ECONOMIC GLOBALIZATION as per IMF, driven by technological progress and human innovation

Activity happening the in the world in the eld of Economy

Key Concepts:

Integration of Economies
Trade Growth
Movements of Goods and Services
Capital Across Borders

International Trading Systems: de nition and overview

International Trading system: net worth of rules and institution nation

Key elements: agreement on tari s, trade barriers, dispute, resolution mechanism

Purpose: Facilitate smooth trade ow, regulate tari s, and create standardized trade rules

Silk Road: The earliest known international trade route, facilitating trade between East and West. The
Silk Road’s signi cance not only for economic reasons but also for cultural and technological
exchanges, like the spread of paper-making ad spices to Europe

Galleon Trade : First true global trade system, connecting Asia the Americas

Silk Road (130 BCE -1450s CE)

It facilitated the exchange of goods like, silk spices and gold, along the transmission of ideas,
technologies, and culture

Impact on Global Economy: The Silk Road laid the foundation for international trade, demonstrating
how interconnected economies could be, despite geographical and cultural di erences. It created early
global economic networks and set a precedent for long-distance trade relations, linking empires and
creating wealth.

Galleon Trade (1565 -1815)

The Manila-Acapulco Galleon Trade connected Asia, the Americans, and Europe through the
Spanish colonial empire, fostering the rst truly global trade system. Silver from the Americas was
exchange for Asian goods like silk and spices, fueling European markets.

Impact on Global Economy: This trade system further integrated global markets, making the exchange
of goods between continents more e cient. it marked the rise of European Colonial powers and created
new wealth expanding global trade networks to unprecedented scales fueling economic growth in both
New World and Old World.
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 Mercantalism (16th - 18th Century)

-Mercantalism:16th to 18th centuries, countries restricted trade to protect their industries

Strategies: High tari s, protectionism, monopolization of trade by colonizers

The competitive nature mercantilism and its role in creating tensions among European powers

NOTE: Modern Economic policies, like tari s and subsidies, are in some ways a legacy of mercantilism
practices.

Key Features: Mercantilism was an economy policy aimed at maximizing national wealth through
exports surpluses, heavy tari s, and colonial expansion. It was characterized by the belief that national
wealth and power were directly tied to control over resources and trade.

Impact on Global Economy: Mercantilism led to the aggressive pursuit of colonies for resource
extraction and markets, Intensifying global competition and establish national trade systems. This period
saw the consolidation of European empires and the increasing control of global trade routes, setting the
stage for industrial era that expanding global markets

The transition to the GOLD STANDARD

Purpose (to back currencies with gold) ( x exchange system)

Gold standard: Established in the late. 19th century (1867), baked currencies with gold, simplifying
trade and stabilizing exchange rates, However, the gold standard collapsed in post-WORLD WAR I and
during the Great Depression. Despite of that, the Bretton Woods Agreement created a modi ed gold
standard system post WORLD WAR II that pegged the US dollar to gold, while other currencies were
pegged to he dollar.

GOLD STANDARD

The Gold standard was a system where currencies were backed by gold reserves, which facilitated
stable exchange rates and international trade by providing a universal measure of value. It became a
central feature of global nance in the 19th Century. It provide x exchange system

Impact on Global Economy: The Gold Standard enhanced the globalization of nance by ensuring
stable exchange rates, which promoted cross-border trade and investment. It also highlighted the
interconnectedness of global economies, as economic crises in one country could have international
repercussions such as the great depression, which led to its decline.
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 -Flyn and Giraldez : age of globalization began when “all important populated continents began to
exchange products continuously - both with each other directly and indirectly via other continents and in
values su cient to generate crucial impacts on all trading partners.

Highlights : weather its gold standard or mercantilism as long as people realize that they can now
exchange product continuously as there able to reach one another both directly and indirectly thats the
starting point of the age of globalization.

-GOLD STANDARD restricted as it compelled countries to back their currencies with xed gold
reserved. WORLD WAR I countries depleted their gold reserves to fund their armies led to abandon the
gold standard
-European Countries adopted FLOATING CURRENCIES that were no longer redeemable in gold
-Returning to a pure standard became more di cult as the global economic crisis called GREAT
DEPRESSION that further emptied governments co ers.

-BARRY EICHENGREEN argued that the recovery of the United States really began when having
abandoned the gold standard , the US government was able to free up money to spend on reviving the
economy

-from FIXED EXCHANGE RATE (GOLD STANDARD) - Floating Exchange Rates (currency determined
by supply and demand in foreign exchange market)

-FIAT CURRENCY is a money issued by the government which relies on the stability and credibility of
the issuing authority.
Example : Philippines use Peso

BRETTON WOODS SYSTEM AND GLOBAL KEYNESIANISM

Bretton Woods Conference (1944) : Established post-war global economic order

Key institutions:

INTERNATIONAL MONETARY FUND (IMF) : Global lender of last resort to stabilize economies
WORLD BANK : Focused on post war reconstruction and development projects

Bretton Woods as a pivotal moment for global economic interdependence and long lasting-peace

Note: The Bretton Woods System in uenced the Marshall Plan for Europe’s post-war recovery, and its
legacy is still seen today in global monetary cooperation.

THE MARSHALL PLAN

The Marshall Plan, o cially known as the Economic Recovery Act of 1948, was a landmark program
that shaped the global economy in the aftermath of WORLD WAR II. Signed into law by President
Harry S. Truman on April 3, 1948, the plan was designed to rebuild the shattered economies of Western
Europe. Its primary goals were to restore industrial and agricultural productivity, prevent the spread of
communism, and stabilize European markets, which were critical to the global economy and U.S
interests. ( To address the problem of COLD WAR after WORLD WAR II )
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 BRETTON WOODS SYSTEM (1944 - 1971)

The Bretton Woods System established a new global economic order after WORLD WAR II. It pegged
(connected) national currencies to the US dollar, which was convertible to gold, and created
international nancial institutions like the IMF and the WORLD BANK to manage global economic
stability and reconstruction.

Impact on Global Economy: Bretton Woods created a more structured and cooperative global
economy, with xed exchange rates fostering international trade and investment. It also
institutionalized global economic governance , creating mechanisms for resolving economic crises and
providing nancial assistance to countries, further promoting global economic integration.

MAJOR EVENTS IN ECONOMIC WORLD

GREAT DEPRESSION (1920s -1930s) was devastating global economic crisis marked by a collapse in
trade, banking, failure, de ation, and mass unemployment.

Nixon Shock (1973-1974) abandonment of Gold Standard and adopting to oating exchange under at
currency (End of Bretton Woods System)

Neoliberalism privatization, rise of oligarchy, globalization and trade liberalization, rising income
inequality

Asian Financial Crisis of 1997 was a major economic and nancial shock that began in Southeast Asia
and quickly spread to other parts of Asia and Beyond. It had severe economic and social impacts on
several Asian Economies, which had been experiencing rapid growth in the years leading up to the
crisis.

The Global Financial Crisis (2007-2008) was severe worldwide economic crisis triggered by the
collapse of the U.S housing market and risky nancial practices. Banks had heavily invested in subprime
mortgages, and when borrowers defaulted, these investments became worthless.
Americans uses credit cards to view the habits of the people to gure out how they pay for their loans

NEOLIBERALISM AND THE WASHINGTON CONSENSUS

Neoliberalism: Economic reforms emphasizing reduced government intervention, privatization, and free-
market policies.

Washington Consensus: Policy framework promoted by institutions like IMF, World Bank, and the US
Treasury in the 1980s-2000s

The impact on developing countries and the rise of economic inequality.

Critics of neoliberalism argue that it increased the wealth gap, with neoliberal policies often bene ting
developed nations and multinational corporations at the expense of smaller, developing economies.
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Neoliberalism (1980s - Present)

Neoliberalism, characterized by free-market policies, deregulation, privatization, and reduced

government intervention in the economy, gained prominence in the 1980s under leaders like Ronal
Reagan and Margaret Thatcher. It promoted globalization economies and liberalized trade

Impact of Global Economy: Neoliberalism accelerated economic globalization by removing trade

barriers, increasing foreign direct investment, and promoting multinational corporations. While it has
contributed to economic growth and e ciency, it has also been criticized for widening income inequality
and reducing social protections. Neoliberalism represents the culmination of centuries of economic
integration and globalization, where markets, rather than the governments, dominate global economic
relations.

Neoliberalism and the Washington Consensus

2008 Global Financial Crisis: how deregulation and free-market policies led to a collapse in the
housing market and subsequent global recession

Critique of Neoliberalism: shift towards more regulated economies in response to the crisis ongoing
debates about the role of governments in markets and the future of globalization
The emergence of new global nancial frameworks, such as Dodd-Frank in the US and the European
Union’s banking regulations, aimed at preventing future crises.

Why Closing Economies Won’t Work (take note)

-Integration of Global Markets
-The Necessity of International Trade for Development
-Challenges with Isolationist Policies

Historical Bene ciaries of Free Trade

-Advanced Nations Dominance in Trade (U.S, JAPAN, EU)
-Pre-2011 Global Export Figures (Advance Vs. Developing Countries)

The Shift in Global Trade

-Increased Participation of Developing Countries
-Key Statistics: By 2011, Developing Nations Account for 51% of Global Exports
-Examples of Rising Economies (China, India, Brazil)

WTO and Trade Liberalization

Reduction of Trade Barriers
Role of the WTO in Global Economic Growth
Increase in Global Per Capita GDP (5-Fold Growth since Mid-20th Century)
Uneven Globalization
Economic Disparities: Some Bene ts More than Others
Case Studies: Japan’s Rise Industry, U.S Sugar Industry
Persistent Trade Imbalances Between Developed and Developing Countries
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Conclusion:

The globalization of the world economy has reshaped the way nations interact, driving unprecedented
levels of growth , innovation , and connectivity it has also enabled countries, particularly developing
nations to increased their global presence through exports and economic participation.
However, it has also exposed inequalities, with certain countries and corporations bene ting far more
than others. While globalization fosters growth. It also presents challenges, such as trade imbalances,
environmental degradation, and social inequities.
As the world continues to integrate economically, the focus should shift towards more regulated creating
more inclusive and sustainable trade practice, ensuring that globalization bene ts all nations equitably.
The need for international cooperation, fair trade policies, and responsible global governance is more
critical than ever. Globalization is not just a force to be embraced or resisted— its a process that must
be managed with fairness and foresight to ensure prosperity for future generations.

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