Global economic structure

• ECONOMIC GLOBALIZATION

  It 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 (Gao, 2000).
• ECONOMIC GLOBALIZATION

  It is one of the three main processes of 'generic' globalization, with the two others being political globalization and cultural globalization.
• According to Flynn and Giraldez (1995), economic globalization emerged with the founding of Manila in 1571
• Spanish galleon routes (white): West Indies or trans-atlantic route begun in 1492, Manila galleon or trans-pacific route begun in 1565. (Blue: Portuguese routes, operational from 1498 to 1640)
• ATTRIBUTES OF THE GLOBAL ECONOMY

  • Global communication systems
  • Transportation systems
  • Transnational business strategies
  • Flexible forms of capital accumulation
  • Global agreements that promote free trade
  • Market economies and private enterprises
  • Abundance of global goods and services
  • Economic disparities
  • International workers, managers, and executives
• A Prior Epoch of Globalization

  A global economic system, specifically a global capitalist system, emerged in about 1896 and reached something of a peak throughout the world by 1914.
• THE GLOBAL ECONOMIC SYSTEM

  Differences in:

  TRANSPORTATION

  railroads and steam ship (then)

  airplane (now)

  COMMUNICATIONS

  telegraph (then)

  Internet (now)
• STRUCTURAL SIMILARITIES: THEN AND NOW

  • Large-scale flows of capital
  • Large-scale immigration
  • Global economic specialization
  • Specialization based on "law" of comparative advantage
  • Emphasis on free trade
• PROBLEMS CREATED: THEN AND NOW

  • The poor are subjugated by the operations of the global economy
  • Not all parts of the world gain equally
  • Certain industries and social classes lose out
  • The poor tend to suffer most when forced to repay debts
• THE BRETTON WOODS SYSTEM

  BACKGROUND

  • Fear of the recurrence of the Great Depression
  • Fear of a resurrection of barriers to trade and the free flow of money
  • Concern for financial stability
• BRETTON WOODS CONFERENCE

  • July 1944
  • Mount WashingtonHotel, Bretton Woods,New Hampshire
• 5 KEY ELEMENTS OF BWS

  1. Each participating state would establish a 'par value' for its currency expressed in terms of gold or in terms of the gold value of the US dollar as of July 1944
  2. Each country would agree to exchange its own currency for those of other countries at the established exchange rates, plus or minus a one-percent margin
• 5 KEY ELEMENTS OF BWS

  1. The International Monetary Fund (IMF) was created to establish, stabilize, and oversee exchange rates
  2. Member states agreed to eliminate all restrictions on the use of its currency for international trade
  3. The entire system was based on the US dollar
• ECONOMIC ORAGANIZATIONS CREATED BY BWS

  General Agreement on Tariffs and Trade (GATT)

  • It was a system for the liberalization of trade. It was superseded by the WTO in 1995. It is simply a forum.
• ECONOMIC ORAGANIZATIONS CREATED BY BWS

  World Trade Organization (WTO)

  • Its focus on trade places it at the heart of economic globalization. It is an independent organization
• ECONOMIC ORGANIZATIONS CREATED BY BWS

  International Monetary Fund (IMF)

  • It deals with exchange rates, balances of payments, international capital flows, and monitoring of macroeconomic policies
• ECONOMIC ORGANIZATIONS CREATED BY BWS

  World Bank (WB)

  • It provides funds to government-sponsored or -guaranteed programs in so-called Part II countries.
• THE END OF BWS

  On August 15, 1971. President Richard Nixon took the US off the gold standard, resulting in a devaluation of the dollar and the end of the standard by which the currencies of other nations operated.
• Organization for Economic Cooperation and Development (OECD)

  • It is a broad group 36 developed nations (as of 2019). It is "the most encompassing 'club' of the world's rich countries"
• European Union (EU)

  • The European Union (EU) encompasses 27 member states (after the United Kingdom left on January 31, 2020). It is the second largest domestic market in the developed world.
• MERCOSUR

  • It was created by the Treaty of Asuncion in 1991 with the goal of a common market in South America by 1995.
• United States-Mexico-Canada

  Agreement (USMCA)

  • It is the successor agreement to the North American Free Trade Agreement (NAFTA). It took effect on July 1, 2020.
• Trans-Pacific Partnership (TPP)

  • In addition to deepening economic ties and expanding trade, the agreement is also considered "a not-so-secret gambit to keep China at bay."
• Organization of Petroleum Exporting Countries (OPEC)

  • It includes the major oil exporters and has succeeded in greatly increasing the price of oil
• Brazil, Russia, India, China, & South Africa (BRICS)

  • These countries have very large and growing populations that could serve as a massive work force and untapped consumer market
• Association of Southeast Asian Nations Plus China, Japan and South Korea (ASEAN+3)

  • It was established in the late 1990s when ASEAN countries decided to enhance cooperation with other major economies of Asia against the backdrop of economic globalizatio.
• MULTINATIONAL CORPORATION (MNC)

  • a major player in economic globalization
  • While transnational corporations (TNCs) involve operations in more than one country, MNCs operate in more than two countries
• Which are the top 5 GDP countries in the world?

  • The US, China, Japan, Germany, and India,
• MNC ACTIVITIES

  Foreign Direct Investment (FDI)

  • It involves investments by one firm in another firm that exists abroad in a different nation-state, with the intention of gaining control over the latter's operations.

  Portfolio Investment

  • It involves the purchase of equity in companies in other countries, but the motivation is financial gain and not to obtain control over those companies.