JONALYN B.

JOEL, LPT

GLOBA
ECONOMY
L
Chapter 2
 THE INTENDED
LEARNING OUTCOMES
At the end of this lesson, students are
expected to have a better grasp of the

GLOBAL ECONOMY | CHAPTER 2

concept of Global Economy and should
be able to:
1.Define economic globalization;
2.Identify the factors that facilitate
economic globalization;
3.Explain the role of international
financial institutions in the creation of
a global economy;
 Proverbs 5:1-
2

My son, stay focused; listen to the

wisdom I have gained; give attention to
what I have learned about life So you
may be able to make sensible
judgments and speak with knowledge.
Definition of ECONOMIC
Global
Economy (1) GLOBALIZATION
"a process making the world economy an
"organic system" by extending transnational
economic processes and economic relations to
more and more countries and by deepening
the economic interdependencies among them“
- Szentes (2003)

”Interpretation of the current trends in the

world economy must be understood in the
global context of an integrated world
GLOBAL ECONOMY | economy.”
CHAPTER 2
- Benczes (2014)
Definition of ECONOMIC
Global
Economy (2) GLOBALIZATION
“While the state does not remain as the sole
unit of analysis; non-state actors such as
international organizations, non-governmental
organizations, and multinational or
transnational corporations play significant
roles in the international economic
processes.”
- B enczes (2014)

GLOBAL ECONOMY |
CHAPTER 2
Definition of ACCORDING TO THE
Global
Economy (3)
UNITED
NATIONS...
(as cited in S hangquan,
2000)

"Economic globalization 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, and wide and rapid spread of
technologies. It reflects the continuing expansion
and mutual integration of market frontiers, and
is an irreversible trend for the economic
development in the whole world at the turn of
GLOBAL ECONOMY |
CHAPTER 2 the millennium."
TWO TYPES OF
ECONOMIES
1) Globalization-
Protectionism
2 ) Trade
Liberalization
 ✓P rotectionism - "a policy of
systematic government intervention in

Protectionism
Globalization-
foreign trade with the objective of
encouraging domestic production.

✓This encouragement involves giving

preferential treatment to domestic
producers and discriminating against
foreign competitors" (McAleese, 2007 as
cited in Ritzer, 2015, p. 1169).
 ✓Trade protectionism - comes in the
form of quotas and tariffs.

Protectionism
Globalization-

✓Tariffs - required fees on imports or

exports.

✓Quotas - a government-imposed
trade restriction that limits the number or
monetary value of goods that a country can
import or export during a particular period.
 ✓This policy was practiced during the
Mercantilist era (16th to 17th centuries until
the early years of the Industrial Revolution

Protectionism
Globalization-
(Chorev, 2007). [Mercantilism - promotes
imperialism, colonialism, tariffs and
subsidies on traded goods.]

✓The Great Depression of 1929 marked

the peak of protectionism.

✓Until today, protectionism exists in

the world economy despite the growth of
trade liberalization.
 ✓China, Japan, and the United

Protectionism
Globalization-
States are being accused of practicing
protectionism (Ritzer, 2015).

✓World War II heavily influenced the

shifting of the dominant economic policy
from protectionism to trade liberalization
or free trade.
 ✓Free trade agreements and
Liberalization technological advances in transportation and
communication mean goods and services
move around the world more easily than
ever.

✓According to economist Jeffrey Sachs,

Trade

mobile phones are the "single most

transformative technology" when it comes to
the developing world.
 ✓Phones give people access to banking
and payment systems and better access to
education and information. Installing
cellphone towers is also a lot cheaper than
Liberalization running thousands of kilometers of
telephone lines.

✓Economists call this leapfrogging, the

idea that countries can skip straight to more
efficient and cost-effective technologies
Trade

that were not available in the past.

✓International trade has also created

new opportunities for people to sell their
products and labor in a global marketplace.
 ✓Fair trade, as defined by the
International Fair Trade Association, is the
"concern for the social, economic, and
environmental well-being of marginalized
Liberalization small producers" (Downie, 2007, pp. C1-C5).
It aims for a more moral and equitable global
economic system.

✓Specifically, it is concerned with

protection of workers and producers,
Trade

establishment of more just prices,

engagement in environmentally sound
practices and sustainable production,
creation of relationships between producers
in the South and consumers in the North,
and promotion of safe working environment.
INTERNATIONAL
ECONOMIC
1) International Monetary
ORGANIZATIONS Fund
2 ) World Bank
3) General Agreement on
Tariffs and Trade (GATT)
4) World Trade
Organization (WTO)
 ✓ 189 member states
✓To monitor exchange rates and identify
International nations that needed global monetary
M onetary support.
✓Global lender of last resort to
Fund prevent individual countries from spiraling
into credit crises.
✓Plays a central role in the
management of balance of payments
difficulties and international financial
crises.
✓Periodically depending on The
World Bank for its resources.
✓IMF funds come from two major
sources: quotas (pooled funds of member
nations, generates the most IMF funds) and
 ✓Formerly known as International Bank for

W orld Reconstruction and Development

✓ 189 member states

Bank ✓Responsible for funding postwar

reconstruction projects and providing assistance
to countries that had been physically and
financially devastated by World War II.
✓Offers loans to middle-income developing
countries.
✓Activities are focused on developing
countries, in fields such as human development,
agriculture and rural development,
environmental protection, infrastructure, large
industrial construction projects, and governance.
✓Provide loans at preferential rates to
member countries, as well as grants to the
poorest countries.
General
Agreements
on Tariffs and ✓A legal agreement signed by 23
countries in October 30, 1947.
Trade (GATT) ✓minimizing barriers to
international trade by eliminating or
reducing quotas, tariffs, and subsidies
while preserving significant regulations.
✓In 1995, the GATT was absorbed into
The WTO which extended it.
General ✓The Uruguay and the Doha rounds -
Agreements The Uruguay round touched on controversial
issues in the agricultural and textile sector
on Tariffs and and produced treaties that would cover the
Trade (GATT) transformation and expansion of global
trade that GATT was unable to cover.
✓ These are the:
Agreement on Trade-Related Intellectual
Property Rights (TRIPs),
Agreement on Trade-Related Investment,
and
General Agreement on Trade in Services
(GATS).
General ✓The Uruguay round also led to the
Agreements creation of the formal international
on Tariffs and institution in 1995 that would serve as the
counterpart of the IMF and W B for trade, the
Trade (GATT) World Trade Organization.
✓Demands of developing countries to
fully implement the Uruguay agreement
particularly in the agricultural sector, and
demands of the US and EU focusing on
matters such as labor, environment, and
investment concerns became irreconcilable
matters (Benczes, 2014).
 World
Trade ✓164 members and 25 observers, as of
Organization 2022.
✓It is an international institution
(WTO) that oversees the global trade among
nations.
✓Superseded the GATT.
✓Main function is to help producers of
goods and services, exporters, and importers
protect and manage their businesses.
God bless us
all!