CHAPTER 2 – The Structures of Globalization

Global Economy

Learning Outcomes

At the end of this lesson, the student should be able to:

1. Define economic globalization;

2. Identify the actors that facilitate economic globalization;
3. Define modern world system.

The Economic globalization refers to the expanding interdependence of world

economies. Shanquan (2000) attributes this to the growing scale of the cross-border
trade commodities and services, flow of international capital, and wide and rapid spread
of technology. In the Philippines, cross-border trading can be best illustrated by the
country’s trading partnerships 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.
A good example of this is Toyota Motor Corporation based in Toyota, Japan. This flow
of international capital can also be observed in foreign portfolio investments, trade
flows, external assistance and external commercial borrowings, and private loan flows.

The United Nations (UN) tried to address the different problems in the world. Their
efforts were guided by the eight Millennium Development Goals, which they created in
the 1990’s. Among these eight goals, the eradication of extreme poverty and hunger
ranked as the first. The other seven goals include: achieving universal primary
education, promoting gender equality and women empowerment, reducing child
mortality, improving maternal health, combating diseases like HIV/AIDS and malaria,
ensuring environmental sustainability, and having a global partnership for development
(United Nations, 2015). The UN tried to achieve them by the year 2015.

Since there are different standards of living around the world, we can expect different
meanings attached to it. In the Philippines, a person is officially living in poverty if he
makes less than 100,534 pesos a year, around 275 pesos a day. This is called the
poverty line or poverty threshold. But we are going to focus on extreme poverty which,
according to the UN (2015), is a condition characterized by severe deprivation of basic
human needs including food, safe drinking water, sanitation facilities, health, shelter,
education and information. The UN defines extreme or absolute poverty as living on
less than $1.25 a day. The organization aims to eliminate extreme poverty for all people
by 2030.
It was three years-ago and the results were in. The UN (2015) reported that 836 million
people still live in extreme poverty but that is down from 1.9 billion, so there is success
or at least a lot of progress. The World Bank predicted that by 2030 the number of
people still live in extreme poverty could drop to less than 400 million. Of-course that
assumes everything will keep improving as it has been. However, climate change has to
be considered since it is a threat to these improvements in global poverty.

Most people who have been lifted out of extreme poverty are still poor and being poor
comes with serious problems, from disease to lack of water. Income inequality is
rampant and one out of seven people still live without electricity.

So why is extreme poverty falling? The answer to this is really complicated. A set of
factors like better access to education, humanitarian aid, and the policies of
international organizations like the UN have made a difference. However, the greatest
contributor is economic globalization. The world’s economies have become more
interconnected and free trade has driven the growth of many developing economies.

Economic Globalization and Global Trade

According to the United Nations (as cited in Shanquan, 2000), Economic globalization
refers to the increasing interdependence of world economies as a result of the growing
scale of cross-border trade of commodities and services, flow of international capital,
and wide and rapid spread of technologies. It reflects the continuing expansion and
mutual integration of market frontiers, and is an irreversible trend for the economic
development in the world at the turn of the millennium.

There are two different types of economies associated with economic globalization----
protectionism and trade liberalization. Protectionism means “a policy of systematic
government intervention in foreign trade with the objective of encouraging domestic
production. This encouragement involves giving preferential treatment to domestic
producers and discriminating against foreign competitors” (McAleese, 2007 as cited in
Ritzer, 2015). Trade protectionism usually comes in the form of quotas and tariffs.
Tariffs are required fees on imports or exports. For instance, a pen that costs $1.00 in
Country A and in Country B, it would be given five-dollar tariff. The pen would become
$6 in Country B. This policy was practiced during the mercantilist era, from sixteenth to
seventeenth centuries until the early years of the Industrial Revolution (Chorev, 2007).
The great Depression of 1929 marked the peak of protectionism. Until today,
protectionism exists in the world economy despite the growth of trade liberalization.
Countries such as China, Japan, and the United States are being accused of practicing
protectionism (Ritzer, 2015)

World War II heavily influenced the shifting of the dominant economic policy from
protectionism to trade liberalization or free trade. Free trade agreements and
technological advances in transportation and communication means goods and services
move around the world more easily than ever. We are talking about everything from
shoes and bananas to innovations and ideas. Let us take mobile phones as an
example. Mobile phones seem to have good consequences for everything including
reducing poverty. According to economist Jeffrey Sachs, mobile phones are the “single
most transformative technology” when it comes to the developing world. Phones give
people access to banking and payment systems and better access to education and
information. In some places, mobile phones help farmers get information and get the
best price for the crops they are producing. Installing cellphone towers is also a lot
cheaper than running thousands of kilometers of telephone lines. Economists call this
leapfrogging, the idea that countries can skip straight to more efficient and cost-effective
technologies that were not available in the past. International trade has also created
new opportunities of people to sell their products and labor in a global marketplace.

Globalization made some countries, especially the developing ones, to gain more in the
global economy at the expense of other nations. There are various ways however; the
country can make trade easier with other countries while lessening the inequities in the
global world. One of them is “fair trade” (Nicholls and Opal, 2005). Fair trade, as defined
by the International Fair-Trade Association, is the “concern for the social, economic, and
environmental well-being of marginalized small producers” (Downie,2007). It aims for a
more moral and equitable global economic system. Specially, it is concerned with
protection of workers and producers, establishment of more just prices, engagement in
environmentally sound practices and sustainable production, creation of relationships
between producers in the South and consumers in the North, and promotion of safe
working environment. Products like coffee, bananas, cotton, wine, tea, and chocolate
have been exchanged in light of fair trade.

A concrete example of the growth of fair trade is the case of American coffee chains
such as Starbucks and Dunkin Donuts. In 2006, there are $2.2 billion spent on certified
products, which 42% greater than the preceding year (Ritzer, 2015). In turn, coffee
growers such as those in Brazil “get at least $1.29 per pound of coffee beans compared
to the current market price of $1.25”.

Guide Questions:

1. Do you think the Philippines is harmed as other countries transfer their activities
to us through outsourcing?
2. In what ways do international organizations help our country’s economy?
3. Does the position of rich countries as giants in the economic chain threaten the
status of less developed countries in the global market?

Learning Activity:
Follow the Product

The products that we consume and use—foods, clothing, and gadgets—are part
of our way of life. Globalization allows for a world-wide exchange of these commodities
and exposure to different cultures as well. This activity will allow the students to
investigate the origin and spread of the products and services sold in our country. They
will also be able to know the countries involved in the production, distribution, and
consumption of the products being sold and consumed in the country.

Divide the class into five groups. Each Group will be assigned to any one of the
following products being sold in the Philippines. The group shall choose a specific
foreign brand of the product assigned to them. List down the main ingredients or raw
materials in manufacturing the chosen product. Identify the corresponding country from
which each ingredient or raw material came from.
a. Coffee
b. Wristwatch
c. Laptop
d. Hamburger
e. Shoes

Rubrics:
Levels of Achievements
Excellent Good Fair Poor
Criteria (8-10pts.) (6-7pts.) (4-5pts.) (0-3pts.)
Focus There is one specific, There is one clear, well- There is one-topic The topic and ideas
and well-focused topic. The focused topic. Main but the main ideas are not clear.
Details main ideas are clear ideas are clear but are are not especially
and are well supported not supported by clear.
by detailed and detailed information or
accurate information. fact.

References
 Aldama, Prince Kennex (2018). The Contemorary World. REX Book Store: Manila
Philippines
 Claudion, Lisandro, Abinales, Patricio (2018) The Contemporary World. C&E
Publishing Inc. Quezon, City Philippines
 Brazalote, Tumoroh, Leonardo, Ryan (2019) The Contemporary World outcome-
based module. C&E Publishing Inc. Quezon City Philippines
 Market Integration

At the end of the topic, the students should be able to:

1. Articulate a stance on global economic integration;

2. Narrate a short history of global market integration in the twentieth century; and
3. Identify the attributes of global corporations
Market Integration

Integration shows the relationship of firms in a market. The extent of integration

influences the market conduct of the firms and consequently their marketing efficiency.
Markets differ in the extent of integration and, therefore, there is a variation in their
degree of efficiency. Market integration is a process which refers to the expansion of
firms by consolidating additional marketing functions and activities under a single
management. There are three basic kinds of Market Integration; horizontal integration;
vertical integration; and conglomeration.

Horizontal integration is a type of integration, some marketing agencies combine

to form a union to reduce their effective number and the extent of actual competition in
the market. One of the clearest examples of horizontal integration is Facebook’s
acquisition of Instagram in 2012 for a reported $1 billion. Both Facebook and Instagram
operated in the same industry and were in similar production stages in regard to their
photo-sharing services. Facebook looking to strengthen its position in the social media
and social sharing space, saw the acquisition of Instagram as an opportunity to grow its
market share, increase its product line, and reduce competition and access potential
new markets. All of these things came to pass, resulting in a high level of Synergy.

Vertical integration occurs when a firm performs more than one activity in the
sequence of the marketing process. It is linking together of two or more functions in the
marketing process within a single firm or under a single ownership. For example, if a
firm assumes wholesale as well as retailing, it is a vertical integration. There are two
types of vertical integration, forward vertical integration takes activities close to the
consumption function. Wholesaler assuming the function of retailing. For example, the
Canadian communications giant Rogers is an example of forward integration. The
company established Rogers TV, a subsidiary company that operates local television
channels. The Rogers TV channels show programs such as cooking and talk shows,
which are produced by Rogers-managed television studios. These provide Rogers with
an opportunity to advertise and sell its digital products using an electronic version of a
retail store. On the other hand, the backward vertical integration is the combination of
sources of supply. Processing firm assumes the function of assembling/purchasing.
Example for Backward Vertical Integration is the Amazon.com, backward vertically
integrated when it became not only a bookseller but a book publisher. As a bookseller,
Amazon.com buys books from various suppliers, such as publishing companies. By
becoming a publisher-itself, it has integrated into its business the role of supplier and
can sell books that its own publishing company publishes.
The third and last basic kind of market integration is conglomeration. A
combination of agencies or activities not directly related to each other may operate
under a unified management. Example of conglomeration are Hindustan Unilever Ltd.
(processed vegetables and soaps), Delhi Cloth and General Mills (Cloth and
Vanaspati). It is involved in a number of different and frequently unrelated activities.
Most of the business firms have some degree of vertical integration, horizontal
integration and conglomerate character. Firm which buys and sells the grains is also
engaged in selling of fertilizers, insecticides and pesticides, feed. Meeting the multiple
needs of their customers, most of whom are farmers spreading the risk and helps in
expanding the activities to additional markets. Hindustan Unilever Limited (HUL) is the
Indian wing of the Multinational consumer goods company Lever International. HUL was
established in 1933 as Lever Brothers and, in 1956, became known as Hindustan Lever
Limited, as a result of a merger among Lever Brothers, Hindustan Vanaspati Mfg. Co.
Ltd. and United Traders Ltd. It is headquartered in Mumbai, India and employs over
16,000 workers, whilst also indirectly helping to facilitate the employment of over 65,000
people. The company was renamed in June 2007 as "Hindustan Unilever Limited".

Activity:

Debate: The students will debate the motion “That global free trade has done more
harm than good”

The class will divide in two the first group will have on the side “Pro-Free Trade” and the
second group will be on the “Anti-Free Trade”. The instructor will be the mediator of the
debate with a certain time each statement.

References
 Aldama, Prince Kennex (2018). The Contemorary World. REX Book Store: Manila
Philippines
 Claudion, Lisandro, Abinales, Patricio (2018) The Contemporary World. C&E
Publishing Inc. Quezon, City Philippines
 Brazalote, Tumoroh, Leonardo, Ryan (2019) The Contemporary World outcome-
based module. C&E Publishing Inc. Quezon City Philippines
 Interstate System
At the end of the topic, the students should be able to:

1. Articulate a stance on global economic integration;

2. Narrate a short history of global market integration in the twentieth century; and
3. Identify the attributes of global corporations
Weber (1997) describes the state as a compulsory political organization with a
cebtralized government that maintains the legitimate use of force within a certain
territory. On the other hand, the concept of nation emphasizes the organic ties that hold
groups of people together and inspire a sense of loyalty and belonging—i. e., ethnicity,
language, religion, and others (Schattle, 2014). Combining these two, a nation-state can
then be defined as a political community that emanates from civic society to legitimacy
execute peace. Thus, the civic society is the basis of the people’s oneness.

1. Treaty of Westphalia (1648) – ended the Thirty Years’ War between major
continental powers of Europe; provided stability for the nations of Europe, until
it faced major challenge by Napoleon Bonaparte
2. Napoleonic Code (Napoleonic Wars,1803-1815) – forbade the birth privileges,
encouraged freedom or religion, and promoted meritocracy in government
service; ended by Anglo and Prussian armies in the Battle of Waterloo
3. Concert of Europe (1815-1914) – alliance of “great powers” (the United
Kingdom, Austria, Russia, and Prussia; under the Metternich system (Klemens
Von Metternich), its power and authority lasted at the dawn of World War I.

Internationalism
The Westphalian and Concert systems divided the world into separate, sovereign
entities. A system of heightened interaction between various sovereign states,
particularly the desire for greater cooperation and unity among states and people is
called internationalism.

According to its principles, internationalism can be divided into two:

Liberal internationalism
Major thinkers and their contributions: German philosopher Immanuel Kant (form
of global government). British philosopher Jeremy Bentham (creation of
international law). Italian patriot Giuseppe Mazzini (believed in a republican
government). US President Woodrow Wilson (principle of self- determination; the
right to a free, and sovereign government; advocate of the League of Nations).

Socialist internationalism
Contemporaries of this were: German socialist philosopher Karl Marx (rooted for
economic equality; believed that social revolution would give change to the
economy and overthrow the state; his ideologies influenced the union of
European socialist and labor parties called the Socialist International or SI in
 1889). Bolshevik party leader Vladimir Lenin (Union of Soviet Socialist Republics
or USSR; established the Communist International or Comintern in 1919, central
body for directing Communist parties all over the world; dissolved in 1943 due to
conflict with allies US and UK). Joseph Stalin (re-established Comintern as the
Communist Information Bureau or Cominform; this helped the various communist
parties that had taken power in Eastern Europe)

“Internationalism is but one window into the broader phenomenon of

globalization. It is a very crucial aspect of globalization since global interactions are
heightened by increased interdependence of states, and; international relations
facilitated by organizations that promote global norms and policies.”

Activity:

Film Viewing with Extended-written responses

The student will watch a film and discuss a relevant issue about global interstate
system. They will create a comparative observation in our Government.

References
 Aldama, Prince Kennex (2018). The Contemorary World. REX Book Store: Manila
Philippines
 Claudion, Lisandro, Abinales, Patricio (2018) The Contemporary World. C&E
Publishing Inc. Quezon, City Philippines
 Brazalote, Tumoroh, Leonardo, Ryan (2019) The Contemporary World outcome-
based module. C&E Publishing Inc. Quezon City Philippines
 Global Governance

At the end of the topic, the students should be able to:

1. Explain the effects of globalization on governments;
2. Identify the institutions that govern international relations; and
3. Differentiate internationalism from globalism

What is Global Governance?

The term global governance lacks any accepted definition. As one analyst puts it:
“...The word…presents dangers and opportunities to anyone who would reopen
the question of global governance, though the term itself lacks in precision what it offers
in its novelty. It is quite certain in most people’s minds that governance is not
government…. But beyond that negative stance, the concept of global governance
needs to be clarified, amplified and, if thought desirable, made operational...” (Desai,
1995)

Oran Young (1994, 15), in turn, defines governance as:

“...the establishment and operation of social institutions (in the sense of rules of
the game that serve to define social practices, assign roles, and guide interactions
among the occupants of these roles) capable of resolving conflicts, facilitating
cooperation, or, more generally, alleviating collective action problems in a world of
interdependent actors..” Young’s definitions properly direct our attention to the
interdependent nature of decision making and the attempt by actors to “manage” or
produce more “orderly” responses to common problems. But it resulting blur two
analytically distinct political processes: bargaining, which divides the available costs and
benefits between actors, and contracting, which enforces the bargains reached. It is the
enforcement of bargains that we intuitively mean by the term governance

Frequently noted in the existing literature, governance is not equivalent to

government or formal institutions. Global governance is not limited to contracts between
states. And governance is a variable between the relations of anarchy and hierarchy

Governance and Globalization

Globalization and global governance are intimately connected. As globalization

occurs, states lose control over their destinies, problems become “bigger” than the
capacities of individual governments, and states must delegate and possibly abdicate
political authority to supranational entities with powers that more nearly coincide with
the scope of the issues and actors to be managed.
Global Governance as an International Organization

Global governance clearly is not world government – indeed, it is better viewed

as the sum of governance processes operating in the absence of world government.
Global governance, ‟is, any purposeful activity intended to “control” or influence
someone else that either occurs in the arena occupied by nations or, occurring at other
levels, projects influence into that arena.‟ It is a process of activity, and to differentiate it
from other terms, its descriptive rather than normative nature should be emphasized:
“global governance is governing, without sovereign authority, relationships that
transcend national frontiers‟.

The Potencies of Global Governances are; creating greater operational capacity

and effectiveness; generating more flexibility and efficiency; establishing a cooperative
work culture in participating organizations; encouraging inter-organizational learning;
and creating greater opportunities for participation and increasing the legitimacy of
governance.
 Activity:

Essay question

1. If you were given a chance to become a President in one term, what form of government you
will impose and what platforms you want to implement?

Levels of Achievements
Excellent Good Fair Poor
Criteria (8-10pts.) (6-7pts.) (4-5pts.) (0-3pts.)
Focus There is one specific, There is one clear, well- There is one topic The topic and ideas
and well-focused topic. The focused topic. Main ideas but the main ideas are not clear.
Details main ideas are clear and are clear but are not are not especially
are well supported by supported by detailed clear.
detailed and accurate information or fact.
information.

References
 Aldama, Prince Kennex (2018). The Contemorary World. REX Book Store: Manila
Philippines
 Claudion, Lisandro, Abinales, Patricio (2018) The Contemporary World. C&E
Publishing Inc. Quezon, City Philippines
 Brazalote, Tumoroh, Leonardo, Ryan (2019) The Contemporary World outcome-
based module. C&E Publishing Inc. Quezon City Philippines