College of Midwifery

st
1 Semester, A.Y. 2020-2021
MODULE 2
THE GLOBAL ECONOMY

INTRODUCTION

This modules introduces the learners to the concept of economic globalization and the important actors
that facilitate the interdependence of world economies.  

‘Global economics’ looks at how trade has shaped the global economy and considers the costs and
benefits of free trade – it also provides an analysis of the major problems  facing the global economy in the 21st
Century, and provides an analysis of the financial crisis and the rise of powerful trading blocs.

DATE AND TIME ALLOTMENT

September 8, 10, 2020/ 3 hrs.

I. INTENDED LEARNING OUTCOMES

At the end of this module, you are expected to:

1. define economic globalization;
2. analyze the actors that facilitate economic globalization; and
3. articulate a stance on global economic integration.

Diagnostic
Instructions: Write AGREE if you think the statement is correct; otherwise, write DISAGREE.
_______________1. Economic globalization includes borderless exchange of goods and services.
_______________2. McDonalds is a transnational corporation.
_______________3. Global economy is influenced by global politics.
_______________4. Unilever is a multinational corporation.
_______________5. Economic globalization can refer to the increasing integration of economics around the world.

II. LECTURE
Economic Globalization refers to the expanding
interdependence of world economies. Shangquan (2000) attributes
this to the growing scale of cross-border trade commodities and
services, flow of international capital, and wide and rapid spread of
technology.

It involves a wide variety of processes, opportunities, and

problems related to the spread of economic activities among
countries around the world.

In the Philippines, cross-border trading can be best illustrated by the country’s trading partnership with
China, the United States, and Australia. Moreover, the flow of international capital can be observed in Foreign Direct
Investment (FDI) , a type of investment in which a company establishes a business in another country for production
of goods or services and still takes part in the management of that business.
Example:
Toyota Motor Philippines Corporation
In which is a subsidiary of Toyota Motor Corporation
based in Toyota, Japan. This flow of international capital can
also be observed in foreign portfolio investments, trades flows,
external assistance and external commercial borrowings, and
private loan flows.

International Monetary Fund (IMF)

IMF serves to stabilize the international monetary
system and acts as a monitor of the world’s currencies. It keeps track of the economy globally and in member
countries, lends to countries with balance of payments difficulties, and gives practical help to members.
IMF defined Economic Globalization as a historical process, the result of human innovation and
technological progress.
“It refers to the increasing integration of economies around the world, particularly through the movement of
goods, services, and capital across borders” (IMF, 2008).
Silk Road
Silk Road derives its name from the lucrative trade in silk carried out
along its length, beginning in the Han dynasty in China.
Its primarily refers to the land routes connecting East Asia and
Southeast Asia with South Asia, Persia, the Arabian Peninsula, East
Africa and Southern Europe.
The Silk Road was important because it helped to generate trade and
commerce between a number of different kingdoms and empires. This
helped for ideas, culture, inventions, and unique products to spread across much of the settled world.

Brief History
Historically, these routes also led to the discovery of the Philippine islands when Portuguese
and Spanish envoys were in search of spices, which then spawned colonization. In the contemporary
period, foreign expatriates come to the country to manage their company’s foreign subsidiaries.
Likewise, the Philippines send thousands of skilled workers to the Middle East as construction
workers, seafarers, and nurses.

FOUR (4) DIMENSIONS OF ECONOMY (Benczes, 2014)

 Globalization of trade of goods and services
 Globalization of financial and capital markets
 Globalization of technology and communication
 Globalization of production

GLOBALIZATION OF TRADE OF GOODS AND SERVICES

World Trade Organization (WTO) eases trade among
countries. It stablished in 1995, “ensures that trade flows as smoothly,
predictably, and freely as possible”
China as a major supplier and exporter of manufactured
goods that has affected the world economy. China-made
products or parts are sent to the United States. To meet this
demand, China creates more jobs for its citizens.
Business Process Outsourcing (BPO) company’s services is increasing throughout the Philippines. So, why do
American companies set up subsidiaries in the country? Cheap labor cost, English proficiency, and customer service
skills are the common reasons.

GLOBALIZATION OF FINANCIAL AND CAPITAL MARKETS

Over recent decades, there has been a steady increase in
cross-border financial flows around the world.
First, various financial institutions including banks and
institutional investors have expanded their activities
geographically. In this process, they acted as an intermediary
to channel funds from lenders to borrowers across national
borders.
Second, the more mature securities markets have gained a clear cross-border orientation. In many
instances, newly issued securities are designed and offered to the public in such a way as to maximize their appeal
to international investors.
These developments reflected the progressive dismantling of controls on cross-border financial flows as well
as the liberalization of national financial markets more generally.

GLOBALIZATION OF TECHNOLOGY AND COMMUNICATION

Information and communication technology (ICT) is a
driving factor in the process of globalization.
It emphasizes that various transaction and interactivities that
transpire instantly due to the internet and communication
technology.

There are ICT key related factors that contribute in driving globalization, namely:

The costs, risks and complexity

Complexity and enormity of Involve in the production process for many
products and services industries require a minimum effective market
size larger than that of the domestic market.

Networks are replacing hierarchies in the basic organizational

Organizations moving structures. The non-centralized character of networks distributes
from hierarchical to the authority exercised by any discrete geographic entity. Team
network organizational working in different countries in a network contributes to the
structures efficient making of the final product, each using their core skills.

Integration of market and The integration of market to cyberspace

cyberspace renders geographic space redundant as a basis
of effective economic governance.

Open source software, developed as a result of a collective

Open source software intellect of peers, downloadable free with source code has
further given impetus to globalization.

The strong growth of computing devices used

throughout the business processes
Is tilting the balance from the physical to the
Transfer from the physical
digital domain. The measure of digital
domain to the digital domain
domain is the degree to which a product or
service can be digitized or stored in a
Computer.
 The internet also has the potential to create new
business models and bring about changes in the
value chain. E-Commerce, all transactions in
information,
New business model
trade in goods and services including financial
services as well as government and social services
over the internet interactively and instantly have
given rise to several new and
Innovative business models.

GLOBALIZATION OF PRODUCTION

This fourth dimension is best illustrated by the

existence of multinational corporations (MNCs) and
transnational corporations (TNCs).

Multinational Corporations (MNCs)

It is usually a large corporation incorporated in one country which produces or sells goods or services in
various countries. The two main characteristics of MNCs are their large size and the fact that their worldwide
activities are centrally controlled by the parent companies.
Transnational Corporations (TNCs)
It is a huge company that does business in several countries. Many TNCs
are much richer than entire countries in the less developed world. Such companies
can provide work and enrich a country's economy - or some say they can exploit
the workers with low pay and destroy the environment.

There are different views on who or what the actors are that facilitate economic globalization.

GLOBAL CORPORATIONS INTERNATIONAL MONETARY SYSTEM

ACTORS
 NATION-STATES

NATION-STATES
The role of Nation-States as manager of the national economy is being
redefined by globalization. Although such is the case, nation-states act as buffer
to negative effects of globalization. In support, Brodie (1996) call the
government as the “midwives” of globalization. It means that nation-states are still
relevant despite assuming a global perspective and act as mediators between
the effects of globalization and the national economy.
In addition, it is a complex one in part due to the varying definitions and
shifting concepts of globalization. While it has been defined in many
ways, globalization is generally recognized as the fading or complete
disappearance of economic, social, and cultural borders between nation-states.
Some scholars have theorized that nation-states, which are inherently divided by physical and economic boundaries,
will be less relevant in a globalized world.
In the looming trade war between China and the United States, each government imposes high tariffs on
goods and services. Thus, this trade war does not only affect their economies but also the rest of the world.
GLOBAL CORPORATIONS
A Global Corporation, also known as a “global company”, is coined
from the base term ‘global’, which means all around the world. It makes
sense to assume that a global company is a company that does
business all over the world.
It is any company that operates in at least a country other than the
country where it originated.
Realistically, expanding to even just one additional country is a lot of work and is therefore a great
achievement. If you are operating in one country, selling your products around the world and shipping them to
customers in countries in Europe while you’re in the United States, that doesn’t necessarily mean you’re a global
company. It takes more than that to earn the name a global company.
BENEFITS OF GLOBAL CORPORATION
 You can increase your customer base
 You can reduce your operating costs
 You don’t need to be bogged down by seasonality
 You can boost the growth rate of your company
 You can create new jobs

INTERNATIONAL MONETARY SYSTEM

An International Monetary System is a set of internationally agreed
rules, conventions and supporting institutions that facilitate international
trade, cross border investment and generally the reallocation of capital
between nation states.
It should provide means of payment acceptable to buyers and sellers of
different nationalities, including deferred payment.

Three (3) Global IMS

1. Gold Standard System
The Global Standard functions as a fixed exchange rate regime,
with gold as the only international reserve and participating countries
determine the gold content of national currencies (Benczes, 2014).
It was a system under which nearly all countries fixed the value of
their currencies in terms of a specified amount of gold, or linked their
currency
Types of to thatStandard
Gold of a country which did so.
System
 Gold Coin Standard
 Gold coin standard or gold currency standard or gold species
standard is the oldest form of gold standard. It is also known as orthodox gold
standard or traditional gold standard.
This standard was prevalent in the U.K., France, Germany and the
U.S.A. before the World War I.

 Gold Bullion Standard

Gold Bullion is gold, silver, or other precious metals in the form of
bars, ingots, or specialized coins that is said to maintain its worth better
than conventional currencies and is therefore kept as a form of emergency
currency by both governments and private citizens alike.
 Gold Exchange Standard
Gold Exchange Standard refers to a system in which there is neither a
gold currency in circulation not gold reserves held for external purposes. Under
this system, the domestic currency of a country (which is composed of
token coins and paper notes) is not converted into gold for meeting internal
needs, but is converted into the currency of some foreign payments.
 Gold Reserve Standard
Gold Standard is a monetary system where a country's currency
or paper money has a value directly linked to gold. A country that uses
the gold standard sets a fixed price for gold and buys and sells gold at that price.
That fixed price is used to determine the value of the currency.
 Gold Parity Standard
Gold Parity standard is the modern version of the gold standard. Under
this standard, every member country has to define the par value of its currency in
terms of gold in order to determine the exchange rate. The gold parity standard
aims at maintaining stable exchange rates without interfering into the
domestic monetary system of the member countries.

2. Bretton Woods System

The Bretton Woods Agreement and System created a collective

international currency exchange regime that lasted from the mid-1940s to
the early 1970s. It is required a currency peg to the U.S. dollar which was in
turn pegged to the price of gold.

Brief History
The Bretton Woods Agreement was negotiated in July 1944 by delegates from 44
countries at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire.
Thus, the name “Bretton Woods Agreement.
Under the system, gold was the basis for the U.S. dollar and other currencies were
pegged to the U.S. dollar’s value. The Bretton Woods System effectively came to an end in early 1970s
when President Richard M. Nixon announced that the U.S. would no longer exchange gold for U.S.
Currency.
The Bretton Woods System collapsed in the 1970s but created a lasting influence on
international currency exchange and trade through its development of the IMF and World Bank.
3. European Monetary System
The European Monetary System was an arrangement between
European countries to link their currencies. The goal was to stabilize
inflation and stop large exchange rate fluctuations between these
neighboring nations, making it easy for them to trade goods with each
other.
The European Monetary System (EMS) was succeeded by the European Economic and Monetary Union (EMU),
which established a common currency called the euro.

Course Title:__________________
Course Code:_________________

Name:________________________
Course and Year:_______________
Date and Time Allotment:________

III. APPLICATION/ACTIVITY
ACTIVITY 1: The Influences of Economic Globalization

Instructions: Dress the human outline with the apparel and accessories that you are currently wearing. Draw at least
10 items and label them. Then, write your own definition of economic globalization and elaborate on it on the space
provided.
ACTIVITY 2: Economic Globalization: Unity or Division?

Instructions:
 Form groups with four (4) members each.
 Discuss among yourself whether economic globalization is something that unites or further divides the
world.
 Using your drawing, articulate a position on global economic integration.
 Write a short explanation of your stand.
 Prepare to present your drawing to the entire class.

V. ASSESSMENT

Instructions: Read the referenced article and complete the statements that follow.

 Witkowska, J. (2016). Integration process in the global economy: Current state and prospects:
The case of the European Union, ASEAN economic community, and NAFTA, Comprehensive
Economic Research, 19(4), 47-65.

1. The three (3) things that I significantly learned from the readings are…

2. The three (3) things that are still unclear to me are…

 3. I used to think that…

4. The three (3) questions that I want to ask about the readings are…

V. OTHER REFERENCES

Rosenau, J. (1996). The dynamics of globalization: Towards an operational formulation. Paper presented at the 42nd
Annual International Studies Association Convention, San Diego.
Schottle, J.A. (1995). Globalization and modernity. Paper presented at the 42nd Annual International Studies
Association Convention, San Diego.
Steger, M. (2005). Ideologies of globalization. Journal of Political Ideologies, 10(1), 11 – 30.
Steger, M. (2013). Globalization: A very short introduction. Oxford, UK: Oxford University Press.
Steger, M. (2014). Approaches to the study of globalization. In M. Steger, P. Battersby, & J. Siracusa (Eds.). the
SAGE Handbook of globalization (Vol. 1, pp. 7 – 21). Thousands Oaks, CA: Sage Publications.
Trivet, V. (2011). 25 US mega corporations: where they rank if they were countries. Business Insider: Retrieved from
http://www.bussinessinsider.com/25-corporations-bigger-tan-countries-2011-6#walmart-is-bigger-than-norway-25

Prepared by.
ABIGAIL A. HIDALGO
Instructor