Lesson 4: Economic Globalization

• Economic globalization


  • The mobility of people, capital, technology, goods and services internationally
  • The integration of countries in the global economy
  • The interdependence of different countries and regions across the world
• Reasons for increased economic globalization

  1. Improvements in the efficiency of long distance transportation

  2. Advances in telecommunication

  3. Importance of information rather than physical capital in the modern economy

  4. Developments in science and technology

  5. Creation of the GATT and WTO
• GATT


  A legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas
• WTO

  An intergovernmental organization that is concerned with the regulation of international trade between nations
• Tariff


  A tax on imports or exports between sovereign states
• Rice Tariffication Law


  • Imposed taxes on rice importers in the Philippines
  • Ideally, the spirit of the law is to temporarily import rice from other countries so the Philippines will be able to gain tariffs from other nations. Said tariffs will be given to farmers so they can improve their production so later, we need not import rice from other nations.
• When you buy a Toyota car, its parts have probably been produced in several different countries. Toyota is one of hundreds of companies with globalized operations.
• It is cheaper if you have countries around the world. Tasks are assigned to them based on what is cheaper in their country.
• Competition between Samsung and Apple

  • Has raised the market standards, as well as the customer service
• Because of globalization, contractualization has become widespread. For example, in McDonald's, instead of concentrating the job to one person, they distribute it to say five persons. This makes it easier for them to fire workers as they only have easy tasks.
• Nike vs Marikina Shoes

  • It will be impossible for Marikina Shoes to compete with Nike in terms of Economies of Scale
• Lehman's Shock (World Financial Crisis)


  • Lehman's bankruptcy filing played a major role in the world financial crisis. After Lehman Brothers filed for bankruptcy, global markets immediately plummeted.
• Multinational companies dictating a developing country's policies

  • Labor laws, corporation laws, taxation laws
• The resources of our planet is enough to feed everyone living in it. However, 1 out of 7 people are still hungry.
• For countries like Bolivia, Congo, and Ethiopia, they have a lot of agricultural resources but a lot of their population especially farmers are poor and hungry, compared to countries with much less land for farming. The reason for this are the policies that the country they are in implements.
• Globalization has impacted nearly every aspect of modern life and continues to be a growing force in the global economy.
• While there are a few drawbacks to globalization, most economists agree that it's a force that's both unstoppable and net beneficial to the world economy.
• There have always been periods of protectionism and nationalism in the past, but globalization continues to be the most widely accepted solution to ensuring consistent economic growth around the world.
• Positive effects of Economic Globalization - Global Market, Competition, Economies of scale, Foreign Direct Investment, Technological Innovation
• Negative effects of Economic Globalization - Fluctuation in Prices, Job Insecurity, Economies of Scale, Interdependence, National Sovereignty, Equity Distribution
• Global Market - The privatization of industries owned by the state has enabled the emerging markets to be successful.