The Global Economy

Lesson 1

FATIMA MYNABELLE DILLERA BELDIA-DARIA, Ph.D.

Lesson 1:The Global Economy
Learning Outcomes:

At the end of this lesson, the learners are expected to demonstrate the following:

◼ Define economic globalization

◼ Analyze the actors that facilitate economic globalization
◼ Articulate a stance on global economic integration

FATIMA MYNABELLE DILLERA BELDIA-DARIA, Ph.D.

Economic Globalization
Steger’s (2014) definition of globalization as the
expansion and intensification of social relations and
consciousness across world time and space implies that
there are various forms of connectivity.

Globalization has affected the Philippine

economy in many ways. It opened the
market to foreign trade and increased
both capital flows and financial
integration. It promoted greater labor
mobility (labor migration) and lessen the
impact of inflation. As with the economy,
globalization also affected politics.
Economic Globalization
Economic globalization refers to the expanding interdependence
of world economies. (Shangquan 2000) attributes this to the growing
scale of cross-border trade commodities and services, the flow of
international capital, and the wide and rapid spread of technology.
In the Philippines, cross-border trading can be best illustrated by
the country’s trading partnerships with China, the United States, and
Australia.
Moreover, the flow of international capital can be observed in
foreign direct investments (FDI), a type of investment in which a company
establishes a business in another country for the production of goods or
services and still takes part in the management of that business.
A good example of this is Toyota Motor Philippines Corporation
which is a subsidiary of Toyota Motor Philippines Corporation based in
Toyota, Japan.
Economic Globalization
In 2008, the International Monetary Fund (IMF ) defined
economic globalization as a historical process, the result of
human innovation and technological progress.
“It refers to the services increasing integration of economies
around the world, particularly through the movement of goods, and
capital across borders” (IMF, 2008).
Economic globalization can be traced from the time when
there was economic movement in Asia, Africa, and Europe through
the Silk Road, was a network of trade routes that connected the
East, particularly China, and the West.
In the contemporary period, foreign expatriates come to the
country to manage their company’s foreign subsidiaries.
Likewise, the Philippines sends thousands of skilled
workers to the Middle East as construction workers, seafarers,
and nurses.
Economic Globalization
Benczes (2014) identifies four interconnected dimensions of the
economy namely:

1) globalization of trade and goods and services;

2) globalization of financial and capital markets;
3) globalization of technology and communication; and
4) globalization of production.
The First Dimension of Economic Interconnectedness:
The first dimension of economic interconnectedness is
demonstrated in the establishment of the World Trade
Organization (WTO) which eases trade among countries.
WTO, established in 1995, “ensures that trade flows as
smoothly, predictably and freely as possible “(WTO, 2012).
Another indicator is the emergence of China as a major supplier
and exporter of manufactured goods that has affected the
world economy. China-made products or parts are sent to the
United States. To meet this demand, China creates more jobs
for its citizens.
https://www.wto.org/english/thewto_e/whatis_e/w
hatis_e.htm
Another good example of economic globalization of
trade and services is the increasing number of business
process outsourcing (BPO) companies in the Philippines.
The Second Dimension is Evident in the Liberalization
The second dimension is evident in the
liberalization of financial and capital
markets.
This is seen in the cross-listing of
shares on one or more foreign stock
exchanges, cross-hedging and
diversification of portfolios, and
round-the-clock trading worldwide
(National Research Council, 1995).
The Third Dimension is the Communication Technology
The third dimension emphasizes
various transactions and interactivities
that transpire instantly due to the internet
and communication technology.
The Fourth Dimension is the Existence of Multinational
corporation
Moreover, the fourth dimension is best illustrated
by the existence of multinational corporations (MNCs)
and transnational corporations (TNCs).

The Coca-Cola Company is an example of an MNC.

Based in Atlanta, Georgia, USA, the company only
manufactures syrup concentrates and sells them to
various bottlers that hold exclusive territories in different
countries including the Philippines.
Szentes (2003) define ECONOMIC GLOBALIZATION:
Economic Globalization is the process of “making
the world economy an ‘organic system’ by extending
transnational economic processes and relations to more
and more countries and by deepening the economic
interdependencies among them”

This implies that the world economy is no longer

controlled by the nation-states, but it must be seen from
a global context – the reliance and integration of world
economies.
Actors that Facilitate Economic Globalization
➔ International Economic and Financial Organizations - (World Bank, the
International Monetary Fund (IMF), and the World Trade Organization
(WTO)
➔ Non-Governmental Organizations - Amnesty International, the
International Federation of Red Cross and Red Crescent Societies, Oxfam
International, CARE, Save the Children, and the World Wildlife Fund
➔ International Governmental Organizations - African Union, the North
Atlantic Treaty Organization (NATO), and the International Criminal Police
Organization (INTERPOL)
➔ Transnational Corporations (TNCs) - Apple, McDonald's, Coca-Cola,
Nike, and Amazon
Economic Globalization observers believe it divides the world:
First, one might observe that the sources of goods
and services are exploited, since these economically poor
nation-states depend on industrialized countries for
employment and income, these industrialized countries
compensate their labor with cheap cost.
Economic Globalization observers believe it divides the world:
Second, economic globalization does not benefit all
nations (World Bank, 2002). There is an uneven
experience among nations. Workers in TNCs are paid
less compared to their counterparts in the companies’
home countries.
Economic Globalization observers believe it divides the world:
Third, Wallerstein (2005) claims that capitalism
created different levels of wages in the economic arena
of world systems. It further divides the world for it leads
to inequality according to expertise, experience, and
skills.
Conclusion
Economic globalization affects all nations and
citizens through the increasing integration of economies
around the borderless world. Its essential players are the
nation-states, global corporations, and the international
monetary systems. Though some people believe that
economic globalization brings unity to all economic
movements, others believe that globalization furthers
the separation among nation-states around the world.
Reference:

Brazalote T., and Leomardo R. (2019). The Contemporary World. C & E Publishing, Inc. Quezon City p.17-21
SELF-ASSESSMENT QUESTIONS (SAQ/ Activity 1)
ECONOMIC GLOBALIZATION: UNITY OR DIVISION?

Instructions:

1. Based on your readings and further research, analyze whether economic

globalization unites or further divides the world.
2. Draw and articulate a position on global economic integration.
3. Write a short explanation of your stand.