The Structures of Globalization

Algeria and Global Geography

  • A region of significance, mentioned in the context of global geography and economy.

The Structures of Globalization

  • Focuses on the interconnectedness among nations driven by various economic and structural forces.

Learning Objectives

  • Define economic dimension
  • Explain the two major driving forces of the global economy
  • Differentiate economic globalization from internationalization
  • Trace the origin of the economic dimension

Economic Globalization

  • Definition: The increasing interdependence of world economies resulting from the growing scale of cross-border trade in commodities and services, the flow of international capital, and rapid technological spread.
    • Source: Gao, 2000.
  • Historical Context: It is a historical process arising from human innovation and technological progress, reflecting increasing integration of economies through movements of goods, services, capital, labor, and knowledge across borders.
    • Source: International Monetary Fund.

Major Driving Forces for Economic Globalization

  1. Rapid Growth of Information: In all types of productive activities, information plays a critical role.
  2. Marketization: A restructuring process enabling state enterprises to function as market-oriented firms through legal changes.

Marketization

  • Definition: A restructuring process allowing state enterprises to operate as market-oriented firms. This is achieved by:
    • Reducing state subsidies.
    • Restructuring management: corporatization, decentralization, privatization.

Dimensions of Economic Globalization

  1. Globalization of Trades and Goods
  2. Globalization of Financial Capital Markets
  3. Globalization of Technology and Communication
  4. Globalization of Production

International Monetary System

  • Definition: A structural framework comprising rules and standards facilitating international trade.
    • A global network involving governments and financial institutions that establishes exchange rates for currencies.
    • Governs currency exchanges among nations.

International Trade

  • Definition: The exchange of goods, services, and capital across national borders, integral to GDP.
  • Economic Significance: Central to resource acquisition for many countries, involving a multi-million dollar activity.

Trade Policies

  • Definition: Regulations and agreements defining standards, goals, and rules governing trade relations between countries.

Focus Areas of Trade Policy in International Trade

  1. Tariffs: Taxes imposed on imported goods.
  2. Trade Barriers: Regulations that restrict international trade.
  3. Safety Regulations: Standards ensuring products meet safety criteria.

Types of Trade Policies

  1. National Trade Policy: Country-specific regulations.
  2. Bilateral Trade Policy: Trade agreements between two nations.
  3. International Trade Policy: Policies governing trade at a global level.

World Trade Organization (WTO)

  • Definition: The only global organization dealing with trade rules between nations.
    • Goal: To ensure smooth, predictable, and free trade.
    • Function: Facilitates negotiations and agreements among member nations.

Global Economy Outsourcing

  • Definition: An activity involving the search for partners and relation-specific investments, influenced by incomplete contracts.
    • Factors: Depends on local and international market thickness for input suppliers, searching costs, and the nature of the contracting environment.

Essential Features of Modern Outsourcing Strategy

  1. Firms must find expert partners capable of required activities.
  2. Companies must convince suppliers to customize products.
  3. Inducing relationship-specific investments in environments with complete contracting.

Market Integration

  • Definition: Occurs when prices across different locations or related goods follow similar patterns over time, indicating a level of interconnectedness among markets.

Global Corporation

  • Also known as Multinational Corporation (MNC): A company operating in multiple countries, leveraging a global environment.

Foreign Direct Investment (FDI)

  • Definition: An investment form involving controlling ownership in a business in one country by an entity based in another country, distinguishing it from portfolio investments.

BRICS Economies

  • Members: Brazil, Russia, India, China, South Africa.
  • Represents a significant group of nations shaping global economic policies and collaborations.

Economic and Political Alliances

G7

  • An inter-governmental political forum of Canada, France, Germany, Italy, Japan, the UK, and the US.

G20

  • An international forum with 19 countries and the European Union, addressing major global economic issues.

Gulf Cooperation Council (GCC)

  • A political and economic union of six Arab states in the Gulf region: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and UAE.

European Union (EU)

  • A political and economic union of 27 member states created to foster economic cooperation.

Quad (Quadrilateral Security Dialogue)

  • A strategic security dialogue involving the US, Australia, India, and Japan, fostering collaboration on security and economic issues.

NATO (North Atlantic Treaty Organization)

  • An intergovernmental military alliance established to promote mutual defense amongst member nations, founded in 1949.

Definitions of State and Nation

State

  • Definition: A compulsory political organization with centralized government and a monopoly on legitimate force within a territory.
    • Characteristics:
    • Tied to territory with recognized borders.
    • Government staffed by national personnel.
    • Controls legitimate force, money, and laws.

Nation

  • Definition: A cohesive group of people distinguished by cultural or historical criteria, often considered as “imagined communities”.
  • Characteristics:
    • Subject to change based on various circumstances.

Four Concepts of Sovereignty

  1. International Legal Sovereignty
  2. Westphalian Sovereignty
  3. Interdependence Sovereignty
  4. Domestic Sovereignty

Economic Sovereignty

  • Definition: The capacity of national governments to make independent economic decisions without external influence.

Economic Integration

  • Seven Stages of Economic Integration:
    1. Preferential trading areas
    2. Free trade area
    3. Customs Union
    4. Common Market
    5. Economic Union
    6. Economic and monetary union
    7. Complete economic union