Economic Globalization

Economic Globalization

- Integration of economies around the world.

- *Movement*

- Growing scale of *cross-border trade*

- *Interdependence* of national economies

Global Economy

- *System* of industry/trade around world.

- Giant economic system.

- Developed because of globalization.

- Economies of every country.

- Includes everything we buy, sell, and own.

International Capital Flow

Transfers of money, stocks, bonds, across borders.

Occurs because of interdependence of world economies.

B.O.T

Balance of Trade

4 Characteristics of Global Economy

1. Globalization

2. International Trade

3. International Finance

4. Global Investment

Globalization

*Spread* of technology, ideas, etc. *across borders* and cultures.

International Trade

Exchange of goods/services between countries

Types of International Trade

Import & Export

International Finance

Money can be transferred between countries at a faster rate (Exchange rates)

Global Investment

FDI (Foreign Direct Investment)

Free trade (😼)

No restriction in import/export

Protectionism

Opposite of free trade: Tariffs, quota, subsidies.

Tariff

Tax on imported goods

Quota

Limits number of import/export

Subsidies

Money given by government to domestic poducers to increase *international competitiveness*

Free trade is good because...

Improves quality of life by:

- Allows lowest-priced goods to enter the market

- Low prices increases purchasing power

- Economic growth as increased consumer purchases

2 Bretton Woods Institutions

World Bank and IMF

Purpose of 2 Bretton Woods Institutions

Rebuild global economy after WW2

World Bank

Concentrates on long-term investment projects, institution-building, social/environmental issues, etc. Aims to reduce poverty and promote long term economic development.

IMF (International Monetary Fund)

Focuses on international monetary systems. And on promoting sustained economic growth.

Cross-border trades

Exchange of goods and services across borders. Regional Trade between borders.

International Trade

Encompasses global trade. Broader.

Includes cross-border trade.

Platforms

Where sellers reach buyers from other countries

Platforms examples

Amazon, AliBaba, eBay

2 types of platforms

E-commerce and Online Marketplaces

E-commerce

One seller sells products. Business itself is a seller

Online Marketplaces

Multiple sellers selling products

Foreign Direct Investment

When countries buy companies in other countries. Ie. China slowly accumulating ownership of different filipino companies.

Economic System

Production, allocation, consumption of goods.

4 Types of Economic Systems

1. Traditional Economic System

2. Market Economic System

3. Command Economic System

4. Mixed Economic System

Traditional Economic System

People make goods based on *trade/bartering*. Agriculture, fishing, and hunting.

Market Economic System

*Supply and demand*. Production/prices are based on competition

Command Economic System

Central government controls production.

AKA:

- Classless economy

- Controlled economy

Mixed Economic System

Hybrid system between *Market and Command Economic Systems*

Global Economy AKA...

World Economy or Worldwide Economy

Global GDP (Gross Domestic Product)

Market value of goods/services within a country.

International trade has made

countries depend one another

for...

Economic survival

Currency Devaluation caused...

destabilization of Asian economies

The Asian Financial Crisis (1997-1998)

Financial collapse of Thai Baht >

Borrowed heavily from intl. markets >

Led to high external debt and economy became dependent on foreign capital >

Depreciated other asian currencies.

First modern financial crisis in the globalized world

The Asian Financial Crisis (1997-1988)

Financial Contagion

Spread of disturbances from one country to another

Financial Contagion

spread of disturbances from one country to another

Horizontal market integration

acquiring the same chain or industry

Vertical market integration

Controlling multiple stages of the chain

Backwards/Upstream

buying or building the suppliers

Forward/downstream

taking control of the distribution or retail

ESM

European Single Market

CARICOM

Caribbean Community

AFTA

ASEAN Free Trade Area

JPEPA

Japan-Philippines Economic Partnership Agreement

Ad Valorem

taxed based on the item’s value

Specific Tax

fixed fee regardless of value

Trade Surplus

greater exports than imports

Trade Deficit

greater imports than exports