GLOBAL

6.53

ECONOMY
GLOBAL ECONOMY
- is the economy of the humans of the
world, considered as the international
exchange of goods and services that is
expressed in monetary units of
account.

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CHANGING STRUCTURE OF THE GLOBAL ECONOMY

 Since the end of World War II, the global economy has steadily
increased its trade and financial openness, enabled in part by
the International Monetary Fund (IMF), the World Bank (WB),
and the General Agreement on Tariffs and Trade (GATT), now
the World Trade Organization (WTO).

 In parallel, colonialism, with its inherent constraints and its

built-in asymmetries collapsed.

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 ECONOMIC INSTITUTIONS

THE WORLD WORLD TRADE

INTERNATIONAL
MONETARY FUND BANK ORGANIZATION
(IMF) (WB) (WTO)

It works to foster global monetary It provides loans for European It oversees multilateral trade
cooperation, facilitate international reconstruction but later expanded agreements and provided economic
trade, promote sustainable its activities to the developing stability and prosperity to Western
economic growth. world. nations.
CHANGING STRUCTURE OF THE GLOBAL ECONOMY

 As formal barriers to trade and capital flows declined, several other

trends combined to accelerate the growth and structural changes in
the developing economies.
 They included:

a) Advances in transportation and communications

technology
b) Management innovation in multi companies
c) A process of learning about doing business in multiple
and diverse environments
d) And the integration of multinational supply chains.

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WHAT IS THE IMPACT OF
6.53
COVID-19 TO THE
GLOBAL SUPPLY
CHAINS?
 PHILIPPINE
ECONOMY
 The Philippines has a mixed economic
system which includes a variety of private
freedom, combined with centralized
economic planning and government
regulation.

 Philippines is a member of the Asia-Pacific

Economic Cooperation (APEC) and the
Association of Southeast Asian Nations
(ASEAN).

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 PHILIPPINES: COMPETING IN GLOBAL ECONOMY

The economy of the Philippines is the World’s

32nd largest economy by nominal GDP according
to the 2021 estimate of the International Monetary
Funds statistics. It is the 12th largest economy in
Asia, and the 3rd largest economy in the ASEAN
after Indonesia and Thailand, Brunei, Malaysia,
Thailand and Indonesia.
The Philippines is primarily considered
a newly industrialized country, which
has an economy in transition from one
based on agriculture to one based more
on services and manufacturing.
As of 2021, GDP by
purchasing power parity was
estimated to be at $8,094.69
US dollars.

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ECONOMIC GLOBALIZATION
ECONOMIC
GLOBALIZATION
The International Monetary Fund (IMF) regards
"economic globalization” as a historical process
representing the result of human innovation and
technological progress. It is characterized by the
increasing integration of economies around the
world through the movement of goods, services, and
capital across borders.

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According to the United Nations,

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.

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INTERNATIONAL TRADE

 The conclusion of World War lI signaled the

beginning of trade facilitation around the globe.
Economies set rules and guidelines for
international trade which led to the formation of
General Agreement on Tariffs and Trade
(GATT).

 These trade rules were developed through series

of rounds or meetings of member 'economies.
INTERNATIONAL TRADE

 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 Veseth, 2008). 

 Global trade has grown dramatically since the post-cold

war era as a result of increasing demand of goods and
services of countries.
 TRADE THEORIES

There are two types of

trade theories explaining
international trade:

DESCRIPTIVE PRESCRIPTIVE
DESCRIPTIVE THEORY

• It deals with the natural order and movement • . Descriptive theory addresses the questions of
of trade. which product to trade, how much product to
offer and produce, and which country to trade in
the absence of government restrictions.
• 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
PRESCRIPTIVE THEORY

• This prescribes whether government, an • This theory views government to have

important economic institution, should participation in deciding which countries to alter
interfere and restrict with the movement of the amount, composition and direction of goods.
goods and services.

• The pressing question describing prescriptive

theory is "Should the government control trade?"
 THREE PERSPECTIVES ON
INTERNATIONAL TRADE

ECONOMIC MERCANTILISM STRUCTURALISTS

LIBERALS
ECONOMIC LIBERALS
 David Ricardo and Adam Smith were known
critics of late-eighteenth 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).

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MERCANTILISM
 An economic theory emerged from about 1500-
1800. This period was the emerging eras of
nations-states and the formation of more central
governments.

 Mercantilism as economic theory, is a system of

trade that advocates a nation to engage in massive
export to accumulate bullions (gold and silver) as
wealth and to minimize import to ensure
economic growth and favorable balance of trade
in the international market.

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 THIS SYSTEM FLOURISHED DUE TO THE FOLLOWING REASONS:

Higher export Export less high The benefits of

than import. valued product and colonial powers.
import less high
valued product
STRUCTURALISTS
 The earliest wave of mercantilism was described
as classical imperialism. The drive of European
countries to explore and colonize 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 using
hard power over developing and less developed
countries.

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STRUCTURALISTS
 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.

 Thus, the economic globalization and market

integration of the 21st century are extensions of
the same economic motives of imperial powers of
the nineteenth and twentieth centuries (Balaam
and Veseth, 2008)

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 ECONOMIC GLOBALIZATION TODAY

o The global crisis will take decades to o The proposed solutions of

resolve. nationalist and leftist groups of
closing national economies to world
trade, however, will no longer
o Economic globalization remains uneven work.
process.

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THE WORLD SYSTEMS THEORY
 THE WORLD
SYSTEMS THEORY

"The world systems theory, developed by

sociologist Immanuel Wallerstein, is an
approach to world history and social change
that suggests there is a world economic system
in which some countries benefit while others
are exploited" (Hurst, M. n.d.)
THE MAIN
CHARACTERISTICS OF THIS
THEORY ARE:

• The world systems theory is established on a three-level

hierarchy consisting of core, periphery, and semi-periphery
areas.

• The core countries dominate and exploit the peripheral

countries for labor and raw materials.

• The peripheral countries are dependent on core countries for

capital.
•The
bothsemi-peripheral countries
core and peripheral share characteristics of
countries.
•This theory emphasizes the social structure of global
inequality.
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