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Lesson 2 - The Globalization of World Economics

The document discusses the history and current state of economic globalization. It describes how globalization has increased dramatically over the past few decades through rising international trade and foreign direct investment. While economic integration has benefits, it also creates an uneven process that advantages some groups over others. There are also environmental and social concerns as countries may lower standards to attract businesses seeking only profits. Overall globalization cannot be reversed but policies are needed to make the system fairer and share its benefits more widely.

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Adam Tolentino
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48 views10 pages

Lesson 2 - The Globalization of World Economics

The document discusses the history and current state of economic globalization. It describes how globalization has increased dramatically over the past few decades through rising international trade and foreign direct investment. While economic integration has benefits, it also creates an uneven process that advantages some groups over others. There are also environmental and social concerns as countries may lower standards to attract businesses seeking only profits. Overall globalization cannot be reversed but policies are needed to make the system fairer and share its benefits more widely.

Uploaded by

Adam Tolentino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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GE 3 - The Contemporary World

The Globalization of
world economy
By Seanne Adrian V. Los Baños
International
MonETary Fund (IMF)
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. These changes are the
products of people, organizations,
institutions, and technologies.
According to the IMF, the value of According to the United Nations
trade (goods and services) as a Conference on Trade and Development
percentage of world GDP (Gross (UNCTAD), the amount of foreign direct
Domestic Product) increased from investments flowing across the world
42.1% in 1980 to 62.1% in 2007. was US$ 57 billion in 1982. By 2015,
Increased trade also means that that number was $1.76 trillion. These
investments are moving all over the figures represent a dramatic increase in
world at faster speeds. global trade in the span of just a few
decades.
International Trade
System
The Silk Road is the oldest known international trade route.

It had a network of routes that connected different parts of


the ancient world from China to what is the Middle East
today and to Europe.

It was called such because one of the most profitable


products traded through this network was silk, which was
highly prized.

When the Han dynasty of China opened trade to the West


in 130 BCE, traders utilized the Silk Road regularly. This
continued until the Ottoman Empire closed it in 1453 BCE.
Mercantilism, a global trade
system from the 16th to 18th
The Silk Road wasn't a global
century, involved countries
trade route because it didn't competing to increase their
include the Americans. income by imposing
restrictions on trade.
Economic globalization is
defined as the exchange of In 1867, a more open trade
products between all populated system emerged when
continents with sufficient countries adopted the gold
impact. standard to establish a
common basis for currency
prices and a fixed exchange
The galleon trade in 1571 rate system based on the
between Manila and Acapulco value of gold.
connected the Americans to
Asian trading routes, marking However, the gold standard
the beginning of economic required governments to
globalization. back their currencies with set
gold reserves, making it
limiting.
Abandoning gold
During World War I, countries used their gold reserves to fund their armies, leading
many to abandon the gold standard. The Great Depression in the 1920s-1930s
further depleted resources, and some economists argue that the gold standard
limited the amount of circulating money, reducing demand and consumption. The
United States was able to recover when it abandoned the gold standard, and other
major industrialized countries followed suit during World War II. The world never
returned to the gold standard of the early 20th century and today operates on fiat
currencies.
WHAT WAS THE VALUE OF
GOLD?
During the Bretton Woods System, which was in effect from 1944 to
1971, the exchange rate of gold was fixed at $35 per ounce. The
formula for the exchange rate was as follows: each participating
country set a fixed exchange rate for its currency in terms of the U.S.
dollar, and the U.S. government agreed to exchange dollars for gold
at the fixed rate of $35 per ounce upon request. This created a
system where the value of other currencies was indirectly linked to
the value of gold.
Economic globalization
today The global financial crisis will take decades to resolve. While
some nationalist and leftist groups propose closing national
economies to world trade, this is no longer feasible in today's
integrated world. International trade is essential for countries
to develop. Exporting, not just local selling of goods and
services, is crucial for national economic growth. The
reduction of trade barriers, known as trade liberalization, has
profoundly altered the dynamics of the global economy.

However, economic globalization remains an uneven process,


with some countries, corporations, and individuals benefiting
more than others. Developed countries are often
protectionists and refuse to lift policies that safeguard their
primary products. This double standard makes it hard for
poorer countries to make economic globalization more just,
resulting in trade imbalances between developed and
developing countries.
how countries
compete for global 40

economic
30

investments:
20

Global commerce has


mainly benefited
10
businesses, not societies. The "race to the bottom"
refers to countries
Businesses are concerned decreasing labor 0

more with profits than standards to entice


social programs. international investors.

Governments weaken
Host countries ease tax environmental laws to
regulations, sacrificing attract investors, leading
social and environmental to fatal consequences on
initiatives. ecological balance and
depleting finite resources.
Conclusion
To conclude, international economic integration is a key aspect of globalization,
although it is not the entire concept. Changes in the economy, particularly through
trade, facilitate the globalization of culture and politics. For example, trade enables
Filipinos to access American movies, music, and products, increasing their
awareness of American culture.

In the realm of politics, many foreign affairs events are conducted to strengthen
trading relationships between states. However, the stakes involved in economic
globalization require policymakers to consider how to make the system fairer. While
some elements of global free trade can be scaled back, policies cannot eliminate it
entirely. Thus, international policymakers should work on making trading deals more
equitable, while governments should devise ways to mitigate the negative impacts
of economic globalization and ensure its benefits are shared by all.

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