[CONTEM_W] Lesson 3: Global Economy

global economy

economy of every country wherein the economies are intertwined and interdependent

global economy

all the world’s countries are connected through trade, money, businesses, and jobs. this includes both micro and macro level company tradings.

global marketing

promoting and selling products or services all around the world, not just in one country.

global marketing

advertisements and strategies to entice people from different countries.

economic globalization

widespread use of international trade in goods, services, capital, technology, and information.

economic globalization

international trading, investment, financial flows, and other interactions.

economic globalization

global economy cannot be contained by any national or territorial boundaries.

economic globalization

process of global economic integration has a significant impact on the dynamics of the global economy.

worldwide financial mix

colossal mix

economic globalization

a nation’s ability to adapt to these changes will largely be determined by its natural resources, current economic productivity, and responses to upcoming opportunities and challenges (global policy forum, n.d.)

post ww ii economic system

refers to the global economic order that emerged after the end of world war ii in 1945

bretton woods system & liberalization of international trade

two major components of post ww ii system

bretton woods system (1944)

established at the united nations monetary and financial conference held in bretton woods, new hampshire.

united nations monetary and financial conference

this is the conference wherein the bretton woods system was established.

bretton woods system

creation of a fixed exchange rate regime.

international monetary fund (imf) & world bank

the 2 financial institutions in the bretton woods system

bretton woods system

facilitated the reconstruction and recovery of war-torn countries and the expansion of international trade.

bretton woods system

it promoted stability by limiting currency fluctuations and ensuring a relatively predictable environment for trade and investment.

1971

the year the BWS ended.

liberalization of international trade

general agreement on tariffs and trade (GATT) in 1947 aimed to reduce trade barriers and promote free trade among member countries.

world trade organization (WTO) in 1995

cover services, intellectual property, and dispute settlement.

advantages of liberalization of international trade

liberalization contributed to increased global economic integration and growth of multi-national corporations.

disadvantages of liberalization of international trade

income inequality, job displacement, and enviromental challenges (kenton, 2022).

marshall plan & keynesian economics

the key aspects of post ww ii economic system

marshall plan

officially known as the european recovery program

marshall plan

proposed by U.S. secretary of state george marshall in 1947.

george marshall

who introduced the marshall plan?

marshall plan

it aimed to provide economic assistance to war-torn european countries to aid their recovery and prevent the spread of communism.

keynesian economics

named after british economist john maynard keynes.

john maynard keynes

who is keynesian economics named after?

keynesian economics

emphasizes the role of government intervention in managing aggregate demand to stabilize the economy.

john maynard keynes

argued that the economy could experience prolonged periods of unemployment and underutilization of resources due to insufficient aggregate demand.

keynesian economics

emphasized the role of public demand.

inequality

uneven distribution of benefits.

inequality

exacerbation of income disparities within and between countries.

inequality

growing concern on concentration of wealth and power in the hands of few.

developing country disadvantaged

unequal power dynamics.

developing country disadvantaged

system did not adequate addressed poorer nations’ development needs and priorities.

environmental impact

increased resource extraction, pollution, and greenhouse gases emissions = environmental degradation and climate change.

labor & job displacement

companies outsource their production or relocate to countries with lower labor standards and wages = job losses and downward pressure om wages.

labor & job displacement

social and economic dislocation.

finacial crisis and instability

the breakdown of bretton woods system in 1970s resulted in increased exchange rate volatility and financial disruptions.

financial crisis and instability

subsequent financial crises exposed vulnerabilities in the global financial sytstem.

democratic deficits

weakening of democratic governance and accountability.

democratic deficits

decisions affecting economic policies, trade agreements, and regulations are often made by non-elected bodies of influenced by powerful interest groups.

economic protection

refers to policies and measures implemented by governments to shield domestic industries and markets from foreign competition.

trade barriere, national control, and strategic industries

key characteristics of economic protection

trade barriers

protectionists measures often involved imposition of tariffs (import taxes), quotas (limit on imports), and subsidies (financial support for domestic industries.

national control

protectionism prioritizes national control over economic activities, emphasizing the importance of domestic production and self-efficiency.

strategic industries

governments may adopt protectionists policies to safeguard strategic industries vital for national security or economic stability.

economic integration

it involves the establishment of closer economic cooperation and collaboration between countries, through the elimination reduction of trade barriers and the promotion of free movements of goods, services, and capital.

free trade agreements, custom unions & common markets, and supranational organizations

key characteristics of economic integration

free trade agreements

countries negotiate FTAs to eliminate tariffs and other trade barriers, thereby promoting trade liberalization.

custom unions & common markets

these further trade policies and facilitate deeper integration.

supranational organizations

they oversee and govern economic cooperation among member states (e.g. WTO).

international monetary fund (IMF)

it promotes global monetary cooperation, financial stability, and sustainable economic growth.

international monetary fund (IMF)

provides financial assistance and policy advice to member countries, monitors global economic developments, and facilitates international monetary cooperation.

surveillance & financial assistance

most important functions of IMF.

world bank

provides financial and technical assistance to developing countries.

world bank

its main goal is to alleviate property and promote economic development.

world bank

provides loans, grants, and expertise for infrastructure, social programs, and capacity-building efforts in developing nations.

5

how many institutions is composed in the world bank?

international bank for reconstruction and development (IBRD)

the original and largest institution within the world bank group.

international bank for reconstruction and development (IBRD)

provides loans and development assistance to middle-income and creditworthy low-income countries.

international development association (IDA)

focuses on providing financial support to the world’s poorest countries.

international development association (IDA)

it offers grants and low-interest or zero-interest loans to low income countries that often face significant development challenges.

international finance cooperation

institution within the WB group that promotes private sector investment in developing countries.

international finance cooperation

it provides investment financing and advisory services to private companies.

multilateral investment guarantee agency (MIGA)

provides political risk insurance and credit enhancement to investors and leaders in developing countries.

multilateral investment guarantee agency (MIGA)

it helps promote foreign direct investment (FDI) by offering guarantees against non-commercial risks.

international centre for settlement of investment disputes (ICSID)

an arbitration institution that provides a forum for resolving investment disputes between foreign investors and host countries.

international centre for settlement of investment disputes (ICSID)

it offers a neutral and impartial platform for settling disputes through arbitration and conciliation procedures.

macroeconomic policies

monetary policies, including interest rate adjustments and quantitative easing can influence borrowing costs, inflation rates, and investment levels.

macroeconomic policies

fiscal policies, including taxation, government spending, and budget deficits, impact economic growth, employment, and public finances.

trade and globalization

trade policies, tariffs, and trade agreements affect the flow of goods, services, and capital between countries.

trade and globalization

globalization has expanded trade, created global supply chains, and allowed for the cross-border movement of labor, capital, and technology.

financial markets and institutions

fluctuations in stock prices, interest rates, exchange rates, and credit availability can impact investment decisions, business operations, and consumer confidence.

financial markets and institutions

financial institutions provide liquidity, credit, and investment opportunities that influence economic activity.

technology and innovation

artificial intelligence, automation, biotechnology, and renewable energy can drive productivity growth, create new business opportunities, and reshape labor markets.

technology and innovation

access to and adoption of technology play a critical role in economic competitiveness and development.

demographics

aging populations can strain social security systems, impact labor markets, and affect consumer spending patterns.

demographics

demographic trends also influence workforce availability, productivity, and economic growth potential.

natural resources and environmental factors

access to and management of natural resources can significantly impact economic development and global trade.

natural resources and environmental factors

environmental factors such as climate change, natural disasters, and sustainability concerns, can affect industries, supply chains, and the cost of doing business

political and geopolitical factors

political stability, governance, and geopolitical developments can shape the global economy.

political and geopolitical factors

trade disputes, geopolitical tensions, and conflicts can disrupt supply chains, hinder investments, and uncertainty.

rethinking and reshaping globalization

greater emphasis on social and environmental standards, as well as efforts to address economic inequality and enhance the participation of marginalized groups.

urgency to address climate change and environmental degradation

transition to low-carbon economies, promote renewable energy, and adopt sustainable production and consumption patterns.

urgency to address climate change and environmental degradation

green finance and sustainable business practices.

rapid technological advancements

AI, automation, and digitalization will continue to reshape economic landscape. however, they also raise concerns about job displacement, inequality, and the digital divide.

changing geopolitical dynamics

rise of emerging economies (e.g. China and India) is likely to lead to a more multipolar world.

changing geopolitical dynamics

evolving relationships between major economies and their policies on trade, investment, and international cooperation will shape thee future direction of the global economic system.

strengthening global economic governance

calls for reforming global economic governance and institutions to enhance inclusivity, representation, and effectiveness are likely to persist.

strengthening global economic governance

fairer distribution of power and decision-making among countries, greater participation of of civil society and non-state actors could influence the future structure and functioning of global economic institutions.