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Lesson 2-SSP 113

The document discusses the history and development of economic globalization from ancient trade routes like the Silk Road to modern international organizations and systems. It describes how the Bretton Woods system established the IMF and World Bank to prevent credit crises after World War 2. However, stagflation in the 1970s led to neoliberal ideas promoting free markets and minimal government spending, exemplified by the Washington Consensus. Today, trade imbalances exist between developed and developing countries as developed nations remain somewhat protectionist.

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Jan Lester Demaala
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249 views8 pages

Lesson 2-SSP 113

The document discusses the history and development of economic globalization from ancient trade routes like the Silk Road to modern international organizations and systems. It describes how the Bretton Woods system established the IMF and World Bank to prevent credit crises after World War 2. However, stagflation in the 1970s led to neoliberal ideas promoting free markets and minimal government spending, exemplified by the Washington Consensus. Today, trade imbalances exist between developed and developing countries as developed nations remain somewhat protectionist.

Uploaded by

Jan Lester Demaala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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THE

GLOBALIZATION
OF WORLD
ECONOMICS
Lesson 2
ECONOMIC GLOBALIZATION
● A historical process representing the result of
human innovation and technological progress -
IMF
● Characterized by the increasing integration of
economies around the world through the movement
of goods, services, and capital across boarders.
INTERNATIONAL TRADING SYSTEM
● Silk Road - oldest known international trade route

● Galleon Trade (1571)


- connected Manila, Philippines to Acapulco, Mexico
- age of Mercantilism
● Adoption of Gold standard (1867)
- led by UK, US, and other EU nations
- more open trade system
- adopted at an International Monetary Conference in Paris
- to create a common system that would allow for more efficient
trade and prevent the isolationism of the mercantilist era
- established a fixed rate system based on the value of gold
INTERNATIONAL TRADING SYSTEM
● The Great Depression (1920s – 1930s)
- worst and longest recession experienced by the Western World
- some economists argued that it is because of the gold standard
- US abandoned the gold standard to free up money spending to
revive the economy
● 20th Century
-until late 1970s the world never returned to gold standard
- fiat currency – currency that are not backed by precious metals
and whose value is determined by their cost and relative to other
currencies
THE BRETTON WOODS SYSTEM
● Influenced by the Idea of British Economist John Meynard
Keynes who believed that economic crisis occur not when a
country does not have enough money, but when money is not
being spent and, thereby, not moving.
● International Bank for Reconstruction and Development
(IBRD)
- responsible for funding postwar reconstruction projects
● International Monetary Fund (IMF)
- global lender of the last resort to prevent individual countries
from spiraling into credit crises
NEOLIBERALISM
● 1940s to early 1970s
- highpoint of Keynesianism
- government poured money into their economies
● Early 1970s
- oil price rose sharply after OPEC imposed an oil embargo
- Arab countries used the embargo to stabilize their economies
and growth
● 1973-1974
- stock markets crashed
- resulted to a “stagflation” – a decline in economic growth and
employment (stagnation) takes place alongside a sharp increase in
prices (inflation)
NEOLIBERALISM
● Friedrich Hayek and Milton Friedman argued that the
governments’ practice of pouring money into their economies had
caused inflation by increasing demand for goods without
necessarily increasing supply
● New form of economic thinking – neoliberalism

● The Washington Consensus


- pushed for minimal govt spending to reduce govt debt
- privatization of govt-controlled services
- compared national economies with households
ECONOMIC GLOBALIZATION TODAY
● Developed Countries vs Developing Countries

● Developed countries are protectionists- refuse to lift


policies that safeguard their primary products that could
otherwise be overwhelmed by imports from developing
world.
● Trade imbalances characterize the economic relations
between developed countries and developing countries

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