The Structures of Globalization

CURRENT LITERATURE
ON ITS HISTORY HAS FOCUSED
MAINLY ON QUESTIONS OF
POLITICAL INTEGRATION, EMPIRE,
AND THE GLOBAL ECONOMY

Given this bias in the literature (globalization literature is more often than not focuses on political and
government integration, business impact, economy and power), the discussion shall focus instead on
processes of cultural exchange and interaction as well as communication, and in particular on the role
of historical actors in this larger process. This includes individual actors, but also groups and social
milieus; the emphasis is not so much on individual biographies, but rather on actors as a heuristic
device that will allow us to link the macro and the micro level and thus to acknowledge the regional,
temporal, and social specificity of the globalization process.
In addition, the focus on non-Western actors will help us elucidate the positionality of global
integration, and the fact that the “world” looked very different depending on from where and when
stands and where one looks. As such, this discussion shall give a different and lighter perspective on
globalization in a different perspective other than the usual internet thingy that you have. However, the
more popular concepts of globalization shall still be discussed in passing.

The Global Economy

The world economy or global economy, refers to the interconnected worldwide economic activities that
take place between multiple countries. These economic activities can have either a positive or
negative impact on the countries involved, is the economy of all humans of the world, considered as
the international exchange of goods and services that is expressed in monetary units of account..

The global economy comprises several characteristics, such as:

• Globalisation: Globalisation describes a process by which national and regional economies,
societies, and cultures have become integrated through the global network of trade,
communication, immigration, and transportation. These developments led to the advent of the
global economy. Due to the global economy and globalisation, domestic economies have
become cohesive, leading to an improvement in their performances.
• International trade: International trade is considered to be an impact of globalisation. It refers to
the exchange of goods and services between different countries, and it has also helped
countries to specialise in products which they have a comparative advantage in. This is an
economic theory that refers to an economy's ability to produce goods and services at a lower
opportunity cost than its trade partners.
• International finance: Money can be transferred at a faster rate between countries compared to
goods, services, and people; making international finance one of the primary features of a
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 global economy. International finance consists of topics like currency exchange rates and
monetary policy.
• Global investment: This refers to an investment strategy that is not constrained by geographical
boundaries. Global investment mainly takes place via foreign direct investment (FDI).

The question now, though the answer is obvious, is ‘What is the importance of global economy?

The economic importance at a micro and macro level: The increase in the world’s population has led
to emerging markets growing economically, making them one of the primary engines of world
economic growth. The growth and resilience shown by emerging markets is a good sign for the world
economy. Before delving into the next point, you need to understand the concept of microeconomics.
It refers to the study of the behaviour of households, individuals, and firms with respect to the
allocation of resources and decision-making. In simpler terms, this branch of economics studies how
people make decisions, what factors affect their decisions, and how these decisions affect the price,
demand, and supply of goods in the market. Therefore, from the perspective of microeconomics, some
of the largest firms with high market value and a few of the richest individuals in the world hail from
these emerging markets, which has helped in the higher distribution of income in these countries.
However, many of these emerging countries are still plagued by poverty, and work still needs to be
done to work towards eradicating it.

Also, the emergence of the global community is the very reason why global economy exists.
Another term that we have to look into is the ‘economic globalization’ as a historical process
representing the result of human innovation and technological progress. It is characterized by
increasing integration of economies around the world through the movement of goods, services, and
capital across borders.
It also refers to the mobility of people, capital, technology, goods and services internationally. It is also
about how integrated countries are in the global economy. It refers to how interdependent different
countries and regions have become across the world.
In the eighteen hundreds in the world economy generally, people and capital crossed borders with
ease, but not goods. In this century, people do not cross borders easily, but technologies, capital and
goods do.

Over the past two to three decades, under the framework of General Agreement on Tariffs and Trade
(GATT) and World Trade Organization, economic globalization has been expanding at a much faster
pace. Countries have rapidly been cutting down trade barriers and opening up their current accounts
and capital accounts.

The story of Toyota as an international brand is a one classic example of globalization, global
community and global economy.

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 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.

This rapid increase in pace has occurred mainly with advanced economies integrating with
emerging ones. They have done this by means of foreign direct investment and some cross-
border immigration. They have also reduced trade barriers.

In some regions of the world, such as the European Union, a large area almost the size of a
continent has opened up to the free movement of capital, labor, goods and services. The
North American Free Trade Agreement (NAFTA) opened up the free movement of goods and
services, but not labor.

Cuba and North Korea are among the most autarkic (self-sufficient) and isolated nations on
the planet. The two countries are the last bastions of the Soviet economic model.

Dan2007

Who facilitates economic globalization?

Drivers of economic globalization

As discussed above, economic globalization stands for the economic interconnectedness of
countries with the global economy as a whole. This interdependence relates both to the exchange of
factors of production (labor, capital, technologies, know-how) and the exchange of products (material
goods and services, finished and unfinished products, consumer and capital goods). Looking closely,
we can say that there are three main drivers for economic globalization and its different characteristics
such as trade (see figure 1), international capital markets, currency markets, migration and more:

1. Demography: The size of the population of a country is important for factor endowment
differences between countries. If a certain economy has a large number of workers but only a
small stock of physical capital, the country is labor-abundant and capital-poor. Such a country

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 has an international competitive advantage in manufacturing labor-intensive products.
Concerning international division of labor, it will specialize on the production and export of
labor-intensive products.
2. Technology: Due to technical progress, costs of transportation and of communication
decreased strongly during the last decades. Without these reductions of costs, phenomena
such as outsourcing, long-distance trade and global value chains would not be possible.
3. Political decisions: Economic processes are not operating in a political or institutional vacuum.
Reducing or even eliminating barriers to trade in goods, services, labor and capital are political
decisions. At the end of the day, whether economically motivated cross-border activities do
actually take place or not depends on the policy frameworks in place. It is this framework which
decides whether cross-border activities are facilitated, made more difficult or even completely
forbidden.

Modern World System

There is one thing that we must not forget before looking into the world system: The definition of
which countries are core, periphery, or semi-periphery can evolve as countries develop. Change is
inevitable kasi.

World systems theory was proposed by sociologist Immanuel Wallerstein. This lesson discusses the
three-level hierarchy approach to economics, which consists of core, periphery, and semi-periphery
countries, in the context of global inequality.
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. Just like we cannot understand an individual's behavior without
reference to their surroundings, experiences, and culture, a nation's economic system cannot be
understood without reference to the world system of which they are a part.
The main characteristics of this theory include:

 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.
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  The peripheral countries are dependent on core countries for capital.
 The semi-peripheral countries share characteristics of both core and peripheral countries.
 This theory emphasizes the social structure of global inequality.

Core Countries
According to the world systems theory, the world is divided into three types of countries or areas: core,
periphery, and semi-periphery. Core countries are dominant capitalist countries that exploit peripheral
countries for labor and raw materials. They are strong in military power and not dependent on any one
state or country. They serve the interests of the economically powerful. They are focused on higher
skill and capital-intensive production. Core countries are powerful, and this power allows them to pay
lower prices for raw goods and exploit cheap labor, which constantly reinforces the unequal status
between core and peripheral countries.
The first core region was located in northwestern Europe and made up of England, France, and
Holland. Today, the United States is an example of a core country. The U.S. has large amounts of
capital, and its labor forces are relatively well paid.
Periphery Countries
Periphery countries is the term used to describe countries who are neither core nor semi-periphery
countries. They have just a small share of the world’s wealth. These nations are not just dependent on
other nations but are often exploited by more developed countries. Some characteristics of periphery
countries include unstable governments, poor education systems, and poor health systems.
According to socialist Salvatore Babones, the world’s periphery countries include:
Bangladesh, Benin, Bolivia, Burkina Faso, Burundi, Central African Republic, Chad, Chile, China,
Congo, Gambia, Ghana, Guinea-Bissau, Haiti, Honduras, India, Indonesia, Kenya, Lesotho,
Madagascar, Malawi, Mauritania, Nepal, Niger, Nigeria, Papua New Guinea, Philippines,
Rwanda, Senegal, Sierra Leone, Solomon Islands, Sri Lanka, Sudan, Togo, Zambia,
Periphery countries are countries who possess a disproportionately small share of the world's wealth.
These areas are less developed than the core and the semi-periphery. They have weaker state
institutions, and are often dependent on more developed nations. Some critics argue that periphery
countries are regularly exploited by countries in the core. Periphery countries may have an unstable
government, inferior technologies, and poor health and educational systems. At times, the
exploitations of these countries with regards to cheap labor, agriculture, and natural resources may
help the core countries remain wealthy. This terminology comes from the World Systems Theory.
What Makes a Country Periphery?
There are several factors that factor in to determine whether or not a country should be considered to
be part of the periphery or the core. Some of these factors include:

 The stability of government.

 The ability to participate in global trade activities.
 The quality of education provided in the country.
 The equality of the wealth in the country.
The Exploitation of Periphery Countries

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The World Systems Theory asserts that the position of periphery countries means that they are
vulnerable to exploitation by the richer, more powerful core countries. The theory states that the
wealthy core countries rely on poor periphery countries for the production of cheap goods to aid in the
industrialization of core countries and to help propel them forward. For many core countries, it is less
expensive to produce goods outside of the country than to produce them within the country.
Can a Periphery Country Become a Core Country?

It is possible that a periphery country can become a core country. One of the ways in which this is
possible is through diversifying industrial production. Many countries in the periphery have an
economic system that is still predominantly agricultural based, which can be vulnerable and
unproductive. Another pathway to attaining core country status is through stabilizing the government
and improving access to education.
In the past, several countries have been able to make the transition from periphery to core countries.
Examples of this include Russia, who industrialized rapidly throughout the 20th century. Definitions of
what a periphery country is have shifted over time, with the list of periphery countries getting shorter in
recent decades. A most recent list of periphery countries is available below.

Output 4:

World Atlas
READ: Second Reading: Modern World System Analysis
READ: Third Reading: A Modern World

Market Integration

In the International Encyclopedia of the Social & Behavioral

Sciences (Second Edition), 2015 Market Integration
hypothesis proposes that market norms emphasizing fair
treatment of anonymous others have culturally evolved to
sustain mutually beneficial exchanges in contexts demanding
frequent interaction with strangers. In turn, as individuals
increasingly interact with markets, they adopt and internalize
these norms (Henrich et al., 2010a). Reciprocally, markets
spread more successfully in places with such norms.
According to this hypothesis, individuals with greater market
exposure will be more likely to have adopted or internalized
these norms and thus will treat anonymous others more
fairly.

This hypothesis has been tested, replicated, and extended in two separate projects covering 24
different societies scattered across the globe, from Siberia to New Guinea. The populations involved
hunter-gatherers, slash-and-burn horticulturalists, subsistence farmers, and wage workers. Overall,
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more market integrated societies tend to make more even splits of a pot of money, independent of the
threat of punishment, income, wealth, education, community size, sex, and age (Henrich et al., 2005,
2010a). Since such equitable tendencies emerge even when punishment is not possible, and
anonymity is assured, the authors argue they arise from internalized local norms. Supporting the
internalization hypothesis, recent work shows that ‘giving’ by westerners in such experiments is the
automatic response (Rand et al., 2012) and involves activation of the brain's reward circuitry
(Harbaugh et al., 2007).

Two important concerns with Henrich et al.'s projects revolve around the many sources of variation in
such a large, global sample (many factors probably are not controlled for), and the direction of
causality – market integration in these studies – cannot be identified as an exogenous cause. Both
concerns have been addressed recently. Among 57 communities in a single ethno-linguistic herding
group in Ethiopia, Rustagi et al. (2010) measured people's willingness to cooperate with strangers in
an economic game. Since these groups are tied to their land by customary rights, people's distance to
markets can be used as a proxy for market integration that is exogenous (not subject to reverse
causality). Herders who live closer to markets were more cooperative, even after statistically
controlling for sex, wealth, literacy, land, and many other variables. Here market contact seems to
have caused people to be more cooperative in anonymous situations. Perhaps most importantly,
groups with more cooperators were better able to make, monitor, and enforce local agreements that
resulted in measurable improvements in forest conservation (Rustagi et al., 2010). That is, the
experience of markets changes our sociality to make it easier to construct and enforce certain kinds of
institutions – increasing institutional quality. Voors et al. (2012) have similar findings from Burundi.

Market integration basically refers to how easily 2 or more markets can trade with each other and
a situation in which separate markets for the same product become one single market,
for example when an import tax in one of the markets is removed.

• *High integration = low barriers to trade = prices are similar in these markets
• *Low integration = high barriers to trade = prices fluctuate between these markets
• Foreign trade helps the integration of markets because it reduces barriers to trade and
increases fluidity between markets.
• *For example, China produces toys at a cheaper price than the US. If foreign trade increased
between the two countries, toys could be sold to the US more easily, making them more
available, thus reducing price.
• *As foreign trade increases, the price of toys will continue going down until it matches (or
almost matches) China’s toy prices (which is the lower limit). Once the prices are similar for
both markets, we can consider them integrated.

The Global Corporations came alongside the market integration READ: Fourth Reading. The
International Financial Institutions like the World Bank play a very big role on the Market
Integration. READ: Fifth Reading. These International Financial Institutions (IFIs) play a major role
in the social and economic development programs of nations with developing or transitional
economies. This role includes advising on development projects, funding them and assisting in their
implementation.
Characterized by AAA-credit ratings and a broad membership of borrowing and donor countries, each
of these institutions operates independently. All however, share the following goals and objectives:

 to reduce global poverty and improve people's living conditions and standards;

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  to support sustainable economic, social and institutional development; and
 to promote regional cooperation and integration.
IFIs achieve these objectives through loans, credits and grants to national governments. Such funding
is usually tied to specific projects that focus on economic and socially sustainable development. IFIs
also provide technical and advisory assistance to their borrowers and conduct extensive research on
development issues. In addition to these public procurement opportunities, in which multilateral
financing is delivered to a national government for the implementation of a project or program, IFIs are
increasingly lending directly to non-sovereign guaranteed (NSG) actors. These include sub-national
government entities, as well as the private sector.

Characteristics of a Global Corporation

Craig Berman said that while many use "global" in the same way as international when it comes
describing a business, some analysts make distinctions between how each operates. On a basic level,
a global company is one that operates in more than one country. Particularly in the United States, the
term can mean different things in different contexts, with the characteristics of a global company
varying accordingly.
Global Corporations in Finance
In the world of finance and investing, a global corporation is one that has significant investments and
facilities in multiple countries and lacks a dominant headquarters. Global corporations are governed by
the laws of the country where they are incorporated. A global business connects its talent, resources
and opportunities across political boundaries. Because a global corporation is more invested in its
overseas locations, it can be more sensitive to local opportunities -- and also more vulnerable to
threats. A company that does business in Africa, for example, might find itself dealing with the
implication from a local Ebola outbreak as well as its commercial operations.
In contrast, an international company is one that is headquartered in the United States, but also does
business overseas and might have a large presence in multiple areas. This company would be
governed by U.S. regulations, assuming its headquarters remain here, but may also have foreign
subsidiaries governed by local laws.
Academic Definition
Business analysts and academics, such as the groundbreaking Michael Porter at Harvard University,
tend to define global businesses more narrowly and distinguish them from other operations overseas.
This approach defines a global business as one that maintains a strong headquarters in one country,
but has investments in multiple foreign locations. Such investments may involve direct investments in
foreign assets, such as manufacturing facilities or sales offices. The headquarters generally is its
home country, though some move to more favorable regulatory or taxation locations over time. Global
corporations strive to create economies of scale by selling the same products in multiple locations,
limiting local customization.
In contrast:
An international company has no foreign direct investment and makes its wares only in its home
country. Its involvement outside its borders is essentially limited to importing and exporting goods.

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A multinational company invests directly in foreign nations, but this is usually limited to a few areas.
Products are customized to local preferences, rather than homogenized, limiting the ability to create
economies of scale.
Transnational companies take the global corporation a step further. A transnational company invests
directly in dozens of countries and distributes decision-making capabilities to its various local
operations.

The role of international financial institutions in the creation of a global economy

Since inception at Bretton, the World Bank and International Monetary Fund (IMF) have undergone
several transformations in their roles of supporting the global financial architecture. There is some
significant progress regarding the globalization of commercial architecture, which has a great boost to
foreign operation and private investment.

Poor performance due to poorly managed developed or developing institutions led to the re-
examination of the role state in curbing mismanagement and therefore enhancing the shift of these
roles to other private market-based approaches. These transformations make the private international
finance trusts as well as the entrepreneurship sectors to play the main role in ensuring economic
development besides lending.

This paper is a discussion of the roles played by the International Financial Institutions (IFIs) in their
mandate to assist by collaborating with the private sectors in pursuit for adjusting the techniques to
suit the required market-oriented developments. What role do the financial institutions play in ensuring
clear principles of economic growth commitments?

The twenty-first century requires procedures and measure that enhance the transformation of global
scenarios. Today the International financial institutions (IFIs) are increasingly engaging countries that
are economically poor into investing in resourceful developments that support economic growth. (IFC
Magazine, 2010)

This has been possible to achieve due to the strict measures taken over violations involving the
internationally applied humanitarian laws. There are various hindrances to the role of IFIs to act as
agents of promoting and ensuring adherence to international humanitarian laws.

These obstacles include countries structural and political concerns. The institutions, however, have the
advantage by the fact of being in a position of publically making harsh utterances against such
countries, indicating the country’s level of tolerating violations or ability to absorb them. They can place
weight behind the humanitarian law thus forcing those in need of support to abide by the rules. (Viknin,
2005)

With this reasoning, they have the leading role in investigating a country’s commitment to impunity
before loaning or funding projects. The institutions have the communal role of influencing engagement
even if symbolically meant for financial considerations.

The steady growth of the private developing markets contributes hugely to fill the needed investment
of flowing capital. The institutions support the growth of the savings gap in the developing nations and
reduce people dependency by diversifying and sourcing funds in terms of strategically planned
investments.

According to Wogan (2010), the financial institutions use the flow of private capital to fill the financial
gaps by conveying technologies, changing the market behaviors, investing in the enhancement of
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managerial skills and funds distribution channels. They thus have a crucial role in assessing the
impact resulting from the flow of private capital on the developing economies.

The international financial bodies have to play the role of changing market positions. The traditional
objectives of some of these institutions such as the World Bank and the IMF entail elevation of poverty
in developing countries, enhancing measures that promote economic growth and protection of the
environment.

Other institutions like the EBRD have come up with a special role of fostering transition of its
operations to cover the open market economies by raising the living standards of those involved with
borrowing through enlightening and expanding their rights as well as guiding in their primary choices.

In line with the World Bank reports (2002), currently, the financial institutions are face up to fostering
development through expansion of the private sector opportunities of developing economic goals.
They have to ensure the poor participate in activities supporting environmentally sustainable growth.

The institutions can ensure this growth by assisting the governments’ role of creating the conditions
necessary for market-orientation towards the achievements and by being participants in investing.

They ought to work with the private sectors to expand to become participating investors in the private
sectors by improving the flow of working capital. Generally, the role fosters the tradition role of
stabilizing the macroeconomic firms as well as ensuring provision of the required physical, legal and
authoritarian infrastructure.

In collaborating with the private sectors, the financial institutions are obliged to think like them by
subject to the dynamics of opportunities in the market. They thus meet the challenges of enhancing
creativity and flexibility to respond to market needs efficiently.

This was evidential when the World Bank transformed to an infrastructure back in pursuit of uplifting
the private sectors since they were highly influential to the economic growth and was less venerable to
corruption. (2002) the support of the private establishments requires the lenders to abide by the
flexibility and confidentiality involved in privatized operations. Engagement with new role comes with
additional facilities such as accountability and further commercial risk analysis, avoidance and control
cultures. (Mirza, 2006)

They have a crucial role in coming up with operational principals for well-run institutions. They aim to
expand the private sectors; therefore they should stay clear of those activities that the segments are in
a good position to handle and instead engage in activities that make an immense contribution to the
transitional process of economic growth.

They have the role of engaging other financial institutions to assist in placing down the funding
required for a chosen investment. This is a vital role in the transition process and the achievement of a
broader perspective for development.

Today the financial institutions have the role of funding the building of other financial institutions in the
local markets. This is a measure to strengthen their capital base through investing in projects offering
broad perspectives.

There is an urgent need for well functioning monetary branches to fulfill the role played by the financial
lending institutions in fulfilling the market economies. They act as intermediaries to collect savings and
invest them in the aim of commanding hard budgetary allocations into the economic recovery
endeavors that enhance development.
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One of the traditional roles played by the financial institution entails financing of efficient infrastructure.
(IFC Magazine, 2006) The constraints experienced on most of the budgetary allocations means that
further commercially oriented investments are required for enhancing access to the private financial
sectors. Relevant markets disciplines ought to strengthen control of costs and minimize risks as a
measure of providing revenue as a discipline introduced by the financial institutions today.

A new focus on the market-oriented economies is highly supporting the flow of capital invested mainly
in the private sector. The primary support by the majority of the financial institutions seems to shift
goals to the development of the private sector by capitalizing on their strengths while minimizing the
risks involved.

The private markets and capital flows involved are powerful forces that represent significant
opportunities for growth. The financial institutions ought to provide clear principals regarding the
selection and design. By supporting the private sectors, the financial institutions aim to encourage or
influence them into promoting the industries that they are not able to reach.

A well-built financial and physical infrastructure creates jobs opportunities and enables broad market
growths. Considering the various roles of the institutions, they can meet the high social and
environmental standards of the companies by enhancing procedures to be followed by clients, which
they teach during their projects support processes or advisory services to support financing projects.

Defining Feature of a Multinational

Today, the core businesses of leading American multinationals, such as Walmart, Kimberly Clark and
Google, are quite different than those of the Phoenicians and Mesopotamians. But all multinationals
share one defining characteristic: the company establishes its central headquarters in its home
country, but operates or has subsidiaries or investments in two or more additional countries. For
example, Walmart, a multinational that earned more than $458 billion in the twelve months ending
April 30, 2015, originated in the United States but has facilities on other continents including Europe
and Asia. Companies large and small may operate multinationally. For instance, Illumina, a “mini-
multinational” -- a company with revenues from $200 million to $1 billion -- operates in China and other
countries.

Advantages of Operating Multinationally

Operating as a multinational grants businesses access to new markets and fresh opportunities to
increase their revenue streams. Also, establishing facilities in markets with extremely high rates of
revenue growth for a large number of product lines is an effective way to offset declining sales in other
markets. In this way, operating internationally decreases a company’s reliance on its home market,
which decreases cash flow risk.

In addition, by operating in multiple countries, companies might also gain access to local resources,
such as steel or grain. These companies also may experience other benefits from operating locally,

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such as lower labor costs, access to the production facilities of suppliers and the more efficient
distribution of products to local markets, which can lower product unit costs by a significant amount.

Disadvantages of Multinational Operations

Establishing facilities or subsidiaries in foreign countries is not without risk. For instance, multinationals
must attempt to counter the cultural differences that can lead to problems in communication,
negotiation and, ultimately, product standardization.
Also, a multinational company is vulnerable to currency rate fluctuations that can erode profits earned
in other countries. In addition, regulatory changes, including import restrictions pertaining to much
needed supplies, might negatively affect the operational and financial feasibility of operating in a host
country.

By pursuing revenue growth through international investment, a company also exposes itself to the
risk that it will be costly to modify its operations to adhere to host-country regulations. These costs can
be magnified by increasing competition for local labor and supplies by other multinationals or local
companies.

The Global Interstate System

The global interstate system is the whole system of human interactions. The modern world-system is
structured politically as an interstate – a system of competing and allying states. Political Scientists
commonly call this the international system and it is the main focus of the field of international
relations. In fact, the United Nations has become the face of this system. It has brought about the
emergence of Financial Institutions- World Bank, International Monetary Fund, Asian Development
Bank, and African Development Bank.

How of globalization impacts the governments

According to the disciplining hypothesis, globalization restrains governments by inducing increased

budgetary pressure. As a consequence, governments shift their expenditures in favour of transfers
and subsidies and away from capital expenditures. This expenditure shift is potentially enhanced by
citizens’ preferences to be compensated for the risks of globalization (“compensation hypothesis”).
Employing two different datasets and various measures of globalization, we analyze whether
globalization has indeed influenced the composition of government expenditures. For a sample of 108
countries, we examine the development of four broad expenditure categories for the period 1970-
2001: capital expenditures; expenditures for goods and services; interest payments; and subsidies
and other current transfers. A second dataset provides a much more detailed classification: public
expenditures, expenditures for defence, order, economic environment, housing, health, recreation,
education, and social expenditures.
Watsons said the biggest effect is a reduction of economic independence. The increasing market size
with the effects of Absolute or Comparative Advantages in manufacturing creates the need to
specialize in narrow product production or service areas to be able to compete successfully. This
requires “OPEN MARKET” policies. On the opposite end of the spectrum, it could just as easily result
in “PROTECTIONIST” policies to restrict domestic access to markets using the tools of import quotas
and/or tariffs on imported goods.

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The main problem with restricting market access using such tools is RETALIATION from other
countries in implementing similar policies against that country… the popular press refers to this as a
“Trade War.” When this happens, the larger market has a distinct advantage as its people can better
afford slightly higher prices for imported goods. Global corporations don’t generally like that an excise
tax is being applied to their goods that will impact sales volumes and profits to the shareholders.
If a marketing study shows sales volumes are significantly affected in revenue losses… Global
Corporations simply establish Wholly Owned Subsidiaries in the countries where their brands are
already well-established, and continue selling them without the excise taxes being applied. In other
cases, third countries, not involved in such Trade Disputes… called “Terms of Trade,” are used to
funnel goods without being subject to the import tax. Cyprus is often used a gateway to import Turkish
products into the European Union without going through procedures to declare Value Added Taxes
for such goods making them far cheaper on European markets.
Institutions governing international relations

After World War II, the United States helped build a global economic order governed by mutually
accepted rules and overseen by multilateral institutions. The idea was to create a better world with
countries seeking to cooperate with one another to promote prosperity and peace. Free trade and the
rule of law were mainstays of the system, helping to prevent most economic disputes from escalating
into larger conflicts. These international organizations are tools for prosperity and peace. The
institutions established include:

Internationalism and globalism

Although the two terms may appear to be similar, yet there exists conceptual difference between the
two. Globalism is much wider term in terms of its meaning, scope and outcome. While Internationalism
lays stress only on the solidarity and cooperation among the Nations, while acknowledging their
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Sovereign Character, Globalism on the other hand not only emphasises the dilution of the Sovereign
Expression of the Nations but demonstrates the conflicts arising out of this dilution as well.

This however does not mean that Globalism is a negative concept, because surrender of national
sovereignty (to some extent) is aimed to moderate the barriers to international exchanges. In spite of
these conceptual differences between the two terms, practically we witness an amalgam of the two
phenomena. In the contemporary world order, the international and transnational exchanges witness
both Globalism and Internationalism with varying degrees.

For example, in International Organisations like WTO, the mode of exchange we witness is a blend
of both Internationalism and Globalism. However, Globalism tends to dominate the scenario. While
the countries seek cooperation for by international trade and respect each other’s independence in
decision making, yet, it is often the
by southern nations that have to compromise their national interests. Subsequently, a conflict arises
between the interests of various nations and in the name of global cooperation practices like neo-
colonialism are undertaken.
Similarly, United Nations that seeks International Cooperation and sorts out various conflicts,
witnesses both the phenomena, but it is again the Globalism that gets a little more edge. Though,
there are various conflicts over a wide dimension of issues (such as the expansion of Security Council,
dominance of the West and many more), yet, the organisation seeks to build consensus among
various stake holders and enforce cooperation in the matters of Global Importance. The historic
Climate Conference in Paris testifies this aspect wherein several nations agreed to put their foot down
for the sake of Global Good.

Also, even though the conflicts exist and sovereignty is surrendered (to some extent) yet they get
overshadowed in pursuit of Global Interests. Similarly organisations like SAARC, BRICS, and IBSA
etc tend to have dominance of internationalism. The interdependence (regional) of the nations
(especially regional) and the need for cooperation among them justifies the existence of such
international institutions.

Terrorism and Fundamentalism in Global context is another important example wherein the aspect of
Globalism dominates in terms of the rapid radicalisation of people round the globe, while the measures
to by counter them entails internationalism wherein this threat is acknowledged and dealt via
cooperation between nations. It depicts their interdependence on one another to deal with this issue.

This example depicts another aspect to the two phenomena being discussed-i.e. - they not only entail
the state but non state actors as well. Thus it shows that free flow of men, material and information
may not necessarily be functional as in the case of several Global Phenomena such as Terrorism,
cultural conflicts, Proliferation of Nuclear Arsenal and so on. Thus it is evident that in the world order
that we witness today, conflicts, cooperation and interdependence among various nations go hand in
hand and so on.
source:abhipedia.abhimanu.com/

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