Economic Globalization

by Prof. Jet T. Castillo

This is a long lesson, so we divided it into
chewable bits…
Part 1 – Economic Systems in the Pre-Colonial Era

Part 2 – Economic Systems During the Colonial Era and Post-Colonial

Era

Part 3- The Age of Economic Cooperation

Part 1
• Pre-Colonialism Economic Systems
In the beginning…
• Simplest economic system
• Hunting and gathering
• “isang kahig, isang tuka”
• Hand-to-mouth subsistence
Evolved to Agricultural Economy
• Agricultural Revolution
• People learned to plant crops and domesticate animals
• Wealth was measured by how much sheep or cattle one has
• Money was not yet invented
• Mesopotamia
Barter Trade
• Before the invention of money, civilizations practice barter trade
• Goods for goods
Economy in the City-States and
Ancient Kingdoms
• Taxation was invented
• Taxation was in kind, not in cash
• Example: 10% of everybody’s harvest goes to
the king.
• If you harvest 100 sacks of potatoes, 10 sacks
will go to the king
Economy in the City-States and
Ancient Kingdoms
• Aside from farming, some people became craftsmen and artisans
• They made clothes, shoes, baskets, tools, jewelry, and furniture
• They became new players in the barter trade
Rise of Merchants
• Some people became “middle men” or
merchants
• Trading expanded geographically
• Merchants travel far to barter with other
communities
• The merchants became a wealthy social
class
• Gold became the trading currency
Age of Ancient Empires
• Kingdoms invaded other kingdoms
• Primarily for economic gains
• Measure of wealth:
• Amount of Gold, treasures,
agricultural produce, slaves
• Later, money was invented
Part 2
• Economic Systems during the Age of Colonialism
Age of Mercantilism
• people operated
only in small
concentric
circles of trade
• They don’t
travel too far, or
inter-
continental, just
to trade their
goods
Age of Discovery
• Age of Mercantilism
• Golden Rule
• He who has the gold, is the one who rules
• European kingdoms tried to accumulate as much gold as possible
Age of Discovery
• But with the Age of Discovery, their operations widened
• Empires now operated inter-continentally
Industrial Revolution
• Europe became the “center” of the economy,
which is now a global economy
• The overseas colonies became the
“periphery”
• Later, the USA also became a “center” of
economic power
Industrial Revolution
• “center” – where the factories are
• “periphery”- the farms, the sources of raw materials
• IMBALANCE- the “center” became richer, the “periphery” remained
poor
Post-Colonial Era
• After World War 2, the “centers” released their respective
“peripheries”
• The Western Powers gave independence to their colonies
Post-Colonial Era: Neo-colonialism
• The 1st World continued to flourish
economically, while the 3rd World (agriculture-
based economies) struggle to improve
economically.
• Raw materials like sugar and copra are cheap;
while finished products like coca-cola and
shampoo are expensive. Who will get a higher
income?
 Post-Colonial Era: Neo-colonialism
• But the old economic order remained.
• The newly-independent countries (former colonies, the 3rd World) still
exports raw materials to their former colonizers.
• In return, the Western Powers (former colonizers, the 1st World)
exports finished products to the former colonies.
• Example: The Philippines exports sugar to the US. In return, the US
exports candies, chocolates, and coca-cola to the Philippines.
Post-Colonial Era
• Banks of the 1st World like IMF and WB loaned money to the 3rd
World countries.
• In the process, they, the rich countries, get more control over them
The 2nd World
• Meanwhile, in the communist bloc, trade happens only
among themselves
• The big communist countries- USSR and China- exports
to the smaller communist states (satellite states) what
they need, including military hardware like tanks, guns,
bombs, etc)
• Small communist countries- North Korea, North
Vietnam, Cuba, etc
Discovery of Oil
• After WW2, petroleum was discovered in the Middle East
• The Middle Eastern countries rose to become economic powers by
exporting oil to the rest of the world
Discovery of Oil
• Now we have a new set of countries that are powerful economically,
but are neither 1st world nor 2nd world.
• They are neither 3rd world too.
• They organized the Organization of Petroleum Exporting Countries
(OPEC)
The OPEC
These Arab states control the prices of petroleum products world-wide
If they drill oil quickly and in large quantities, there will be an over-
supply
Prices will go down
If they slowed down the drilling of oil- there will be a shortage of
supply
Prices will go up
The New World Order

• With the collapse of

communism in the
1990s, the 1st, 2nd, 3rd
world labeling of the
countries of the world
became outdated
• The labeling system we
have now is
“Developed” and
“Developing” countries
Part 3
• The Age of Economic Cooperation
Age of Economic Cooperation
The European Union (EU)
• The Western European countries, mostly former 1st world countries,
banded together economically.
The European Union (EU)
• One currency – the Euro (if you’re a tourist,
no need for money changers)
• Porous borders – no visa (easy and fast
travel from one EU country to another)
• Relaxing of trade restrictions – less taxes,
less threatening for sellers, results to higher
income of the sellers
The European Union (EU)
for example: you’re an exporter of French wine
Before EU was formed After EU was formed

• You pay large amount of tax to
the countries you send your
product to
• You pay less tax, you get more
income
• You become richer quicker
• The richer citizens gets, the
richer the country becomes
The APEC
• Asia Pacific Economic
Cooperation
• Operates somewhat like the
EU
• Relaxation of tariffs (taxes)
among member countries
The APEC
• The Philippines is a member of this
• That’s why we see a lot of foreign products in our market
• Ponkan, apples, etc
The APEC
• Downside:
• Some countries can’t compete economically with others
The APEC
• Example:
• Korea, Japan, US sells computers, cars, appliances, and gadgets
• Large price, less taxes = large income

• Philippines and other agriculture-based countries sells bananas

• Cheap price, less taxes= small income
The APEC
• The situation is worsened by China
• China sells apples and ponkan to the Philippines
• We patronize Chinese fruits over Philippine fruits
• Thus, our farmers get lesser income now
The ASEAN Integration
• Association of South East Asian Nations (ASEAN)
• Philippines, Indonesia, Malaysia, Singapore, Myanmar,
Cambodia, Laos, Vietnam, Thailand, Brunei
The ASEAN Integration
• Thailand proposed an EU-like set-up in 2015
• Thailand is on the advantage, we are at the disadvantage
• Thailand has a lot to sell
• They have a lot more agricultural produce (rice, fruits) compared to
the Philippines
The ASEAN Integration
• This ASEAN Integration is not yet in full swing
• It is still in the early stages
• You don’t need a visa to enter ASEAN member states
• The K12 Program was instituted to have seamless transfer of students from
one ASEAN state to another
• Soon we might have a common currency
• What do you think?
Synthesis
What have we seen in this lesson?
There is a globalization of economy
- Countries tear down borders and merge their economies
- They do this for mutual economic gains
- They call this “economic cooperation”
Question
• Is this fair?
• Or is this another modus of the developed countries to lord it over the
developing countries?