GLOBAL

ECONOMY:
INTERNATION
AL TRADING
SYSTEM

This Photo by Unknown Author is licensed under CC BY-ND

LEARNING OUTCOMES:

At the end of the lesson, you should be able to;

1.Define Economic globalization

;2.Identify the factors that facilitate economic globalization

and

3. Explain the economic inequality in global economy.

 GLOBAL ECONOMY: INTERNATIONAL
TRADING SYSTEM

• 1. Silk Road - " a

network of pathways in
the ancient world that
spanned from China to
Middle East and
Europe".
This Photo by Unknown Author is licensed under CC BY-SA
 GLOBAL ECONOMY: INTERNATIONAL TRADING
SYSTEM
• 2. Galleon Trade –
• According to Flyn and Giraldez, the age
of globalization started “when all
important populated continents began to
exchange products continuously-both
with each other directly and indirectly
via other continents and in values
sufficient to generate crucial impact on
all trading partners“
Abinales, Cladion, 2018)
 GLOBAL ECONOMY: INTERNATIONAL
TRADING SYSTEM
• 3. Gold Trade - The United
Kingdom, United states and other
European nations adopted the gold
standard ...as a common basis for
currency prices and fixed exchange-
rate system -all based on the value
of gold. (Abinales, Claudio, 2018)

This Photo by Unknown Author is licensed under CC BY-SA-NC

 GLOBAL ECONOMY: INTERNATIONAL
TRADING SYSTEM
• 4. Fiat currencies- is a system
in 20th century that "allows
governments to freely and
actively manage their
economies by increasing or
decreasing the amount of
money in circulation as they
see fit.
GLOBAL ECONOMY: BRETTON WOODS
SYSTEM

After two world wars, world leaders created a global economic system
for long-lasting peace.
Set up a network of global financial institutions that would promote
economic interdependence and prosperity.
Bretton Woods System (BWS) was inaugurated in 1944 during the
United Nations Monetary and Financial conference.
 GLOBAL ECONOMY: BRETTON WOODS
SYSTEM
• BWS was "influenced by  the ideas of British
Economist John Maynard Keynes who assumed
that:
• 1) Economic crisis occur when a country does
not have enough money, but when money is
not being spent and, thereby, not moving.
• 2) If the economies slow down then
government should infuse money to
reinvigorate the market.
• 3) As prices of commodities increased,
companies would earn more, and would have
more money to hire workers “.
(Abinales, Claudio, 2018) 
 THE SAVIORS OF THE WORLD AFTER WORLD
WAR II
1. International Bank for Reconstruction and
Development (IBRD or World Bank) is
responsible for funding a reconstruction
projects of countries affected by world wars.  
2. International Monetary Fund (IMF) is a
lending institution that helps each country to
recover from financial crises.  
3. General Agreement on Tariffs and Trade
(GATT 1947) is to reduce tariffs and other
hindrances for free market.
FACTORS THAT END KEYNESIANISM

• Organization of Arab Petroleum Exporting Countries (OAPEC) imposition of oil

embargo in early 1970s because of the war between Egypt- Syrian forces against Israel.
• Stock Market crashed in 1973-1974.
• United States delinked the US dollar to gold.
• Stagflation and Stagnation –Decline of economic growth and employment.
• Inflation – Increased of prices of goods
• (Increased of Demand and Low supply)
 NEOLIBERALISM
• Neoliberalism is “now generally thought to label the philosophical view that
a society’s political and economic institutions should be robustly liberal and
capitalist, but supplemented by a constitutionally limited democracy and a
modest welfare state” Vallier, Kevin, Edward N. Zalta (ed.), URL <https://plato.stanford.edu/archives/sum2021/entries/neoliberalism/>.
• Friedrich Hayek and Milton Friedman challenged the Keynesian
theory and argued that government intervention in economies distort
the proper functioning of the market that result to inflation.
• The government’s practice of pouring money into their economies had
caused inflation by increasing the demand for goods without
necessarily increasing the supply.
 NEOLIBERALISM

• The Washington consensus (1980s-2002) advocates for minimal government

spending to reduce government debt.
• Proponents:
• US Pres. Ronald Regan
• UK Prime Minister Margaret Thatcher
• They also called for the privatization of government-controlled services such
as; water, power, communications and transport.
• Free market can produce the best result.
 FINANCIAL CRISIS: A CHALLENGE TO
NEOLIBERALISM
Neo-liberalism came under significant strain
during the global financial crisis in 2007-
2008 when the world experienced the
greatest economic downturn since the great
depression.
• The crisis can be traced back to the 1980s
when the United State systematically
removed various banking and investment
restrictions.
 FINANCIAL CRISIS
• 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.
• 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.
 CHALLENGES TO NEOLIBERALISM

1. Greece has been forced by Germany and IMF to cut back

their social and public spending.
2. The reduction in government spending has slowed down
growth and increase unemployment.
3. Continuous economic crisis has sparked a political
upheaval in Europe.
 GLOBAL ECONOMY TODAY
1. The world has become too
integrated.
Some form of the international
trade remains essential for
countries to develop in the
contemporary world.
Import Export
 GLOBAL ECONOMY TODAY
• Exports make national economies grow at present.
In the past, the first world
countries like US, Japan
and European union
benefited from free trade
by 65% compared with
VS
29 % accounted for the
developing countries.
At present, global exports
of developing countries
like Philippines, India,
Argentina, Brazil
accounted for 51% while
advance countries gone
down to 45 %.
 INEQUALITY IN GLOBAL ECONOMY

• Economic globalization is unequal process.

• Developed countries are protectionists.
• Examples:
• Japan refused to import rice to their country.
• United States protects its sugar industry.
 INEQUALITY IN GLOBAL ECONOMY
The beneficiaries of global commerce are mainly
transnational corporations (TNCs) and not government.

Government (HC) TNCs

Loosen Tax (GATT) gained
Weaken Environmental
Laws lot of profits
Sacrifice Social Program
that protects the poor.
Race to the Bottom Policy
THE END