CHAPTER ONE: CONTEMPORARY WORLD AND GLOBALIZATION 2.

Investment into developing country’s economies

DEFINITION, CHARACTERISTICS, ADVANTAGES AND DISADVANTAGES
3. Greater range and access to different products

4. Increase production of companies due to greater demands

CONTEMPORARY WORLD
5. Larger market range
 refers to the circumstances and ideas of the present age
 also referred to as the modern time, modern world or present time 6. Job Creation

GLOBALIZATION 7. Greater innovation and development in products and technology

 ongoing process that involves interconnected changes in the economic, cultural, 8. Cheaper products
social and political spheres of society
DISADVANTAGES OF GLOBALIZATION
 it involves the ever-increasing integration of these aspects between nations,
regions, communities and even seemingly isolated places. 1. Outsourcing of services to other countries
 also refers to a multidimensional set of social processes that create, multiply ,
2. Possible increase of unemployment-machines and technology
stretch and intensify worldwide social interdependencies and exchanges while
at the same time fostering in people a growing awareness of deepening 3. Closure of small business
connections between the local and the distant.
4. Degradation of environment- scarcity of resources
QUALITIES AND CHARACTERISTICS OF GLOBALIZATION
(HELD AND MC GREW, 2002) 5. Conflict between and among countries

1. Creation and Multiplication MCDONALDIZATION THEORY

- GEORGE RITZER, MCDONALDIZATION OF SOCIETY
2. Expansion and Stretching  A process in which the principles of “fast-food restaurant” are coming to dominate
more and more sectors in the US and the world.
3. Intensification and Acceleration

4. Consciousness and Awareness Characteristics of Mcdonaldization

1. Efficiency
GLOBAL INTERDEPENDENCE
-best possible means to achieve whatever end is desired.
 situation in which human interactions and relationships transcend national 2. Calculability
borders and in which social problems within any one country such as - quantity over quality
unemployment, drug addiction, water shortages, natural disaster or the search 3. Predictability
for the national security- are shaped by social forces and forces and events take -employees and customers are expected to respond in a predictable behavior
place outside the country, indeed in various part of the globe. 4. Control (by means of technology)
- great technology system can replace employees
ADVANTAGES OF GLOBALIZATION 5. Irrationality of Rationality
1. Greater understanding and knowledge of many countries culture - both employees and customers suffer (for example, efficiency in speed may result
to long lines or queues)
CHAPTER 2
GLOBALIZATION THEORIES
REALISM
 Focuses on the shifting distribution of power among states.
 Realists explained that the core idea of dominating the world is through the
employment of power.
 Examples of power that could be used to overrule are economic (market and
resources such as financial and manpower), political (military and territory) and
technology (logistics and systems).
 Realists argue that countries open their economies to the world because of two
reasons.
 First, financial returns of expanding markets offer new economic opportunities
to the capitalist (origin country)
 Second, a political explanation which is the continued centrality of political
power and military strength are obvious forces of interdependence and realistic
behavior of the more and most powerful countries.
LIBERALISM
 Is a perspective in international relations where actors and institutions
emphasize relationships and negotiations.
 Liberalists observe the importance of interaction and communication and focus
on solving problems and conflicts affecting them.
 Liberal accounts describe the transformation of political-economic structures
and the development of global interconnectedness in terms of:
Spread of Democracy and Institutions
 Liberals discounted realism as a barrier in the progress of relations
between nations.
 They believe in the vital function played by rule of law as a safeguard or
self-respect and social stability.
 Transparency is also identified as a measurement in sustaining
international cooperation and global understanding.
 In some respects, democratic institutions are highly recognized by many
if they perform and practice in accordance to the rule of law and
democratic accountability.
Global Economic Ties
 Liberals see economic ties and cooperation such as market integration
and economic alliances are fitting fixtures of globalization.
 The core belief of Liberalism is that economic alliance and integrating
the domestic economy into a regional or economic bloc will deliver
prosperity and security.
 Opening the markets to other countries is described as an act of the
country’s commitment to global consciousness and moral
understanding of multistate interest.
International Organizations
 Liberals believe that the formation of leading regional and international
organizations like global commerce and governance are main
instruments in the maintenance of peace and solidarity.
 The school of liberalism is keen in recognizing the role of these
institutions in emphasizing the importance of international institutions.
 For example, Organization of Petroleum Exporting Countries (OPEC) has
a global commitment for the sustainability of oil supply to countries that
are dependent with the organization’s member economies.
IDEALISM
 Idealists and Constructivists hold the notion that values and norms play pivotal
roles in sustaining and reforming the process and works of individuals, groups
and nations.
 This theory emphasizes on the functions of ideologies, frameworks, systems and
identities in understanding globalization and international order.
 Its core beliefs centers on the centrality of ideas, beliefs, emotions and
collective values that shape the political and economic landscapes of the world.
 Idealism presents the changing norms and evolutions of individuals, groups and
states with the goal of influencing the dynamics and pattern of social structure.
 idealists and Constructivists value the importance of “appropriateness” and
“transparency” in reshaping and framing rules affecting the general welfare of
its members, may it be individual or collective.
 ROLES OF IDEAS AND TECHNOLOGY IN GLOBALIZATION ECONOMIC SYSTEMS
 Is an organized way in which a country allocates resources and distributes goods
 Ideas are non-material entities of culture, it embodies one’s perception of his
and services across the whole nation or a given geographic area.
social world or environment.
 A set of institutional arrangements and a group of coordinating mechanisms that
 It defines on how values, norms and beliefs are used by governments and
respond to the economizing problem.
institutions in hold and exercising powers (Nau, 2008)
 When ideas are used well based on their intended application, development
THREE TYPES OF ECONOMIC SYSTEMS
takes place.
 It could be utilized for linking and transfer of knowledge in a transnational 1. Market Economy
community of nations, scientific and social innovation, increase in the
 There is private ownership of economic resources in the use of market and prices to
understanding of people in their day-to-day life.
coordinate and direct economic activity.
 Singleton, 2008 elaborated the three important technological trends in the last
 An economic system in which the decisions regarding investment, production and
twenty years that made significant changes in the interaction of nations and
distribution are guided by the price signals created by the forces of supply and
people:
demand.
 Knowledge and technology are significant determinants of wealth
 Market economy, also known as Capitalistic or Free Market Economy, relies on
and power. The success of economy of a country requires pool of
capitalism, free enterprise and freedom of choice.
resources like ideas and technology. The technological advancement
of a nation is an identity of its economic power.
2. Command Economy
 The fast pace of technological change. From industrialization to
 Government owns most property resources and there is central economic planning.
modernization, technology has taken a significant role in business,
 The government decides how the factors of production used.
governments and individuals.
 The government determines who owns the businesses, who buys and sells to whom
 Dispersed knowledge and technology. The increasing trends in
and who makes the ultimate decisions regarding businesses, including who works
communication revolutions make it more possible to move data and
for them.
ideas from people to people and country to country at a faster and
more convenient way.
3. Mixed Economy
CHAPTER 3: Global Economy  An economic system wherein the basic or key industries are either owned or
controlled by the government or by the people collectively.
 World-wide activity between various countries that are considered intertwined
 Mixed economies typically maintain private ownership and control of most of the
and thus can affect other countries negatively or positively.
means of production, but often under government regulation.
 The system of industry and trade around the world that has developed as a result
of globalization. INTERNATIONAL TRADE (IT)
 Is the process and system when goods, commodities, services cross national
 It is all the economies in the world which we consider together as one economic economy and boundaries in exchange for money or goods of another country.
system. To put simply, it is one giant entity.

 It is the way in which countries have been developing to operate collectively as

one system.
GATT- GENERAL AGREEMENT ON TARIFFS AND TRADE
 Rules and guidelines for international trade
 These trade rules were developed through series of rounds or meetings of member
economies.
 Is a set of multilateral trade agreements aimed at the abolition of quotas and the
reduction of tariff duties among the contracting nations.
 It was signed by 23 nations in Geneva on October 30, 1947, took effect on January 1,
1948.
 It remained in effect until the signature by 123 nations in Marrakesh on April 14,
1994, of the Uruguay Round Agreements, which established the World Trade
Organization (WTO) on January 1, 1995.
TRADE THEORIES
1. Descriptive Theory
 It deals with the natural order and movement of trade.
 It describes the pattern of trade under the idea of “laissez faire”, a French term
which means “leave alone”.
 It refers to the notion that individuals are the best economic agents to solve the
problems through invisible hand rather than the government policies.
2. Prescriptive Theory
 This prescribes whether government, an important economic institution, should
interfere and restrict with the movement of goods and services.
 This theory views government to have participation in deciding which countries to
alter the amount, composition, and direction of goods.
WHY COUNTRIES ENGAGE IN INTERNATIONAL TRADE?
 Use of Excess Capacity in Demand
 The inadequate domestic demand pushes business organizations to expand
their market base outside the national territory.
 Cost Reduction and Increase of Profit
 A market leader for a particular good or service may garner a lower
production cost by increasing its market in global rather than domestic.
 Cheaper Supplies
 A country imports goods from other countries because of inexpensive raw
materials and supplies used for production.
 The availability of buying cheaper materials from other countries lowers the
costs in production which might result to an increase in the profit of
businesses.
 Addition of Product Line
 Economies usually aim for a variety of products and services available in the
market.
 It offers consumers to choose and buy products that are of competitive
prices, degree of importance and will offer higher satisfaction.
 Reducing the Risk
 Importing products is seen as an alternative to countries that are vulnerable
to supply shortage.
 Foreign Policy Tool
 The membership of a country to regional market integration and economic
relationships is part of its foreign policy.
 Enhancing the economic and political affiliation of a country is very
important in sustaining its international status in a global environment.
TRANSNATIONAL CORPORATIONS
 Is an enterprise that is involved with the international production of goods and
services, foreign investments or income and asset management in more than one
country.
 Also termed as Multi-national corporation
 Is a business that is based or registered in one country but has outlets/affiliates or
does business in other countries.
 A TNC is a huge company that does business in several countries, many of them are
much richer than entire countries in the less developed world.
Advantages of Transnational Corporations
 Creation of jobs, stable income and more reliable than farming
 Improved education and skills
 Investment in infrastructure
 Helps locals as well as the TNC
 Help to exploit natural resources
 A better developed economic base for the country
Disadvantages of Transnational Corporations  Currently, World Trade Organization has 164 members since July 29, 2016.
 Fewer workers employed
 Considering the scale of investment, poorer working conditions WORLD BANK
 Damage to the environment by ignoring local laws  Is an international institution that provides loans to developing countries for capital
 Profits going to companies overseas rather than locals programs.
 If labor costs increase, the company may move elsewhere  “WORKING FOR A WORLD FREE OF POVERTY”
 Natural resources are being over-exploited  Is a Monetary International Financial Organization formed on July 1944.
 Its headquarters is in Washington D.C., United States
The Top 10 Best-Performing Companies in the  It has 362 members
World, 2019 by CEOWORLD MAGAZINE  Parent Organization : The World Bank Group
APPLE $961.3 BILLION  President: Jim Yong Kim
MICROSOFT $946.5 BILLION  The World Bank operates under the leadership and direction of the president and
AMAZON 916.1 BILLION organizational units responsible for regions, sectors and general management.
ALPHABET 863.2 BILLION  The World Bank provides long-term loans for various development projects of 5 to
BERKSHIRE HATAHWAY 516.4 BILLION
20 years duration.
FACEBOOK 512 BILLION
ALIBABA 480.8 BILLION
WORLD BANK GROUP
TENCENT HOLDINGS 472.1 BILLION
 The WORLD BANK GROUP is a family of five international organizations that make
JPMORGAN CHASE 368.5 BILLION
JOHNSON & JOHNSON 366.2 BILLION leveraged loans to developing countries. It is the largest and most famous
development bank in the world and is an observer at the United Nations
INTERNATIONAL ORGANIZATIONS Development Group.
 Its five organizations are the International Bank for Reconstruction and
WORLD TRADE ORGANIZATION (WTO) Development (IBRD), the International Development Association (IDA), the
 WTO is a successor to GATT, and the original GATT text is still in effect under the International Finance Corporation (IFC), the Multilateral Investment Guarantee
WTO framework, subject to the modifications of GATT 1994. Agency (MIGA) and the International Centre for Settlement of Investment Disputes
(ISCID).
 The WTO came into being on January 1, 1995.
 It was the outcome of the lengthy (1986-1994) Uruguay round of GATT negotiations.
EUROPEAN UNION (EU)
It was essentially an extension of GATT.
 A political, economic regional organization with 28 member-economies in Europe
 The WTO is member-driven, with decisions taken be general agreement among all
member of governments and ideals with the rules of trade between nations at a  It was founded in 1958
global or near-global level.  Its main economic engine is “single market” where goods and services can move
 They deal with agriculture, textiles and clothing, banking, telecommunications, freely across its members without restrictions and barriers.
government purchases, industrial standards and product safety, food sanitation  The union’s purpose is to promote peace, establish a unified economic and
regulations, intellectual property and much more. monetary system, promote inclusion and combat discrimination, break down
 The WTO agreements are lengthy and complex because they are legal texts covering barriers to trade and borders, encourage technological and scientific developments,
a wide-range of activities.
 champion environmental protection and among others, promote goals like a  Economic Surveillance
competitive global market and social progress. o The IMF oversees the international monetary system and monitors
 The EU is governed by three main bodies: The EU Council, EU Parliament and the the economic and financial policies of its 189 member countries. As
EU Commission. part of this process, which takes place both at the global level and in
 The Council’s main job is to create and propose new policies and legislation for the individual countries, the IMF highlights possible risks to stability and
European Union; it operates under a different EU President every six months. advises on needed policy adjustments.
 The Parliament then debates and passes the laws proposed by the Council, electing  Lending
members once every five years. o The IMF provides loans to member countries experiencing actual or
 The Commission enforces and operates the laws for the European Union. potential balance of payments problems to help them rebuild their
international reserves, stabilize their currencies, continue paying for
Core Values of EU imports, and restore conditions for strong economic growth, while
1. Human Dignity correcting underlying problems.
2. Freedom  Capacity Development
3. Democracy o The IMF works with governments around the world to modernize
4. Equality their economic policies and institutions, and train their people. This
5. Rule of Law helps countries strengthen their economy, improve growth and
6. Human Rights create jobs.

28 members: ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN)

Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland,  ASEAN was founded in 1967 by the five Southeast Asian Nations of Indonesia,
France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Malaysia, Philippines, Singapore and Thailand.
Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United  This was during the polarized atmosphere of the Cold War, and the alliance aimed
Kingdom to promote stability in the region.
 Over time, the group expanded to include its current 10 members.
INTERNATIONAL MONETARY FUND (IMF)  ASEAN aims to promote collaboration and cooperation among member-states, as
 Is an organization of 189 countries working to foster global monetary cooperation, well as to advance the interests of the region as a whole including economic and
secure financial stability, facilitate international trade, promote high employment trade growth.
and sustainable economic growth and reduce poverty around the world.  It has negotiated a free trade agreement among member states and with other
 IMF operates through a “weighted voting basis”, decisions are controlled by countries such as China, as well as eased travel in the region for citizens of member
dominant contributors and funders to the organization. countries.
Purpose of IMF:  ASEAN COUNTRIES:
 To ensure the stability of the international monetary system- the system of 1. Philippines 6. Malaysia
exchange rates and international payments that enables countries to transact with 2. Cambodia 7. Myanmar
each other. 3. Brunei Darussalam 8. Singapore
 IMF does this in three ways: 4. Indonesia 9. Thailand
5. Lao PDR 10. Vietnam