Economic and Globalization
Economic and Globalization
Economic Globalization
Economic globalization refers to the growing interdependence of the world
economies as a result of the increasing scale of trade in goods and services across the
world, the influx of foreign capital, and the pervasive and radical dissemination. It
also refers to the international movement of capital, goods and services.
On the other hand, countries may also remove or reduce the barriers or
restriction for trade liberalization. The reduction of barriers such as tariffs and
important quotas to facilitate exchange of goods and services which would lessen
consumer costs while increasing efficiency and promoting economic growth. Trade
liberalization would also increase competition among local and international
businesses which would also lessen consumer prices. This would also allow
developing countries to access markets across the developed world attracting
foreign investments.
However, trade liberalization posits immense risk to local businesses and its
products. Powerful countries may also take advantage of the vulnerabilities of the
underdeveloped and developing countries as to its policies and standards. Countries
and companies who cannot compete in the trade liberalization may lose gain and
have less profit in the long run.
Core countries are industrialized nations with skilled labor force which
produce manufactured goods,
however, with limited resources.
It has strong central government
and a large tax based. On the
other hand, the semi-periphery
countries are middle income and
industrializing countries moving
towards becoming core nations.
Periphery countries are the least
economically diverse and least
industrialized nations which need
investment, however, with
enough resources.
The core countries fill its insufficient raw resources to manufacture goods
from the exports of semi-periphery and periphery countries. Non-core countries
exports raw materials since they are incapable of transforming these into goods. The
exported raw resources to the core nations coming from semi-periphery and
periphery nations are cheap, however, the manufactured goods from the core
nations exported to semi-periphery and periphery are high profit consumption
goods.
Countries that are not as rich as the core countries usually depend on these
powerful, wealthy, and industrialized countries. The incapacity of the semi-
periphery and periphery nations to manufacture their raw resources into goods and
the capability of the core nations to utilize its skilled labor force and the exported
raw resources has perpetrated inequalities among these countries. The power of the
core countries to control global market has perpetrated growing inequalities
exploiting the periphery countries where rich is getting richer and the poor is getting
poorer.
The economic globalization has paved the way for the integration of markets.
Market integration facilitates the transfer of price signals from one market to another
which allows the stability of prices of the global market. It is a phenomenon where
the market is experiencing patterns of prices of products.
Local corporations and the international financial institutions (IFIs) have
crucial roles in the promotion of market integration to generate price stability. Loans,
credits, and grants are the common programs implemented by the IFIs to generate
economic and social growth to countries. It also provides advisory and technical
assistance for the sustainability of the programs.
The World Bank was created to rebuild the war-ravaged economies of Asia
and Europe. The IBRD has evolved into one of the most significant lender of foreign
aid to the world especially to developing nations. It provides loan with low interest,
credits with zero interest, and developmental grants to boost economic growth.
Moreover, it provides strategic advice and financial assistance to countries ravaged
by previous world wars in order to end extreme poverty and promote overall
prosperity. The World Bank has four other organizations which help the
organization to achieve its goal. These were:
1. International Bank for Reconstruction and Development (IBRD) helps
middle-income countries to facilitate debt financing.
2. International Development Association (IDA) provides low-income
countries with interest-free loans.
3. International Finance Corporations offers investment financing and
financial advisory services to private sectors and to developing countries.
4. International Center for Settlement of Investment Disputes helps in
mediating and arbitrating disputes regarding international investment.
On the other hand, the International Monetary Fund (IMF) was created to
uphold the Bretton Woods system - a fixed exchange rate system. Its main function
is to safeguard the stability of the world’s monetary system. It is composed of 189
member countries that collaborate and cooperate to achieve global monetary
cooperation, financial stability, international trade, and economic growth.
The European Union follows political and economic union where 28 member
states have a single currency which is Euro. This economic and political policy
delivered peace and stability, and prosperity to the region for more than five
decades. The EU remains to its commitment on the promotion of the standard of
living of the people, transparent and democratic institutions. The EU is considered
as the largest trade block in the world providing the biggest exporters of services
and goods and is also considered to be the largest market on import.
C. Global Corporations
The growth of global corporation is a manifestation of globalized market
integration. The Transnational Corporations (TNCs) and Multinational Corporation
(MNCs) propagated across the world and are no longer limited to their home
countries.
Today, the company produces nearly 400 brands in over 200 countries.
More than 70 percent of the company’s income comes from outside the United States.
Coca-Cola is an extraordinarily successful example of multinationalization (跨國化).
Its success raises the question of why and how it has been so successful. The
multinationalization of the Coca-Cola Company is also often used as an example to
illustrate the concept of economic globalization.
Note: The following website provides more detailed information about the history
of the company: http://heritage.coca-cola.com/
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1. How was economic globalization illustrated in the Coca-cola company?
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2. How were the states and nations affected by expansion of international companies
such as Coca-cola?
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3. What are the factors that facilitated the integration in the global market of the
Coca-cola company? Explain.
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