global economy

The global economy

refers to the worldwide system of economic activities, where different 2 countries are connected through the exchange of goods, services, information, labor, and capital.

It's like a giant web linking all national economies into one interconnected network.

When one country experiences economic growth or crisis, it affects other countries.

Example: A financial crisis in the United States can impact markets in Asia, Europe, and beyond like what happened during the 2008 Global Financial Crisis

In short: No economy stands alone anymore, what happens in one country can have ripple effects worldwide.

The 2008 Global Financial Crisis

was a severe worldwide economic downturn that started in the United States and quickly spread across the globe.

Even though the Philippines was not at the center of the crisis

it still felt the ripple effects because of globalization and economic interdependence.

The Philippine economy is closely tied to the global economy through

a. Exports

b. Overseas Filipino Workers (OFWs)

c. Foreign Investments

a. Exports

Electronics, garments, and agricultural products sold to other countries

b. Overseas Filipino Workers (OFWs)

Millions of Filipinos working abroad sending remittances back home.

c. Foreign Investments

International companies investing in Philippine industries.

Philippine Export Products

1. Electronics and Semiconductors

2. Agricultural Products

3. Furniture and Wood Products

4. Processed Foods and Beverages

5. Business Process Outsourcing (BPO) Services

1. Electronics and Semiconductors

Microchips, semiconductors, printed circuit boards, electronic components for smartphones, computers, and appliances.

Top Buyers of Electronics and Semiconductors

United States, China, Hong Kong, Japan, Singapore

2. Agricultural Products

Agriculture remains a key part of Philippine exports, especially tropical fruits, coconut products, and fisheries.

Agricultural Products in the Philippines

a. Bananas (Philippines is one of the world's top exporters of bananas)

b. Coconut Products (copra, coconut oil, dried coconut and coconut water)

c. Pineapples and Mangoes

d. Fisheries and Seafood (tuna, sardines, shrimps, and milkfish)

3. Furniture and Wood Products

a. Handcrafted furniture made of rattan, bamboo, and hardwood.

4. Processed Foods and Beverages

Canned tuna, dried mangoes, coconut water, banana chips.

5. Business Process Outsourcing (BPO) Services

(Although not a physical product, services like call centers, IT support, and online work)

Fun Fact

The Philippines is #1 in bananas export in Asia.

Globally Critical Products and Their Source Countries

These are often called "choke point products" or strategic commodities because they play an essential role in global supply chains.

Globally Critical Products and Their Source Countries (Most Critical to the World)

a. Taiwan

b. Saudi Arabia & Middle East

c. china

These three are so vital that losing them could paralyze global industries almost instantly

taiwan

Semiconductors (chips power smartphones,computers, cars, medical devices, Al, and military tech.)

Saudi Arabia & Middle East

Crude Oil (Fuels transportation, electricity, manufacturing companies, entire industries depend on stable oil supplies)

China

Rare Earth Elements-(they are hard to extract and refine, and only a few countries, like China, dominate their production, such as: powerful permanent magnets, electric vehicle (EV) motors, wind turbines, headphones, speakers, and hard drives.)

How the Global Economy Works

The global economy works through globalization, which increases interaction and interdependence between countries.

key components of a global economy

1. international trade

2. global financial system

3. labor and migration

4. multinational corporations (MNCs)

5. international organizations

International Trade

Buying and selling goods/services across borders.

Example: The Philippines exports bananas and coconuts but imports cars and electronics.

Global Financial System

Flow of money and investments between countries.

Example: Stock markets in Japan and the US affect each other

Labor and Migration

Workers move across borders for jobs.

Example: Overseas Filipino Workers (OFWs) contribute to the Philippine economy through remittances.

Multinational Corporations (MNCs)

Companies operating in multiple countries.

Example: Apple designs iPhones in the US, manufactures parts in China and South Korea, assembles them in Vietnam, and sells them globally.

International Organizations

Groups that regulate and support economic activities.

a. IMF (International Monetary Fund): Helps stabilize economies and provides emergency loans

b. World Bank: Funds development projects like roads, schools, and hospitals.

c. WTO (World Trade Organization): Sets rules for fair international trade

factors driving the global economy

1. trade liberization

2. technology

3. global supply chains

4. foreign direct investment (FDI)

5. transportation & logistics

Trade Liberalization

Removing trade barriers like tariffs and quotas to encourage free trade.

example: ASEAN free trade area

technology

innovation improves communication and production efficiency

example: online banking, e-commerce

global supply chains

parts of a product are made in different countries and assembled elsewhere

example: car manufacturing

foreign direct investments (FDI)

companies investing in other countries to expand operations

example: Japanese car factory in Thailand

transportation & logistics

movement of goods across the world

example: cargo shipping and air freight

global economic challenges

1. inflation and rising cost of living

2. economic inequality

3. climate change and environmental degradation

4. geopolitical conflicts and wars

5. global supply chain disruptions

6. debt crisis

7. technological disruption and job loss

8. pandemics and global health crisis

Inflation and Rising Cost of Living

When prices of goods and services increase worldwide, purchasing power decreases, making it harder for people to afford basic needs.

Example: The post-pandemic period saw high global inflation due to disrupted supply chains and rising energy costs.

Economic Inequality

There's a growing gap between rich and poor countries, as well as between wealthy individuals and low-income groups.

Example: Wealth is concentrated among a few billionaires while millions live in extreme poverty.

Climate Change and Environmental Degradation

Extreme weather events disrupt agriculture, energy production, and infrastructure, causing economic losses.

Example: Typhoons, wildfires, and droughts destroying farmlands and affecting global food supply.

Geopolitical Conflicts and Wars

Wars and political tensions disrupt global trade and create instability.

Impact: Sanctions, refugee crises, and damaged trade routes raise costs worldwide

Example: The Russia-Ukraine conflict disrupted grain and energy supplies globally.

Global Supply Chain Disruptions

When parts of the supply chain tail, it causes delays and shortages worldwide.

Example: During the COVID-19 pandemic, factories shut down, leading to shortages of semiconductors, medicines, and essential goods.

Debt Crisis in Developing Countries

Many poorer nations borrow money to finance development, but when debt becomes too high, they struggle to repay it.

Impact: Cuts to education, healthcare, and infrastructure.

Example: Sri Lanka's 2022 economic crisis caused by high debt and lack of foreign currency reserves.

Technological Disruption and Job Loss

Automation and Al improve efficiency but can replace traditional jobs, especially in manufacturing and services.

Impact: Rising unemployment and the need for retraining workers.

Example: Al-driven customer service replacing call center jobs worldwide.

Pandemics and Global Health Crises

Diseases spread quickly due to global travel, disrupting labor forces and economies.

Example: COVID-19 caused a worldwide recession, loss of jobs, and increased poverty.

types of economic system

1. traditional

2. market

3. command

4. mixed

Traditional Economy

An economy based on customs, traditions, and beliefs. Decisions about production and trade are rooted in history and culture rather than modern technology or profit.

Key Features of traditional economy

Relies on bartering instead of money. Agriculture, hunting, and fishing are the main activities. Roles and jobs are inherited or passed down through generations.

command economy (planned economy)

The government controls all major economic decisions, including production, prices, and distribution of resources.

Key Features of command economy (planned economy)

-The state owns factories, farms, and businesses.

-Central planners decide what to produce, how to produce, and for whom.

-Focuses on equal distribution of wealth. Limited private property rights.

examples of command economy

1. North Korea

The closest example of a pure command economy today.

characteristics of command economy

The government owns all businesses, farms, and factories. Citizens are assigned jobs by the state. Prices and wages are set by the government. Little to no private property or entrepreneurship.

Main Industries: Military production, agriculture, and heavy industry.

traditional economies that still exists today

1. africa

2. asia

3. south America

Africa

A. Maasai Tribe (Kenya & Tanzania)

Livelihood revolves around livestock, which serves as both food and currency.

Asia

A. Baduy Tribe (Indonesia)

Live in isolation and avoid modern technology. Depend on farming, weaving, and bartering.

South America

A. Yanomami (Brazil and Venezuela)

Hunting, fishing, and shifting cultivation. Rely on the rainforest for food, shelter, and medicine.

market economy (Capitalism)

An economy driven by supply and demand, where individuals and businesses make most economic decisions with minimal government intervention.

Key Features of market economy

Private ownership of resources and businesses. Competition determines prices and quality. Profit is the main motivation for producers.

market economy examples

1. united states

2. canada

united states

Businesses and individuals own most resources. Prices are set through competition.

Example: If demand for electric cars rises, companies like Tesla and Ford compete to meet that demand

canada

Most businesses are privately owned and operated

Key Industries: Oil, natural resources, finance, technology.

mixed economy

A combination of market and command systems, where both private individuals and the government play important roles in the economy.

Key Features of mixed economy

Private businesses operate freely, but the government regulates certain industries. Government provides public services like education, healthcare, and defense. Balance between economic freedom and social welfare.

examples of mixed economy

a. france

b. canada

Why It's a Mixed Economy: france

Many businesses are privately owned. The government has a strong role in regulating and supporting industries,especially healthcare, transportation, and energy.

Why It's a Mixed Economy: canada

Private businesses run most industries such as technology, oil, and finance. The government provides universal healthcare and public education, funded by taxes.

Economic systems describe

how a country organizes the production, distribution, and consumption of goods and services. These systems define who owns resources, how decisions are made, and how wealth is distributed within a society.

The Philippines has a mixed economy.

this means that both private businesses and the government play important roles in the country's economic activities. While most industries are privately owned and run by individuals or corporations, the government also intervenes to regulate, support, and provide essential services for the public.

private sector drives

the private sector has a huge role in the Philippine economy

examples of private economy

1. food and retail: Jollibee, SM, ayala malls

2. banking: BDO, Metrobank, BPI

3. technology and BPO: concentrix, Accenture, globe, PLDT

this company's compete freely, prices are largely determined by supply and demand, which is a market economic characteristic

government provides public services and regulation

The government steps in to ensure fairness and to provide services that are essential the population

examples of government roles

1. education: public schools and universities like UP and PUP

2. healthcare: PhilHealth, government hospitals like PGH

3. infrastructures: roads, bridges, airports

4. utilities: some water and energy services regulated partly owned by the government

this reflects a command economy characteristic, where the states take control in certain sectors for the welfare of the people

Combination of Both = Mixed Economy

The Philippines shows elements of both systems, which makes it a mixed economy.

example of why Philippines is a mixed economy

During the COVID-19 pandemic:

Market economy side: Private hospitals and companies continued operating independently.

Command economy side: The government imposed lockdowns, provided financial aid (ayuda), and distributed vaccines.

This balance of private freedom and government intervention perfectly reflects a mixed economy.