International organizations

Intergovernmental Organizations (IGO)

- IGOs can enter into agreements (kí kết thỏa thuận) with other IGOs or nation states
- Typical characteristics of classical IGOs:
 Most have a legislative body that creates legal acts, such as resolutions and directives,
that bind the IGO under international law (nghị quyết và chỉ thị ràng buộc IGO theo
luật pháp quốc tế)
 IGO’s may also have a dispute resolution mechanism to resolve conflicts between
member states
 IGOs typically have a deliberative body, an executive organ an administrative organ
and a variety of specialized agencies (IGOs thường có cơ quan thảo luận, cơ quan
điều hành, cơ quan hành chính và nhiều cơ quan chuyên môn).
- The development of IGOs
 Roots in Europe
 1900: few dozen to 300 formal IGOs in 2008
 The success of the Commission for the Navigation of Rhine (1831)
 Purpose of facilitating communication, commerce and decrease conflict
 Some examples of IGOs: UN, African Union, EU, G8, NAFTA, WTO,..
The league of nation
Origin
- Set up as part of the Treaty of Versailles in 1920
- Officially came into existence on 10 January 1920
- Envisioned to be a truly international organization which would maintain world peace
and security by acting together to prevent war
Aims of the League
- The first intergovernmental organization established “to promote international
cooperation and to achieve international peace and security
- To promote open just and honorable relations between nations
- To lay out a system of international law
- Founding document – the Covenant of the League of Nations Charter 26 articles – 10
dealt directly with the peace promotion
Membership
- 63 states because members of the League of Nations (with at most 60 at the same time)
- Defeated countries could not join eg. Germany
- USSR excluded
- A club for the victory
Successes
 - In it’s the first decade, the League heard and resolved more than 30 disputes, most of
which were among small nations
- Dealing with health issues – targeted the treatment of specific diseases (eg. Leprosy)
- Economic and social contributions
- Established the permanent court of international justice: precursor to the United Nations’
international court of justice
- Dealing with the improvement of living and working conditions worldwide (through ILO
– unique organization with membership – employers, employees and government
representatives) – 150 treaties
Failures
- Fail to prevent World War II (biggest failure)
- Less successful when it attempted to resolve disputes between more powerful nation
states
Weakness of the League
- USA, USSR, Germany (at first) didn’t join
- No permanent army
- No mechanism for coordinating military or economic actions against miscreant states
- Structure a disaster – everyone had to agree before any action taken
- Weakest at dealing with issues that nations saw as a threat to their security
- Most members of the league were unwilling to put the security of their nations at risk in
order to fulfill collective security
-
The United Nations (consider as the successor of the League of Nation)
- The United Nations was created at the end of the Second world war, replacing the league
of nations
- US President Franklin D Roosevelt was a driving force behind the creation of the UN
- The name United Nations was used by Roosevelt to describe the alliance fighting the
Axis powers in the WW2
- Headquarters: New York: six languages: English, Spanish, Russian, Chinese, French and
Arabic
- 193 members
- Current secretary: Antonio Guterres (from 1/1/2017)
- Financially supported through contribution of member nations
UN’s institutions
- Specialized agencies: WHO, International Labor organization,…: have their own
constitutions, regularly assessed budgets, executive heads, self-contained financially and
politically and not subject to UN control
- Funds and programs: UNDP, UNICEF, UNFPA,…directly under the management of UN,
funded on a voluntary basis
Purpose
- Promote world peace and stability, prevent war
- Improve economic and social conditions such as health and education
- Provide forum for nations to address issues
- Encourage dialogue
The UN’s six main bodies
a. UN General Assembly
- Main organ of the UN
- Main purpose: provide a forum for debate and discussion among members
- The real powers of UNGA rest in its control of UN budget and in its ability to make
recommendations
- Submits resolutions and amend the charter
- Oversees the operations of all the agencies within the UN
- UNGA has the power to elect the non-permanent members to the UNSC, the
representatives for ECOSOC, and various members of the Trusteeship Council
- Required to work closely with the UNSC
- Meets for a three months period each year, beginning on the third Tuesday of September
and ending before Christmas.
- All nations have an equal vote
- Membership in the UNGA has been and continues to be very political (Eg: Taiwan case)
b. UN Security Council
- Designed to be the most important organ of the organization
- Making recommendations to the UNGA for the application of new members and
nomination the secretary general, has the power to authorize the use of force by the
organization
- Investigates and settles arguments with or without military action
- Consists of 15 members
- Five permanent members (US, UK, China, France, Russia) have veto power
- The other 10 members are chosen by the UNGA for a 2 – year term.
- The weakness in enforcing peace: veto power: the UN can only take serious action when
all the policemen agree: decisions of the security council shall be made by an affirmative
vote of nine members including the concurring votes of the permanent members
c. Secretariat
- The UN administration
- Is the chief administrator, spokeperson of UN, appointed by the General Assembly and
approved by the Security Council for a five-year renewable term
- Workers include interpreters, translators, lawyers, engineers and editors
- Workers carry out the day to day work of the UN all over the world
d. Economic and Social Council
- Promoting higher standards of living, full employment, and economic and social progress
- Identifying solutions to international economic, social and health problems
 - Facilitating international cultural and educational cooperation
- Encouraging universal respect for human rights and fundamental freedoms
- Consumes 80% of the UN budget
- 18 members at the foundation of UN – 54 members in 2008
e. International Court of Justice
- Judicial organ of the UN
- Hears cases between countries
- 2 main functions:
 Settles conflicts between member nations
 Advises other international organizations on appropriate policy
- Located in The Hague, The Netherlands
f. Trusteeship Council
- Responsible for assisting with the transition of former colonies to independent countries
- A total of 11 territories, most of which were becoming independent after years of
colonialism, were placed under “trusteeship”
- 1994: independence of Palau, the last of the trust territories, the TC completed its work
and became inactive
The UN in Global context
- Raising awareness for marginal groups
- Promote concern for human rights
- Contribute to multilateral diplomacy
- Partnership with NGOs
- Global cooperation and engagement
- 17 sustainable goals
- Limits:
 Paradox between IO and State
 Not structured to be global authority that surpasses the sovereign authority of states
 Need the cooperation and commitment of states
- Points to remember
 Still the only IGO of global scope with nearly universal membership
 The UN can only do what its members, particularly its most powerful members allow
to do
 The UN has struggled to prevent conflict between and within nation states. Still, it
continues to function and has proven an invaluable institution in many ways.
World Trade Organization
- WTO is an international organization designed to promote free and uniform trade and
banking and finance rules and regulations
- Has 164 members representing 98% of world trade
 - Over 20 countries are seeking to join the WTO. To join the WTO, a government has to
bring its economic and trade policies in line with WTO rules and negotiate its terms of
entry with the WTO membership
- WTO main functions:
 Administering WTO trade agreements
 Form for trade negotiations
 Handling trade disputes
 Monitoring national trade policies
 Technical assistance and training for developing countries
 Cooperation with other international organizations
 To ensure that trade flows as smoothy, predictably and freely as possible.
- WTO goals
 The reduction of tariffs, with the end goal of tariff elimination
 The prevention of dumping
 Reductions in farm subsidies
 The elimination of quotas on textiles from developing countries
 The introduction of regulations on service sectors, including banking insurance, and
shipping in order to standardize practices
What is an NGO
- An organization consisting of non-governmental representatives and individuals, a
characteristic that distinguishes them from IGO’s
- NGOs have no international legal status, therefore, they don’t enter into treaties or other
international agreements, although they might promote such agreements
- Types of international NGOs
 Human rights
 Development
 Environmental
- NGOs activities
 Advocate particular political, social or economic positions
 Lobby government at the local, regional, national and international level
 Provide consultative services at the local, national, international level and provide
crucial services either in cooperation with, or in place of the state
 Engage in economic development, education, and capacity building at the local,
regional,..
 Engage in self help
Value and critics of NGOs
- Value:
 Helped bring an end to apartheid in South Africa
 Successfully motivated nation-states to codify human rights and other humanitarian
treaties and conventions
  Establishment of codes of conduct for firms and states
- Factors contribute to NGO success
 The number of members and their commitment and willingness to engage in
organization activities
 The amount of money the NGO has to carry out its mission
 The leadership of the organization its access to policy makers and the media and its
ability to maintain its autonomy from nation-states
 Becoming accredited as a consultative body of the UN, a provision outline in the
original UN Charter
- Critics
 Financial/funding problems
 Donor driven versus value-vision-mission
 Weak government and capacity, internal division
 Government intervention
 Accountability
 Tax evasion rather than public utility maximization goals

- Advocate to the people that need

- Take part in negotiation
- Purchase as a diverse…
NGOs suggest to involve
- Raising public awareness in terms of climate change, political power,…(doc sach)
1. Global south: developing countries ( fair binding….phan Common Denominator: 3 dieu
dong ys vs nhau)
2. First line conflict
g. What can be done: doan cuooi
 Communicate
 Open discussion
 Strategic
 Culture
1. Definition
- Culture is a set of belief, values and practices that are learned through processes of
enculturation and socialization
 Enculturation: the process of acquiring one’s culture, ordinarily as a child, in
interaction with other members of one’s society/process through which one becomes
a member of a culture demonstrating an understanding of its rules, norms, and
expectation
 Socialization: process through which one learns the accepted rules of behavior for a
culture or society
2. The cultural globalization
- Western popular culture:
 Language: English
 Arts: Hollywood movies,…
 Lifestyles: fashion trends, similarities in social practices: eating, drinking,
socializing,..
 Viral mechanism promotes the popularity of a few distinctive cultural traits via social
networks
- International flows:
 The development of ICTs enhances the flow of international information and
communication
 The ease of long-distance, high-speed travel intensifies the flow of people
 The spread of global brands embeds standards of values in different cultures

- Multi-level international cooperation

 Global integration requires a level of sameness in multicultural dialogues
 Interconnected markets and open societies magnify the spectrum of cultural
exchanges
 Risk-and profit sharing mechanism accelerate the cross-cultural communication
3. Cultural dynamic
- Dynamic: action, practice, movement, growth, and generation
- Cultural dynamics: the formation, maintenance and transformation of culture over time
- Culture never stands still, by continuously moves and develops
4. Diffusion
- The spreading of a cultural trait from one society to another, may not involve contact
- Diffusion is a selective, not automatic process. A society accepting a foreign cultural trait
is likely to adapt it in a way that effectively harmonizes it with the society’s own
traditions
- There are three basic patterns of diffusion
- 3 types of diffusion
 Diffusion by direct contact in which elements of a culture are first taken up by
neighboring societies and then gradually spread farther and farther afield
 Diffusion by intermediate contact, in which third parties, frequently traders, carry a
cultural trait from the originating society to another group
 Stimulus diffusion in which knowledge of a trait belonging to another culture
stimulates the invention or development of a local equivalent
5. Acculturation
- Cultural diffusion where a subordinate culture adopts many of the cultural traits of the
more powerful culture due to continuous contact
- Cultural imperialism
 Active promotion of one’s cultural system over another
 A form of domination that involves privileging one culture over less powerful ones or
imposing/ injecting the cultural practices of a dominant culture into other cultures,
other culminating in the adoption of the cultural practices of the imperial power
 Media and communication
 Economic influence
 Language and education
 Global brands and corporations
- Cultural nationalism
 The process of protecting and defending a certain cultural system against dilution or
offensive cultural expression while at the same time actively promoting the
indigenous culture
- Cultural hybridization
 Cultural hybridization is the blending of elements from different cultures
 Foreign cultural imports are assigned fresh meanings within the receiving culture
 It occurs when people mis traditional arts, mass communication and popular culture
in new way, enabling people to express personal and cultural identities that are
different from existing ones
 Locals are influenced by global culture, but also re-interpret it and adapt it to their
lives
- Cultural hybridization
 Creole languages, a new language developed from simplifying blending different
languages that come into contact within particular population at a specific point in
time
 Global restaurant chains like Kentucky Fried Chicken or McDonald’s (KFC),
modifying their menus to suit the tastes or mores of different cultures
  Martial arts films in the US that adapt traditional Asian cultural elements to fit the
tastes of the viewing public
- Global and local interaction
 Global goes local: global product is localized to adapt with local culture
 Local goes global: local culture is welcomed at global level
 Local transforms local: local businesses use the knowledge of their own culture to
compete with global companies
- In some contexts, local cultures may largely be replaced by western cultural products,
practices, and values
- In other cases, global pressures, may lead to a resurgence of attention to and celebration
of local cultures
- In still others, cultural exchanges result in new forms of cultural hybridity
- McDonald’s 4 processes of rational organization
 Efficiency: the fastest way to get from being hungry to being full. Efficiency in Mc
Donaldization means that every aspect of the organization is geared toward the
minimization of time
 Calculability: objective shoud be quantifiable rather than subjective.
McDonaldization developed the notion that quantity equals quality and that a large
amount of product delivered to the customer in a short amount of time is the same as
a high quality product
 Predictability: standardized and uniform services. Predictability means that no matter
where a person goes, they will receive the same service and receive the same product
every time when interacting with the McDonaldized organization.
 Control: standardized and uniform employees, replacement of human by non-human
technologies
 Glocal: McDonald’s changed consumer behaviors,…
6. A civilization
- Defined by common ancestry, values, language and religion
- Civilizational cultures are defined by common objective elements (language, history,
religion, customs, institutions) and by subjective self-identification (us and them)
- Major civilizations:
 Sinic/Chinese, Japanese, Hindu, Western, Islam
 Latin American and Africa candidates for civilization
7. Huntington’s thesis
- Global politics is multi-polar and multi-civilizational, NOT “Westernization” of non-
Western states.
- Huntington’s worldview does not allow for productive forms of cultural hybridity nor the
idea that exchange can facilitate better relations among states
- For Huntington, the more different civilizations interact with one another, the more they
will clash
 Globalization and politics
1. Nation-state and sovereignty: nhà nước và chủ quyền quốc gia
a. Nation-state: independent country, consists of a large group of ppl sharing the same
language, history,…
- State: an internationally recognized, politically organized, populated, geographical area
that possesses sovereignty, consists of 4 characteristics:
 A fixed territory with boundaries
 A population
 A government
 The capacity to enter into relations with other states
- Nation: shared cultural or ethnic identity rather than to a legally recognized geographic
territory, when we talk about the nation, we wannabe talk about the people
- Nation – state: a type of state that provides sovereign territory for a particular culture or
ethnic group. However, it is also frequently used interchangeably with the terms “state”
and “country”. (the country that fit the best into this definition: Japan, because they
majority of the population share the identity of being the Japanese nation and also they
are being governed by the Japanese government)
- It is very hard to find a state with the only a particular nations of people living under it, so
similar to.
b. Sovereignty/ territory: chủ quyền/lãnh thổ: of go hand in hand together
- Territory: refer more to the land, the area
 An area with fixed boundaries: ranh giới
 Boundaries can change because of war (ex: in WW1, Germany had lose and it lost
some area), purchase, annexation: sáp nhập (ex: việc Nga sáp nhập đảo Cremia ở
Ukraine)
- Sovereignty:
 A country to have true sovereignty, it means that they have to be able to make their
own decision within their territory.
 Supreme and absolute power within its territorial boundaries and over its own people:
quyền lực tối cao và tuyệt đối trong phạm vi lãnh thổ và đối với người dân của mình
 Ability to decides its own foreign and domestic policy its own government and forms
its own economic systems, basically, get to decide its own policy, economic system,
culture policy as well.
 Sovereign is the full right and power of a governing body over itself, without any
interference from outside sources or bodies
 + 2 dimensions: Internal: refers to the authority, the rise and power of governing and
means supreme authority within one’s territory, External: relates to the recognition on
the part of all states that each possesses this power in equal measure (ex: Vietnam
internally Vietnamese government has the authority and the power to decide policy
and matter of the country within the Vietnamese border. Externally, Vietnamese is
recognized by also other countries that have the same power, same status).
 Sovereign/ sovereignty: the principle that emerged from the peace of Westphalia
which suggests that a political entity has the sole authority to make decisions about
policy, procedure, and institutions within a given geographic territory
 Westphalian model
+ The world consists of sovereign territorial states which recognize no superior
authority
+ Westphalian sovereignty assumes the absolute control of nation-sates over all
conduct that occurs within their own territories
+ Responsibility for cross-border wrongful acts is a “private matter” concerning those
affected
 4 different sovereignty claims by Krasner:
+ Domestic: public control within a state
+ Interdependence: control over trans-border movements
+ International legal: mutual recognition (they have recognition from other country
that also progress its international legal status)
+ Westphalian: exclusion of external actors from domestic authority
 These 4 meanings of sovereignty are not logically coupled, nor have they
covaried in practice: state can be ineffective domestically but they retain their
international recognition.
 Term: responsibility to protect: is the result of 2005 United Nations will submit
meeting => it defines as each individual state has responsibility to protect its
population from genocide, war crime, ethnic cleansing, crime against humanity.
2. Globalization and sovereignty
- Challenges by globalization
 Climate changes is global, hence indiscriminating against any international border
 Migration becomes easier and commonplace with often instance of a person holding
multiple citizenships
- The rise of ICT:
 Difficult for government to control the flow of images, information, arguments and
ideas into and across its territory
 Past: hard copies of ideas/images – easy to control
 Now: the world of electronic communication, it’s harder to restrict the flow of texts
and ideas
- The rise of global governance
 Increasingly integrated global economy
 The rise of international organization
  “New” international Law
- Increasingly integrated global economy
 Sharp reduction of tariffs and trade barriers since the end of WW2 => free movement
of goods and services that is central to globalization
 Globalization has spurred the cross-border movement of capital => international
capital markets prevent nation states from pursuing independent macroeconomic
policies freely
- International organizations are legal entities established by more than one nation-state
pursuant to an international agreement
- Legal personality: enables them to exercise rights and fulfill duties on the international
plane independently
- Diversity in both form and purpose:
 International tribunals that resolve disputes between nations
 Agencies
 Discussion of issues and joint policies
- 2 characteristics diminish nation-state sovereignty: independence and heightened powers
- Ios must reflect the interests of more than one member, which means they will not be
completed beholden to any nation-state
- Ios have begun to acquire sovereign powers previously held by nation-states
- Ios can influence nation-states without directly exercising sovereign powers (IMF, World
Bank)
 Becoming a member of an IO: waives a certain degree of sovereignty
3. NGOs
- Lack formal power but have big influence on different issues
- Each NGO focuses on a particular issue, unlike states which are comprehensive in their
involvement
- Representatives of independent citizen organizations are increasingly active in policy
making at the UNs => the most effective voices for the concerns of ordinary people in the
international arena
- NGOs: advocates of human rights, the environment, social programs, women’s rights and
more
4. MNCs
- Reduce the power of a nation – state by:
 Playing the roles as invisible hands
 Interfering national economic activities, social structure and political system
 Shaping foreign policy for that country as they have the power to influence the
government through their economy
5. “New” International Law
- State-state relation -> state – individual
- Expand subject matter: the international convention on civil and political rights
guarantees the individual rights of free expression, political association, property, life,
and procedural justice, among others, international convention on economic, social and
cultural rights guarantees the right to health care, economic wellbeing, and work
- Non-state actors, Ios in the law making process
6. Challenges
a. Economic sovereignty
- Protectionism reduction by WTO, GATT
- Internationalization of market brings with them new set of limitation
- Increasing influence of transnational corporations
- Institutions such as WB, IMF create new constraints
b. Political sovereignty
- Bound by norms and rules laid down by IGOs, treaties,….(CO2 emissions, human
rights,..)
- Erosion of national citizenship
- More vulnerable to disruption or violence from abroad (terrorism, cyber attacks,…)
- Controlling immigration and preventing illicit migration
c. Cultural sovereignty
- Promotion of western culture and values
- Cultural homogenization
- Erosion of indigenous culture
- Cultural appropriation
d. Opportunities
- By acting multilaterally -> increase the power to act effectively
- Globalization offers global cooperation, surveillance
- Technology and system of monitoring available
e. The rise of Anti-globalization
- Populism, which frames politics as a battle between ordinary people and corrupt elites,
has grown rapidly as a political force, with support for populist parties in national
elections across Europe surging from 7% to more than 25% in 20 years
- Brexit: UK leaving EU
- A referendum held on 23 June 2016 to decide whether the UK should leave or remain in
the EU. Leave won by 51.9% to 48.1%
- England and Wales voted for Brexit
- Why Brexit: own control of border, cut down on immigration and retake jobs

Globalization and economy

1. Economic globalization
- Refers to the intensification and stretching of economic interrelations across the globe
- Broadly refers to the increasing integration of national economies around the world,
particularly through trade and financial flows
- Involves trade in goods and services, capital flows and trade in assets (currency, stocks),
the transfer of technology and ideas, and international flows of labor or migration
- 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,
wide and rapid spread of technologies, ease in transport
2. The emergence of the global economic order
- Bretton Woods Conference: reversed protectionist policies of the interwar period
 Economic cooperation -> commitment to expand international trade
 Establish binding rules on international economic activities
 More stable money exchange system -> the value of each country’s currency was
pedded to a fixed gold value of the US dollar
 Allowed states to set their own political and economic agendas
- Bretton Woods Conference: new international economic organizations:
 The international monetary fund: administer the international monetary system
 The international bank for reconstruction and development, later known as World
Bank: provide loans for Europe’s postwar reconstruction
 The general agreement of Tariffs and Trade: global trade organization enforcing
multilateral trade agreements
- US President Richard Nixon abandoned the gold – based fixed rate system in 1971
 Helped usher in the era of neoliberalism
 Privatization, deregulation, and the dismantling of the welfare stat
 Instituted tax cuts, decreased social spending, increased military spending, and
implemented market deregulation
 Decreases in taxes, especially for corporations, stimulate economic growth
- Neoliberalism
- Economic globalization
 The internationalization of trade and finance
 The increasing power of transnational corporations
 The enhanced role of international economic institutions
- Internationalization of trade and finance
 Reduction of existing trade barriers among nations => enhance consumer choice,
increase global wealth, secure peaceful international relations, and spread new
technologies around the world
 Deregulation of interest rates, the removal of credit controls, and the privatization of
government – owned banks and financial institutions
 Internet further accelerated the liberalization of financial transactions
- MNCs
 69 of top 100 economic entities are corporations not countries (2016)
 1/3 of world production is done by multinational enterprises and they account for half
of world trade
 Walmart, Apple and Shell richer than Russia, Belgium, Sweden
  MNCs and their global strategies have become major determinants of trade flows, the
location of industries, and other economic activities around the world -> extremely
important players that influence the economic, political and social welfare of may
nations
- Enhanced role of international economic institutions
 Structural adjustment programmes: reform the internal economic mechanisms of
debtor countries in the developing world so that they would be in a better position to
repay the debts
- Global supply/ value/ production chain
 Global supply chains: consist of world wide networks of suppliers, manufactures,
warehouses, distribution centers and retailers through which raw materials are
acquired, transformed and delivered to customers
 A value chain refers to the full spectrum of value added activities required to bring a
product form tis conception, through design, sourcing raw materials and intermediate
inputs, production, marketing, distribution and support to final consumers. Value
chains become “global” when their component activities are geographically spread
across several economies
 A production chain refers to linkages within or among a group of firms in a
particular GVC for producing specific products, such as particular types of
computers, mobile phones and automobiles
3. Upside and downside
- The upside
 Allowing firms to source their inputs more efficiently, to access knowledge and
capital beyond the domestic economy and to expand their activities into new markets
 Lower labor costs in developing countries
 Transfer of Technology
 Positive effect on the national economy and result in a higher standard of living
 Economies of scale
 New opportunities for smaller firms and participants from emerging-market
economies
 Consumers have access to a wider variety of goods
- The Downside
 Worldwide natural disasters, emergencies, and other policy-driven circumstances,
such as the Coronavirus Disease 2019 (COVID-19) pandemic, have shown that GVC
links integrate and create interdependence between economies, which can leave
companies vulnerable to external shocks, including interruptions in other countries
 Unemployment (certain industries and sectors sending jobs to countries where
workers are willing to do the same amount of work or more for smaller wages)
 Income disparity and inequality
 Increased competition
 Environmental Concerns
- Increasing Economic Crime
  Economic crime, also known as financial crime, refers to illegal acts committed by an
individual or a group of individuals to obtain a financial or professional advantage.
The principal motive in such crimes is economic gain.
➢ investment fraud
➢ mass-marketing fraud
➢ payment-order fraud
➢ insurance fraud
➢ benefit fraud
➢ procurement rigging
➢ loan and mortgage frau

Globalization and finance

1. Financial globalization
- Globalization: an increasingly freer flow of goods, companies, people, ideas
(technology), services (including financial services),..
- 2 main trends
 The globalization of the markets for goods and non-financial services.
➢ Recent trend began after WWII with GATT rounds (1947) and the WTO (1995).
 The globalization of financial markets and financial services.
➢ Recent trend began in the 1980s with developed countries liberalizing their capital
markets followed by developing countries in the 1990s.
- Financial globalization
 Financial globalization is an aggregate concept that refers to increasing global
linkages created through cross- border financial flows.
➢ Stock market trading in New York stock exchange can affect Tokyo and Hong
Kong
 Financial market Globalization: The integration of a country's domestic financial
system into the international arena.
→ individual domestic financial markets become so closely integrated with others
 This integration is represented by:
➢ Large trading volumes across borders.
➢ Securities of different nations (corporate and government issues) trading in many
major financial market centers.
➢ Financial events in one country affect other countries.
 Financial market globalization has resulted from:
+ The liberalization of capital flow restrictions worldwide and
+ Advancing technology (in communications).
  Today, companies look at funding possibilities in financial markets around the world
& investors can select from opportunities offered by a vast array of countries.
- Key concepts:
 Capital Flows: transactions involving financial assets between international
entities/The movement of money for the purpose of investment, trade or business
production. Financial assets to be included can be bank deposits, loans, equity
securities, debt securities, etc.
 Financial Integration: Financial integration is the process through which financial
markets in an economy become more closely integrated with those in other
economies or with those in the rest of the world. This implies an increase in capital
flows and a tendency for prices and returns on traded financial assets in different
countries to equalize (De Brouwer, 2005).
 Gross domestic product (GDP) : the market value of all officially recognized final
goods and services produced within a country in a given period.
 GDP per capital: the value of al final goods and services produced within a country in
a given year divided by the average population for the same year; It is often
considered an indicator of a country's standard of living
 GDP growth (annual %) Annual percentage growth rate of GDP at market prices
based on constant local currency.
 Foreign direct investment (FDI): an investment in the form of a controlling ownership
in a business, in real estate or in productive assets such as factories in one country by
an entity based in another country/cross-border investment in which an investor
resident in one economy establishes a lasting interest in and a significant degree of
influence over an enterprise resident in another economy.
 WHY FDI? cheaper wages, tax exemptions, tariff-free access, bilaterally commercial
conflict avoidance, professional experts’ services …
 FDI in Vietnam
+ Factors that attract foreign investment to VN: recently-signed free trade
agreements, political stability, ongoing economic reforms, a young and increasingly
urbanized population, competitive labor costs, effective COVID vaccine campaign,..
+ Trend: shifting foreign investments to high-tech industries and ensuring those
investments include provisions relating to environmental protection
 Official Development Assistance (ODA): loans made on concessional terms and
grants by official agencies of the members of the Development Assistance Committee
(DAC), to promote economic development and welfare in countries and territories in
the DAC list of ODA recipients. It includes loans with a grant element of at least 25
percent (Low interest, long duration – 20- 40 years)
 Official Aid: aid flows from official donors to countries and territories in part II of the
DAC list of recipients: more advanced countries of Central and Eastern Europe, the
countries of the former Soviet Union, and certain advanced developing countries and
territories. Official aid is provided under terms and conditions similar to those for
ODA.
- Main agent:
 Governments
 Borrowers, investors
 Financial institutions
- Governments:
 Allow globalization by liberalizing restrictions on the domestic financial sector
 Provide tools to regulate market and international transactions: tariffs, quotas,
monetary and fiscal policies
 Reasons for liberalization and deregulation
+ Governments found capital controls increasingly costly and difficult to maintain
effectively
+ Errunza (2001) and the World Bank (2001) argue that policymakers have become
increasingly aware that government-led financial systems and non-market approaches
have failed
+ Crises have heightened the importance of foreign capital to finance government
budgets and smooth public consumption and investment
 Foreign capital has helped governments capitalize banks with problems, conduct
corporate re-structuring, and manage crises
 Opening up the privatization of public companies to foreign investors has helped
increase their receipts
 Benefits of a more efficient and robust domestic financial system for growth and
stability of the economy and for the diversification of the public and private sectors’
investor base.
- Borrowers, investors: including households and firms:
 Borrower: Firms can expand their financing alternatives by raising funds directly
through bonds and equity issues in international markets → reducing the cost of
capital, expanding their investor base, and increasing liquidity, in the case of FDI,
they benefit from new technology, know-how, management, and employee training
 Investor: take advantage of favorable economic conditions; benefit from international
diversification; More financing alternatives help foreign investors overcome direct
and indirect investment barriers
- Financial institutions: Major driving force of financial globalization thanks to:
 Gains in IT → diminished the importance of geography, allowing international
corporations to service several markets from one location
 In developed countries, increased competition has led banks and other nonbank
financial firms to look for expanding their market shares into new businesses and
markets, attracting customers from other countries
 Liberalization of the regulatory systems has opened the door for international firms to
participate in local markets.
2. Potential benefits and potential risks:
- Potential benefits:
  More financially interconnected world; deeper degree of financial integration of
developing countries with international financial markets.
 Increase the availability of funds (both foreign institutions and individuals might
provide capital to developing countries)
 Can improve the financial infrastructure → borrowers and lenders operate in a more
transparent, competitive, and efficient financial system, reduce information
asymmetries
- Potential risks: Generates financial volatility and crises:
 when a country liberalizes its financial system, it becomes subject to market
discipline exercised by both foreign and domestic investors
→ small changes in fundamentals, or even news, can trigger sharp changes
 Imperfections in financial markets can generate bubbles, herding behavior,
speculative attacks, and crashes
 External factors: If a country becomes dependent on foreign capital, sudden shifts in
foreign capital flows can create financing difficulties and economic downturns
 Financial crises through contagion : real links, financial links, and herding behavior
3. global financial crisis (2008)
- The worst economic disaster since the Great Depression of 1929
- The crisis led to the Great Recession, where housing prices dropped more than the price
plunge during the Great Depression
- The United States alone lost more than 8.7 million jobs. U.S. households lost roughly $19
trillion in net worth as the stock market plunged
- The Great Recession led to a loss of more than $2 trillion in global economic growth ●
Deregulation of financial derivatives was a key underlying cause of the financial crisis
- Credit rating
- A subprime mortgage can be any home loan intended for borrowers with impaired credit.
They often have adjustable rates. Banks independently decide which borrowers don't
qualify for prime mortgages
- Derivative: products that derives their value from another underlying asset.
- MBS: Mortgage-backed security: bonds that are secured by mortgages.
- CDS: Credit swap security: a financial derivative that guarantees against bond risk. It
allows one lender to "swap" its risk with another. Swaps work like insurance policies.
- CDO: Collateralized Debt Obligation: are bundles of debt that banks package for resale
to investors.
- GFC 2008 main causes:
 Excessive investments and deregulation: Financial Services Modernization Act,
repealed the Glass-Steagall Act of 1933 → allowed banks to use deposits to invest in
derivatives.
 Risky Wall Str. behavior
➢ Packing subprime mortgage loans -> Resell to investors as mortgagebacked
securities (MBS)
➢ Create CDS – insure against defaults
 ➢ MBS, and CDSs created a domino-like collapse of the housing market
 Loose lending standards in the housing market
➢ Subprime mortgage loans to almost everyone (even with questionable
creditworthiness)
➢ Fed reduced the federal funds rate 11 times between May 2000 –December 2001
from 6.5% - 1.75%
➢ Consumers took advantage of the cheep credit to purchase durable goods such as
appliances, automobiles, and especially houses -> Creation of a “housing bubble” in
late 1990s
 The subprime mortgage crisis
➢ Mid-2004 : Federal funds rate = 1.25%
➢ Mid-2006: The interest rate = 5.25% → borrowers can’t pay → sell houses
➢ When supply outpaced demand -> Home prices spiraled
- Sum up:
 A change in bank investing regulations allowed banks to invest customers’ money in
derivatives.
 Derivatives were created from subprime residential mortgages, and demand for
homes skyrocketed.
 When the Federal Reserve raised interest rates, subprime mortgage borrowers could
no longer afford their mortgages.
 The supply of houses outran demand, borrowers defaulted on their mortgages, and the
derivatives and all other investments tied to them lost value.
 The financial crisis was caused by unscrupulous investment banking and insurance
practices that passed all the risks to investors.
- Asian financial crisis:
 A crisis caused by the collapse of the currency exchange rate and hot money bubble.
● It started in Thailand in July 1997 and swept over East and Southeast Asia. The
financial crisis heavily damaged currency values, stock markets, and other asset
prices in many East and Southeast Asian countries.
 1996 to 1997, the nominal GDP per capita dropped by 43.2% in Indonesia, 21.2% in
Thailand, 19% in Malaysia, 18.5% in South Korea, and 12.5% in the Philippines.
Hong Kong, Mainland China, Singapore, and Japan were also affected
 A major cause is considered to be the collapse of the hot money bubble
+ Late 1980s and early 1990s, many Southeast Asian countries, including Thailand,
Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic
growth mainly boosted by export growth and foreign investment → high interest rates
and fixed currency exchange rates (pegged to the U.S. dollar) were implemented
+ Mid-1990s, the Federal Reserve raised the interest rate against inflation
→appreciation of the U.S. dollar
+ Currencies pegged to the U.S. dollar also appreciated → hurt export growth
 + Shock in both export and foreign investment, asset prices began to collapse →
panicked foreign investors began to withdraw
 Massive capital outflow caused depreciation pressure on the currencies of the Asian
countries.
→ The Thai government first ran out of foreign currency to support its exchange rate,
forcing it to float the baht
→ The value of the baht thus collapsed immediately afterward. → The same also
happened to the rest of the Asian countries soon after.

Lec 10

The debate:

- Globalist claim: globalization benefits everyone and globalization is inevitable ( glob in some
terms can reverse,..)
- There is plenty of evidence that current patterns of growth and globalization are widening
income disparities (su chenh lech) and hence acting as a brake on poverty reduction
- Globalization policies have contributed to income poverty, increased inequality between and
within nations
-