STRUCTURES

OF
GLOBALIZATI
ON
GE 5: The Contemporary World
The Global Economy
•United Nations defines Economic globalization as
“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. The rapid growing significance of information
in all types of productive activities and marketization are the
two major driving forces for economic globalization.”
•One manifestation of economic globalization is the interconnections of various
components of production, where the stages in production takes place in different
location depends on the favorable conditions such as cheap labor, raw material,
skilled labor and market consumer.
Emergence of Global trade
• According to Dennis O. Flynn and Arturo
Giraldez, global trade emerged in two ways:
•1.) all heavily populated continents began to
exchange products continuously – both with each
other directly and indirectly via other continents
and..
•2.) did so in values sufficient to generate lasting
impacts on all trading partners.
Silk Road
Manila-Acapulco Galleon Trade (1565-1815)
 Global Actors
• Multinational Corporations- it is a business organization
whose activities are located in more than two countries and is
the organizational form that defines foreign direct investment.
This form consists of a country location where the firm is
incorporated and of the establishment of branches or
subsidiaries in foreign countries (A.A Lazarus, 2001 p. 10197)

• The International Monetary Fund (IMF)- founded at the

Bretton Woods Conference in 1944, it is the official
organization for securing international monetary cooperation.
It has done useful work in various fields, such as research and
the publication of statistics and the tendering of monetary
advice to less-developed countries. It has also conducted
valuable consultations with the more developed countries.
•North Atlantic Treaty or NATO- it is based on the North
Atlantic Treaty, which provides the organization a framework.
The treaty provides that an armed attack against one or more of
NATO`s member nations shall be considered an attack against
them all.

•World Trade Organization (WTO), International

Monetary Fund (IMF), and the World Bank
•These three institutions underwrite the basic rules and
regulations of economic, monetary, and trade relations between
countries. Many developing nations have loosened trade rules
under pressure from the IMF and the World Bank.
Members of NATO
The Bretton Woods System
• The Bretton Woods System was largely influenced by John Maynard Keynes, a British
economist.
• Keynes believed that economic crises occur not when a country does not have money,
but when money is not being spent or not moving.
•Moreover according to Keynes, when economies slow down, governments have to
reinvigorate markets with infusions of capital.
•The active role of governments in managing spending would serve as a basis for type of
system called global Keynesianism.
•In 1944, delegates at Bretton Woods created two financial institutions: The International
Monetary Fund and World Bank.
Keynesian Economics vs. Neoliberalism
• With the ideas of John Maynard Keysian being applied in IMF and World Bank’s strategy,
governments poured money into their economies in order to reinvigorate their respective
economies, although causing inflation. (Keysian economics)
•Nonetheless, the effectivity of the Keynesian economics was greatly tested in the 1970’s when
prices of oil rose dramatically due to Organization of Arab Petroleum Exporting Countries’
(OAPEC) decision to impose an embargo on US and other countries due to the latter’s support on
Israel (resupplying Israel with needed arms for Yom Kippur War).
• Added with the 1973 and 1974 stock market crash in the US a phenomenon called “stagflation”
happened, wherein economic growth and employment declined, with sharp inflation of goods.
(prices increased)
• Even with great government spending and intervention on economy, this did not remedy the
situation.
NEOLIBERALISM
• With the failure of Keysian economics to remedy the stagflation that happened in
US and other countries in the 1970’s, a new form of economic thinking was
introduced– Neoliberalism.
•According to Investopedia, Neoliberalism can be defined as a policy model that
encompasses both politics and economics and seeks to transfer the control of
economic factors from the public sector to the private sector.
• It called for the privatization of government-controlled services like water, power,
communications, transport.
• highlighted free markets