chapter 2

the structures of globalization

economic globalization

Ø The United Nations (UN) defines it as “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.”

economic globalization

can be defined as the dramatic change or increase in global trade in the span of a few decades.

US$57 billion in 1982.; 2015; $1.76 trillion.

Ø According to the United Nations Conference on Trade and Development (UNCTAD), the amount of foreign direct investment flowing across the world was _________ By ______, that number was _______ This has steadily increased for the next years.

trade

is the concept of exchanging goods and services between two people or entities.

international trade

Ø the concept of exchange between people or entities in two different countries.

protectionism

trade liberalization

2 Major Economic Policies in Economic Globalization

protectionism

is a policy of protecting one's economy from foreign competition by creating trade barriers. One of the most used form of protectionism is the imposition of tariffs

tariffs

the fees and taxes on imports

trade liberalization

is the reduction of trade barriers to make international trade easier between countries. Most countries in the world are currently shifting towards this economy.

free trade

When two or more countries trade goods and services without tariffs or taxes

trade blocs

agreements made between governments to reduce or eliminate trade barriers

outsourcing

Ø This is the transfer of jobs from developed countries to developing nations in order to reduce production cost.

transnational companies (tnc) and multinational companies (mnc)

examples of companies practicing business process outsourcing

world trade organization

 is the only global international agency dealing with the rules of trade between nations.

world trade organization

Ø implements and institutionalizes agreements, negotiated and signed by all the member nations. The goal is to ensure that trade flows as smoothly, predictably and freely as possible and prevent trade abuses between developed and developing nations.

silk road

The oldest known international trade system

silk road

Ø This is the network of pathways in the ancient world that spanned from CHINA to what is now the Middle East and to Europe. In this era, silk is a high priced profitable product to trade. Traders used the Silk Road regularly from 130 BCE when Chinese Han Dynasty opened trade to the West until 1453 BCE when ottoman Empire closed it.

Silk, Tea, Dyes, Precious Stones, Chinaware, Porcelain, Cinnamon, Ginger, Bronze and Gold Artifacts, Medicines, Perfume, Ivory, Rice, Paper, Gunpowder

goods traded on the silk road (from east to west)

Slaves, Horses, Saddles and Riding Track, Grapes, Domestic and Exotic Animals such as Dogs and Cats, Honey, Fruits, Glassware, Woolen Blankets, Rugs and Carpets, Textiles, Gold and Silver, Camels, Weapons and Armor

goods traded on the silk road (from west to east)

1. Change of way of life

Impact of the Silk Road

1. Change of way of life

Ø Before the establishment of the silk road, people worked for their own families. They harvested crops for personal consumption. Built houses for their own community. Manufactured clothes, shoes and other ornaments for themselves. During the onset of the silk road system, people engaged in silk production rather than doing anything else. As demand for silk grew, more and more, people devoted their lives to silk production.

2. Promulgation of Ideas

Ø The Silk Road was a vital route not just for goods but ideas as well. It had a significant impact on the spread of Buddhism in Central Asia.

15th century

closure of silk road

galleon trade

its establishment opened up a wider global trading system due to its use of ocean routes and ships. It was a system of trading ships sailing across the Pacific Ocean. The economic link between Manila and Acapulco, Mexico has resulted in the great exchange of goods and culture between the West and the East.

1571

when was galleon trade established

90 to 120 days

trading ships of galleon trade sailed for how many days?

mercantilism

was one of the earliest efforts to develop an economic theory. It aimed to maximize the exports and minimize the imports for an economy. It promotes imperialism, tariffs and subsidies on traded goods to achieve surplus rather than deficit.

16th century

mercantilism was developed in the?

16th to the 18th

Mercantilism was widely implemented in many industrialized parts of Europe from the __________ centuries.

economic interventionism.

Some scholars argue that it (mercantilism) is still practiced in the economies of industrializing countries in the form of _______

the gold standard

It was introduced and led by the UK to counter the restrictive and isolating mercantilist ideology. The US, the rest of Europe, and many countries followed this because they all wanted a standardized transaction in the booming world trade market.

19th-20th century

when was the gold standard implemented?

1920-1929

when was US economy expanded rapidly and the nation’s total wealth grew more than double?

new york stock exchange

place where the highest to the lowest classes in the society poured their money into stocks.

october 24,1929

when did the stock market crashed because nervous investors began selling overpriced stocks en masse?

12M

how many shares were traded during the great depression (black thursday)?

keynesian economics

this was developed to understand and study the great depression

british economist john maynard keynes

who developed the keynesian economics?

franklin d. roosevelt

he signed the “New Deal” within 100 days, creating 42 new agencies mandated to stimulate agricultural and industrial production, create jobs, allow unionization, and provide unemployment insurance, which would stimulate recovery.

new deal; 1933-1939

Ø was a series of programs, public work projects, financial reforms, and regulations implemented in the United States between ____________

fiat money

is government-issued currency that is not backed by a physical commodity, such as gold or silver.

fiat money

its value is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it.

during a 1944 conference of all of the WW2 Allied nations. It took place in Bretton Woods, New Hampshire.

when and were did the bretton woods agreement created and signed?

44

how many nations participated in the bretton woods agreement?

bretton woods agreement

Ø The purpose was to change the gold standards and to recover from the experience of the Great Depression. It also wanted to provide for postwar reconstruction. It was an unprecedented cooperative effort of nations because for more than a decade, barriers between their economies have been set up.

The International Monetary Fund (IMF)

International Bank for Reconstruction and Development (IBRD).

what were the institutions established by the bretton woods agreement?

The International Monetary Fund (IMF)

would monitor exchange rates and lend reserve currencies to nations with balance-of-payments deficits. was the global lender of last resort to prevent countries from spiraling into credit crises.

International Bank for Reconstruction and Development (IBRD).

Ø was responsible for providing financial assistance for post-World War reconstruction and the economic development of less developed countries (Ghizoni, 2013). was responsible for reconstruction projects after the war since many of the world’s cities were left in shambles.

General Agreement on Tariffs and Trade (GATT)

its purpose was to eliminate harmful trade protectionism, tariffs, and other hindrances to international trade. it restored economic health to the world after the devastation of the depression and WW2.

1947; 1993; 1995

Ø GATT was signed in ______ and lasted until ______ when it was replaced by the World Trade Organization (WTO) in _____.

neoliberalism

It is often associated with Adam Smith’s laissez faire economics

its idea  includes extensive economic liberalization policies such as privatization, fiscal austerity, deregulation, free trade, and reductions in government spending in order to enhance the role of the private sector in the economy (McMaken, 2016).

adam smith’s laissez faire economics

the policy that prescribes a minimal amount of government interference in the economic issues of individuals and society