environment.
The Bretton Woods System
After the two world wars, world leaders
sought to create a global economic system that
would ensure a longer-lasting global peace.
They believed that one of the ways to achieve
this goal was set up a network of global
financial institutions that would promote
economic interdependence and prosperity. The
Bretton Wood system was inaugurated in 1944
during the United Nations Monetary and
Financial Conference to prevent the
catastrophes of the early decades of the
century from reoccurring and affecting
international ties.
The Bretton Woods system was largely
influenced by the ideas of British economist
John Maynard Keynes who believed that
economic crises occur not when a country
does not have enough money, but when
money is not being spent and, thereby, not
moving. When economies slow down,
according to Keynes, governments have to
reinvigorate markets with infusions of capital.
This active role of governments in managing
spending served as the anchor for what would
be called a system of global Keynesianism.
Delegates at Bretton Woods agreed to
create two financial institutions. The first was
the International Bank for reconstruction and
Development (IBRD, or World Bank) to be
responsible for funding postwar reconstruction
projects. It was a critical institution at a time
when many of the world’s cities had been
destroyed by the war. The second institution
was the International Monetary Fund (IMF),
which was to be the global lender of the last
resort to prevent individual countries from
spiraling into credit crises. If economic growth
in a country slowed down because there was
not enough money to stimulate the economy,
the IMF would step in. To this day, both
institutions remain key players in economic
globalization.
Shortly, after Bretton Woos, various
countries also committed themselves to further
global economic integration through the
General Agreement on Tariffs and Trade
(GATT) in 1947. GATT’s main purpose was to
reduce tariffs and other hindrances to free
trade.
Neoliberalism and Its Discontents
The high point of global Keynesianism
came in the mid-1940s to the early 1970s.
during this period, governments poured money
into their economies, allowing people to
purchase more goods and, in the process,
increase demand for these products. As
demand increased, so did the prices of these
goods. Western and some Asian economies
like Japan accepted this rise in prices because
it was accompanied by general economic
growth and reduced unemployment. The theory
went that, as prices increased, companies
would earn more, and would have more money
to hire workers. Keynesian economists
believed that all this was a necessary trade-off
for economic development.
In the early 1970s, however, the prices
of oil rose sharply as a result of the
Organization of Arab Petroleum Exporting
Countries’ (OAPEC, the Arab member-
countries of the Organization of Petroleum
Exporting Countries or OPEC) imposition of an
embargo in response to the decision of the
United States and other countries to resupply
the Israeli military with the needed arms during
the Yom Kippur War. Arab countries also used
the embargo to stabilize their economies and
growth.
The “oil embargo” affected the Western
economies that were reliant on oil. To make
matters worse, the stock markets crashed in
1973-1974 after the United States stopped
linking the dollar gold, effectively ending the
Bretton Woods system. The result was a
phenomenon that Keysion economics could not
have predicted—a phenomenon called
stagflation, in which a decline in economic
growth and employment (stagnation) takes
place alongside a sharp increase in prices
(inflation).
Around this time, a new form of
economic thinking was beginning to challenge
the Keynesian orthodoxy. Economists such as
Friedrich Hayek and Milton Friedman argued
that the governments’ practice of pouring
money into their goods without necessarily
increasing supply. More profoundly, they
argued that government intervention in
economies distort the proper functioning of the
market.
Economists like Friedman used the
economic turmoil to challenge the consensus
around Keynes’s ideas. What emerged was a
new form of economic thinking that critics
labeled neoliberalism. Form the 1980’s onward,
neoliberalism became the codified strategy of
the United States Treasury Department, the
World Bank, the IMF and eventually the World
Trade Organization (WTO) – a new
organization founded in 1995 to continue the
tariff reduction under the GATT. The policies
they forwarded came to be called the
Washington Consensus.
The Washington Consensus dominated
global economic policies from the 1980’s until
the early 2000’s. it advocates pushed for
minimal government spending to reduce
government debt. They also called for the
privatization of government-controlled services
like water, power, communications and
transport, believing that the free market can
produce the best results. Finally, they
pressured governments, particularly in the
developing world, to reduce tariffs and open up
their economies, arguing that it is the quickest
way to progress. Advocates of the Washington
Consensus conceded that, along the way,
certain industries would be affected and die,
but they considered this, “shock therapy”
necessary for long-term economic growth.
The appeal of neoliberalism was in its
simplicity. It advocates like US President
Ronald Reagan and British Prime Minister
Margaret Thatcher justified their reduction in
government spending by comparing national
economies to households. Thatcher, in
particular, promoted an image of herself as a
mother, who reined in overspending to reduce
the national debt.
The problem with household analogy is
that governments are not households. For one,
governments can print money, while household
cannot. Moreover, the constant taxation
systems of governments provide them steady
flow of income that allows them to pay and
refinance debts steadily.
Despite the initial success of neoliberalism
politicians like Thatcher and Reagan, the
defects of the Washington Consensus became
immediate palpable. A good early example is
that of post-communist Russia. After
Communism had collapsed in the 1990’s, the
IMF called for the immediate privatization of all
government industries. The IMF assumed that
such a move would free these industries. The
IMF assumed that such a move would free
these industries from corrupt bureaucrats and
pass them on to the more dynamic and
independent private investors. What happened,
however, was that only individuals and groups
who had accumulated wealth under the
previous communist order had the money to
purchase these industries. In some cases, the
economic elites relied on easy access to
government funds to take over the industries.
This practice has entrenched an oligarchy that
still dominates the Russian economy to this
very day.
The Global Financial Crisis and the
Challenge to Neoliberalism
Russia’s case was just one example of
how the “shock therapy” of neoliberalism did
not lead to the ideal outcomes predicted by
economist who believed in perfectly free
markets. The greatest recent radiation of this
thinking was the recent global financial crisis of
2008-2009.
Neoliberalism came under significant
strain during the global financial crisis of 2007-
2008 when the world experienced the greatest
economic down turn since the Great
Depression. The crisis can be traced back to
the 1980’s when the United States
systematically removed various banking and
investment restrictions.
The scaling back of regulations
continued until the 2000’s paving the way for
brewing crisis. In their attempt to promote the
free market, government authorities failed to
regulate bad investments occurring in the US
housing market. Taking advantage of “cheap
housing loans”, Americans began building
houses that were beyond their financial
capacities.
To mitigate the risk of these loans,
banks that were lending houseowners’ money
pooled these mortgage payments and sold
them as “mortgage-backed securities” (MBSs).
One MBS would be a combination of multiple
mortgages that they assumed would pay a
steady rate.
Since there was no such surplus money
circulating, the demand for MBSs increased as
investors clamored for more investment
opportunities. In their haste to issue these
loans, however, the banks became less
discriminating. They began extending loans
and individuals with dubious credit records-
people who were unlikely to pay their loans
back. These high-risk mortgages became
known as sub-prime mortgages.
Financial experts wrongly assumed that,
even if many of the borrowers were individuals
and families who would struggle to pay, a
majority would not default. Moreover, banks
thought that since there were so many
mortgages in jus one MBS, a few failures
would not ruin the entirety of the investment.
Banks also assumed that housing prices
would continue to increase. Therefore, even if
homeowners defaulted on their loans, these
banks could simply reacquire the homes and
sell them at a higher price, turning profit.
Sometime in 2007, however, home
prices stopped increasing as supply caught up
with demand. Moreover, it slowly became
apparent the families could not pay off their
loans. This realization the rapid reselling of
MBSs, as banks and investors tried to get rid of
their bad investments. This dangerous cycle
reached a tipping point in September 2008,
when major investment banks like Lehman
Brothers collapsed, thereby depleting major
investments.
The crisis spread beyond the United
States since many investors were foreign
governments, corporations, and individuals.
The loss of their money spread like wildfire
back to their countries.
These series of interconnections
allowed for a global multiplier effect that sent
ripples across the world. For example,
Iceland’s banks heavily depended on foreign
capital, so so when the crisis hit them, they
failed to refinance their loans. As a result of this
credit crunch, three of Iceland’s top commercial
banks defaulted. From 2007 to 2008, Iceland’s
debt increased more than seven-fold.

Until now, countries like Spain and
Greece are heavily indebted (almost like Third
World countries), and debt relief has come at a
high price. Greece, in particular, has been
forced by Germany and the IMF to cut back on
its social and public spending. Affecting
services like pensions, health care, and various
forms of social security, these cuts have been
felt most acutely by the poor. Moreover, the
reduction in government spending has slowed
down growth and ensured high levels of
unemployment.
The United States recovered relatively
quickly thanks to a large Keynesian-style
stimulus package that President Barack
Obama pushed for in his first months in office.
The same cannot be said for many other
countries. In Europe, the continuing economic
crisis has sparked a political upheaval.
Recently, far-right parties like Marine Le Pen’s
Front National in France have risen to
prominence by unfairly blaming immigrants for
their woes, claiming that they steal jobs and
leech off welfare. These movements blend
popular resentment with utter hatred and
racism. We will discuss their rise further in the
final lesson.
Economic Globalization Today
The global financial crisis will take
decades to resolve. The solutions proposed by
certain nationalist and leftist group of closing
national economies to world trade, however,
will no longer work. The world has become has
integrated. Whatever one’s opinion about the
Washington Consensus is, it is undeniable that
some form of international trade remains
essential for countries to develop in the
contemporary world.
Exports, not just the local selling of
goods and services, makes the international
economies grow at present. In the past, those
that benefited the most from free trade were
the advanced nations that were producing and
selling industrial and agricultural goods. The
United States, Japan, and the member-
countries of the European Union were
responsible for 65 percent of global exports,
while the developing countries only accounted
for 29 percent.
When more countries opened up their
economies to take advantage of increased free
trade, the shares of the percentage began to
change. By 2011, developing countries like the
Philippines, India, China, Argentina, and Brazil
accounted nations---including the United States
—had gone down to 45 percent. The WTO –led
reduction of trade barriers, known as trade
liberalization, has profoundly altered the
dynamics of the global economy.
In the recent decades, partly as a result
of these increased exports, economic
globalization has ushered in an unprecedented
spike in global per capita GDP rose over five-
fold in the second half of the 20 th century. It
was this growth that created the large Asian
economies like Japan, China, Korea, Hong
Kong and Singapore.
And yet, economic globalization remains
an uneven process, with some countries,
corporations, and individuals benefiting a lot
more than others. The series of trade talks
under the WTO have led to unprecedented
reduction in tariffs and other trade barriers, but
these processes have often been unfair.
First, developed countries are often
protectionists, as they repeatedly refuse to lift
policies that safeguard their primary products
that could otherwise be overwhelmed by
imports from the developing world. The best
example of this double standard is Japan’s
determined refusal to allow rice imports into the
country to protect it’s farming sector. Japan’s
justification is that rice is “sacred”. Ultimately, it
is economic muscle as the third largest
economy that allows it to resist pressures to
open its agricultural sector.
The United States likewise fiercely
protect its sugar industry, forcing consumers
and sugar-dependent business to pay higher
prices instead of getting cheaper sugar from
plantations of Central America.
Faced with these blatantly protectionist
measures from powerful countries and blocs,
poorer countries can do very little to make
economic globalization more just. Trade
imbalances, therefore, characterize economic
relations between developed and developing
countries.
The beneficiaries of global commerce
have been mainly transnational corporations
(TNCs) and not governments. And like any
other business, these TNCs are concerned
more with profits than with assisting the social
programs of the governments hosting them.
Host countries, in turn, loosen tax laws, which
prevents wages from rising, while sacrificing
social and environmental programs that protect
the underprivileged members of societies. The
term “race to the bottom” refers to countries’
lowering their labor standards, including the
protection of workers’ interest, to lure in foreign
investors seeking high profit margins at the
lowest cost possible. Governments weaken
environmental laws to attract investors,
creating fatal consequences on their ecological
balance and depleting them of their infinite
resources (like oil, coal, and minerals).
Conclusion
International economic integration is a
central tenet of globalization. In fact, it is so
crucial to the process that many writers and
commentators confuse this integration for the
entirety of globalization. As a reminder,
economics is just one window into the
phenomenon of globalization; it is not the entire
thing.
Nevertheless, much of globalization is
anchored on changes in the economy. Global
culture, for example, is facilitated by trade.
Filipinos would not be aware of American
Culture if not for the trade that allows locals to
watch American movies, listen to American
music, and consume American products. The
globalization of politics is likewise largely
contingent on trade relations. These days,
many events of foreign affairs are conducted to
cement trading relations between and among
states.
Given the stakes involved in economic
globalization, it is perennially important to ask
how this system can be made more just.
Although some elements of global free trade
can be scaled back, policies cannot do away
with it as a whole. International policymakers,
therefore, should strive to think of ways to
make trading deals fairer. Governments must
also continue to devise ways of cushioning the
most damaging effects of economic
globalization, while ensuring that its benefits
accrue for everyone.
CHAPTER 3: A History of Global Politics:
Creating an International Order
The world is composed of many
countries or states, all of them having different
forms of government. Some scholars of politics
are interested in individual states and examine
the internal politics of these countries. For
example, a scholar studying the politics of
Japan may write about the history of its
bureaucracy. Other scholars are more
interested in the interactions between two or
more countries. These scholars are studying
international relations. Moreover, when they
explore the deepening of interactions between
states, they refer to phenomenon of
internationalization.
The Attributes of Today’s Global System
World politics today has four key
attributes. First, there are countries or states
that are independent and govern themselves.
Second, these countries interact with each
other through diplomacy. Third, there are
international organizations, like the United
Nations (UN), that facilitate these interactions.
Fourth, beyond simply facilitating meetings
between states, international organizations
also take on lives of their own. The UN, for
example, apart from being a meeting ground
for presidents and other heads of state, also
has task-specific agencies like the World
Health Organization (WHO) and the
International Labour Organization (ILO).
What are the origins of this system? A
good start is by unpacking what one means
when he/she says a ‘‘country’’ or what
academics also call the nation-state. This
concept is not as simple as it seems. The
nation-state is a relatively modern
phenomenon in human history, and people did
not always organize themselves as countries.
At different parts in the history of humanity,
people in various regions of the world have
identified exclusively with units as small as
their village or their tribe, and at other times,
they see themselves as member of larger
political categories like ‘’Christendom’’ (the
entire Christian world).
The nation-state is composed of two
non-interchangeable terms. Not all states are
nations and not all nations are states. The
nation of Scotland, for example, has its own
flag and national culture, but still belongs to a
state called the United Kingdom. Closer to
home, many commentators believe that
Bangsamoro is a separate nation existing
within the Philippines but, through their elites,
recognizes the authority of the Philippine state.
Meanwhile, if there are states with multiple
nations, there are also single nation with
multiple states. The nation of Korea is divided
into North and South Korea, whereas the
‘’Chinese nation’’ may refer to both the
People’s Republic of China (the mainland) and
Taiwan.
What then is the difference between nation
and state?
In layman’s term, state refers to a
country and its government, i.e., the
government of the Philippines. A state has four
attributes. First, it exercises authority over a
specific population, called its citizen. Second, it
governs a specific territory. Third, a state has a
structure of government that crafts various
rules that people (society) follow. Fourth and
the most crucial, the state has sovereignty over
its territory. Sovereignty here refers to internal
and external authority. Internally, no individuals
or groups can operate in a given national
territory by ignoring the state. This means that
groups like churches, civil society
organizations, corporations and other entities
have to follow the laws of the state where they
establish their parishes, offices, or
headquarters. Externally, sovereignty means
that a state’s policies and procedures are
independent of the interventions of other
states. Russia or China, for example, cannot
pass laws for the Philippines and vice versa.
On the other hand, the nation, according
to Benedict Anderson, is an ‘’imagined
community’’. It is limited because it does not go
beyond given ‘’official boundary’’, and because
rights and responsibilities are mainly the
privilege and concern of the citizens of that
nation. Being limited means that the nation has
its boundaries. This characteristic is in stark
contrast to many religious imagined
communities. Anyone, for example, can
become a Catholic if one chooses to. In fact,
Catholics want more people to join their
community; they refer to it as the call to
discipleship. But not everyone can simply
become a Filipino. An American cannot simply
go to the Philippine Embasy and “convert’’ into
a Philippine citizen. Nations often limit
themselves to people who have imbibed a
particular culture, speak a common language,
and live in a specific territory.
Calling it “imagined” does not mean that
the nation is made-up. Rather, the nation
allows one to feel a connection with a
community of people even if he/she will never
meet all of them in his/her lifetime. When you
cheer for a Filipino athlete in the Olympics, for
example, it is not because you personally know
that athlete. Rather, you imagine your
connection as both members of the same
Filipino community. In a given national territory
like the Philippine archipelago, you rest in the
comfort that the majority of people living in it
are also Filipinos. Finally, most nations strive to
become states. Nation-builders can only feel a
sense of fulfillment when that national ideal
assumes an organizational form whose
authority and power are recognized and
accepted by “the people”. Moreover, if there
are communities that are not states, they often
seek some form of autonomy within their
“mother states”. This is why, for example, the
nation of Quebec, though belonging to the
state of Canada, has different laws about
language (they are French-speaking and
require French language competencies for their
citizens). It is also for this reason that Scotland,
though part of the United Kingdom, has a
strong independence movement led by the
Scottish Nationalist Party.
Nation and state are closely related
because it is nationalism that facilitates state
information. In the modern and contemporary
era, it has been the nationalist movements that
have allowed for the creation of nation-states.
States become independent and sovereign
because of nationalist sentiment that clamors
for this independence.
Sovereignty is, thus, one of the
fundamental principles of modern state politics.
Understanding how this became the case
entails going back as far as 400 years ago.
The Interstate System
The origins of the present-day concept
of sovereignty can be traced back to the Treaty
of Westphalia, which was a set of agreements
signed in 1648 to end the Thirty Years’ War
between the major continental powers of
Europe. After a brutal religious war between
Catholics and Protestants, the Holy Roman
Empire, Spain, France, Sweden, and the Dutch
Republic designed a system that would avert
wars in the future by recognizing that the treaty
signers exercise complete control over their
domestic affairs and swear not to meddle in
each other’s affairs.
The Westphalian system provided
stability for the new nations of Europe, until it
faced its first major challenge by Napoleon
Bonaparte. Bonaparte believed in spreading
the principles of the French Revolution---liberty,
equality, and fraternity---to the rest of Europe
and thus challenged the power of kings,
nobility, and religion in Europe. The Napoleonic
Wars lasted from 1803-1815 with Napoleon
and his armies marching all over much of
Europe. In every country they conquered, the
French implemented the Napoleonic Code that
forbade birth privileges, encouraged freedom
or religion, and promoted meritocracy in
government service. This system shocked the
monarchies and the hereditary elites (dukes,
duchesses, etc.) of Europe, and they mustered
their armies to push back against the French
emperor.
Anglo and Prussian armies finally
defeated Napoleon in the Battle of Waterloo in
1815, ending the latter’s mission to spread his
liberal code across Europe. To prevent another
war and to keep their systems of privilege, the
royal powers created a new system that, in
effect, restored the Westphalian system. The
Concert of Europe was an alliance of “great
powers” ---the United Kingdom, Austria,
Russia, and Prussia---that sought to restore the
world of monarchial, hereditary, and religious
privileges of the time before the French
Revolution and the Napoleonic Wars. More
importantly, it was an alliance that sought to
restore the sovereignty of states. Under this
Metternich system (named after the Austrian
diplomat, Klemens von Metternich, who was
the system’s main architect), the Concert’s
power and authority lasted from 1815-1914, at
the dawn of World War I.
Despite the challenge of Napoleon to
the Westphalian system and the eventual
collapse of the Concert of Europe after World
War I, present-day international system still has
traces of this history. Until now, states are
considered sovereign, and Napoleonic
attempts to violently impose systems of
government in other countries are frowned
upon. Moreover, like the Concert system,
“great powers” still hold significant influence
over world politics. For examples, the most
powerful grouping in the UN, the Security
Council, has a core of five permanent
members, all having veto powers over the
council’s decision-making process.
Internationalism
The Westphalian and Concert systems
divided the world into separate, sovereign
entities. Since the existence of this interstate
system, there have been attempts to transcend
it. Some, like Bonaparte, directly challenged
the system by infringing on other states’
sovereign, while others sought to imagine other
systems of governance that go beyond, but do
not necessarily challenge, sovereignty. Still,
others imagine a system of heightened
interaction between various sovereign states,
particularly the desire for greater cooperation
and unity among states and peoples. This
desire is called internationalism.
Internationalism comes in different
forms, but the principle may be divided into two
board categories; liberal internationalism and
socialist internationalism.
The first major thinker of liberal
internationalism was the late 18th century
German philosopher Immanuel Kant. Kant
likened states in a global system to people
living in a given territory. If people living
together require government to prevent
lawlessness, shouldn’t that same principle be
applied to states? Without a form of world
government, he argued, the international
system would be chaotic. Therefore, states,
like citizens of countries, must give up some
freedoms and “establish a continuously
growing state consisting of various nations
which will ultimately include the nations of the
world.” In short, Kant imagined a form of global
government.
Writing in the late 18th century as well,
British philosopher Jeremy Bentham (who
coined the word “international law” in 1780),
advocated the creation of “international law”
that would govern the inter-state relations.
Bentham believed that objective global
legislators should aim propose legislation that
would create “the greatest happiness of all
nations taken together”.
To many, these proposals for global
government and international law seemed to
represent challenges to states. Would not a
world government, in effect, become supreme?
And would not its laws overwhelm the
sovereignty of individual states?
The first thinker to reconcile nationalism
with liberal internationalism was 19th century
Italian patriot Giuseppe Mazzini was both an
advocate of the unification of the various
Italian-speaking mini states and a major critic
of the Metternich system. He believed in a
Republican government (without kings,
queens, and hereditary succession) and
proposed a system of free nations that
cooperate with each other to create an
international system. For Mazzini, free,
independent system. He argued that if the
various Italian mini-states could unify, one
could scale up the system to create, for
example, a United States of Europe. Mazzini
was a nationalist internationalist, who believes
that free, unified nation-states should be the
basis of global cooperation.
Mazzini influenced the thinking of United
States president (1913-1921) Woodrow Wilson,
who became one of the 20th century’s most
prominent internationalist. Like Mazzini, Wilson
saw nationalism as a prerequisite for
internationalism. Because of his faith in
nationalism, he forwarded the principle of self-
determination—the belief that the world’s
nations had a right to a free, and sovereign
government. He hoped that these free nations
would become democracies, because only by
being such would they be able to build a free
system of international relations based on
international law and cooperation. Wilson, in
short, became the most notable advocate for
the creation of the League of Nations. At the
end of World War I in 1918, he pushed to
transform the League into a venue for
conciliation and arbitration to prevent another
war. For his efforts, Wilson was awarded the
Nobel Peace Prize in 1919.
The league came into being that same
year. Ironically and unfortunately for Wilson,
the United States was not able to join the
organization due to strong opposition from the
Senate. The League was also unable to hinder
another war from breaking out. It was
practically helpless to prevent the onset and
intensification of World War II. On one side of
the war were the Axis Powers---Hitler’s
Germany, Mussolini’s Italy, and Hirohito’s
Japan—who were ultra-nationalists that had an
instinctive disdain for internationalism and
preferred to violently impose their dominance
over other nations. It was in the midst of this
war between the Axis Powers and Allied
Powers (composed of the United States,
United Kingdom, France, Holland, and
Belgium) that internationalism would be
eclipsed.
Despite its failure, the League gave birth
to some of the more task-specific international
organizations that are still around until today,
the most popular of which are the World Health
Organizations (WHO) and the International
Labour Organization (ILO). More importantly, it
would serve as the blueprint for future forms of
international cooperation. In this respect,
despite its organizations dissolution, the
League of Nations’ principle survived World
War II.
The league was the concretization of the
concepts liberal internationalism. From Kant, it
emphasized the need to form common
international principles. From Mazzini, its
enshrined the principles of cooperation and
respect among nation-states. From Wilson, it
called for democracy and self-determination.
These ideas would re-assert themselves in the
creation of the United Nations 1946 (see next
lesson).
One of Mazzini’s biggest critics was
German socialist philosopher Karl Marx who
was an internationalist, but who differed from
the former because he did not believe in
internationalism should deliberately reject
nationalism, which rooted people in domestic
concerns instead of global ones. Instead, Marx
placed a premium on economic equality; he did
not divide the world into countries but into
classes. The capitalist class referred to the
owners of factories, companies, and other
“means of production”. In contrast, the
proletariat class included those who did not
own the means of production, but instead,
worked for the capitalist.
Marx and his co-author, Friedrich
Engels, believed that in a socialist revolution
seeking to overthrow the state and alter the
economy, the proletariat “had no nation”.
Hence, their now famous battle cry, “Workers
of the world, unite! You have nothing to lose
but your chains”. They opposed nationalism
could make workers in individual countries
identify with the capitals of their countries.
Marx died in 1883, but his followers
soon sought to make his vision concrete by
establishing their international organization.
The Socialist International (SI) was union of
European socialist and labor parties establish
in Paris in 1889. Although short-lived, the SI’s
achievements included the declaration of May
1 as Labor Day and the creation of an
International Women’s Day. Most importantly, it
initiated the successful campaign for an 8-hour
workday.
The SI collapsed during World War I as
the member parties refused or were unable to
join the internationalist efforts to fight for the
war. Many of these sister parties even ended
up fighting each other. It was a confirmation of
Marx’s warning: when workers and their
organizations take side of their countries
instead of each other, their long-term interest
are compromised.
As SI collapsed, a more radical version
emerged. In the so-called Russian Revolution
of 1917, Czar Nicholas II was overthrown and
replaced by a revolutionary government led by
the Bolshevik Party and its leader, Vladimir
Lenin. This new state was called the Union of
Soviet Socialist Republics, or USSR. Unlike the
majority of the member parties of the SI, the
Bolshevik did not believe in obtaining power for
the working class through elections. Rather,
they exhorted the revolutionary “vanguard”
parties to lead the revolutions across the world,
using methods of terror if necessary. Today,
parties like this are referred to as Communist
parties.
To encourage these socialist revolutions
across the world, Lenin established the
Communist International (Comintern) in 1919.
The Comintern served as the central body of
directing Communist parties all over the world.
This international was not radical than the
Socialist International, it was also less
democratic because it followed closely to the
top-down governance of the Bolshevik.

Many of the world’s states feared the

Comintern, believing that it was working in
secret to stir up revolutions in their countries
(which was true). A problem arose during
World War II when the Soviet Union joined the
Allied Powers in 1941. The United States and
the United Kingdom would, of course, not trust
the Soviet Union their fight against Hitler’s
Germany. These countries wondered if the
Soviet Union was trying to promote revolutions
in their backyards. To appease his allies,
Lenin’s successor, Joseph Stalin, dissolved the
Comintern in 1943.

After the war, however, Stalin re-

established the Comintern as the Communist
International Bureau (Cominform). The Soviet
Union took over the countries in Eastern
Europe when the United States, the Soviet
Union, and Great Britain divided the war-torn
Europe into their respective spheres of
influence. The Cominform, like the Comintern
before it, helped direct the various communist
parties that had taken power in Eastern
Europe.

With the eventual collapse of the Soviet

Union in 1991, whatever existing thoughts
about communist internationalism also
practically disappeared. The SI managed to re-
establish itself in 1951, but its influence
remained primarily confined to Europe, and has
never been considered a major player in
international relations to this very day.

For the postwar period, however, liberal

internationalism would once again be
ascendant. And the best evidence of this is the
rise of the United Nations as the center of
global governance.