Learning Outcomes

Define Economic Globalization

Identify the actors that facilitate economic
globalization
Narrate a short history of global market integration in
the twentieth century
Articulate your stance on global economic
integration
International Monetary Fund
 Historical process representing the result of human
innovation and technological progress.

 Increasing integration of economies around the world.

 Movement of goods, services, and capital boarders.

 Products of people, organizations, institutions, and

technologies.
 Value of Trade

80
60
40 Value of Trade
20
0
1980 2007
International Trading
Systems
Silk Road
 Network of pathways in the ancient world that spanned
China to what is now the Middle East and to Europe.
 Most profitable product traded was Silk
 Traders used the Silk road regularly from 130 BCE until
1453 BCE.
 International but not truly Global.
Dennis O. Flynn and Arturo
Giraldez
Age of Globalization

began when all important populated

continents began to exchange products
continuously.
 1571

- Flynn and Giraldez trace back the establishment

of galleon trade that connected to Manila in the
Philippines and Acapulco in Mexico.

- First time that Americas were directly connected

to Asian trading routes.
Age of Mercantilism
 16th century – 18th century

Competed for one another to sell more goods to

boost their country’s income. (monetary reserves)

 Mercantilism

system of global trade with multiple restrictions.

Imposed high tariffs

Forbade colonies to trade with other nations

Restricted trade routes

Subsidized exports
Gold Standard
Open trade system in 1867
International Monetary in Paris
Its goal was to create a common system that would
allow for more efficient trade and prevent the
isolationism of the mercantilist era.
Common basis for currency prices and fixes
exchange rate system
 Very restrictive system
- compelled countries to back their currencies
with fixed gold reserves.
World War 1
- gold standard was abandoned
World War 2
- Other major industrialized countries followed
suit.
The Great Depression
1920s – 1930s

Worst and longest recession experienced by the

Western world.

Largely caused by the gold standard

Barry Eichengreen
Economic Historian

Recovery of United States began when they

abandoned the Gold standard
More indirect versions of the gold standard were
used until as late as the 1970s.

The world never returned to the gold standard of

the early 20th century.
Fiat Currencies
Currencies that are not backed by precious
metals.

Value is determined by their cost relative to

other currencies.

Allows governments to freely and actively

managed their economies.
The Bretton Woods
System
Inaugurated in 1944 during the United Nations
Monetary and Financial Conference.

Prevent the catastrophes of the early decades

of the century.

British economist: John Maynard Keynes

Global Keynesianism
International Bank for Reconstruction and Development (
IBRD or World Bank)
 Responsible for funding postwar reconstruction projects.
International Monetary Fund
 Global lender of last resort to prevent individual countries
from spiraling into credit crises
General Agreement on Tariffs and Trade (GATT)
 1947
 Reduce tariffs and other hindrances to free trade
Neoliberalism and Its
Discontents
High point of global Keynesianism (1940s-1970s)

Demand increased = prices of goods increased

Prices increased companies earn more more

workers.

Necessary trade-off for economic development

Organization of Arab Petroleum Exporting
Countries (1970s)

Oil embargo

Stock markets crashed in 1973-1974

Stagflation
 A phenomenon, in which a decline in economic
growth and employment (stagnation) takes place
alongside a sharp increase in prices (inflation).
Friedrich Hayek and Milton Friedman
 Argued that government intervention in economies
distort the proper functioning of the market.
Friedman
Used the economic turmoil to challenge the
consensus around Keynes’s ideas.
Neoliberalism
1980s
Codified strategy of:
 United States Treasury Department
 World Bank
 IMF
 World Trade Organization
 New organization founded in 1995 to continue the tariff
reduction under the GATT.
Washington Consensus
Dominated global economic policies (1980s-
2000s)

Its advocates pushed for minimal government

spending to reduced government debt.

Shock Therapy
Neoliberalism
US President Ronald Reagan and British Prime
Minister Margaret Thatcher
 Compared national economies to household
Household Analogy
The Global Financial Crisis and the

Challenge to Neoliberalism

Russia’s case

Global Financial Crisis of 2008-2009

 Greatest economic downturn since The Great
Depression
Mortgage-backed securities
Global multiplier effect that sent ripples across
the world.
Iceland’s debt increased more than seven-fold
Spain and Greece are still heavily indebted.
Large Keynesian-style stimulus package
 Helped United States to recover quickly
 President Barack Obama
Marine Le Pen’s Front National in France
Economic Globalization
Today
Global financial crisis will take decades to resolve.

The world has become too integrated.

Free Trade

65 % of Global Exports
 United States, Japan, and member-countries of the European
Union
29% of Global Exports
 Developing countries
2011
51 % of Global Exports
 Philippines, India, China, Argentina, and Brazil
45 % of Global Exports
 United States
Trade Liberalization
 Profoundly altered the dynamics of the global
economy.
The global per capita GDP rose over five-fold in
the second half of the 20th century.
 Japan
 China
 Korea
 Hong Kong
 Singapore
Economic globalization remains an uneven
process.
Developed countries are often protectionist.
(Double Standard)
 Japan’s determined refusal to allow rice imports
into the country to protect its farming sector.
 United States protection to its sugar industry.
Trade imbalances
 Characterize economic relations between
developed and developing countries
Global Commerce
 Transnational Corporations (TNCs)
 Concerned more with profits than assisting the social
programs of the governments hosting them.
 Host countries loosen tax laws
“Race to the bottom”
 Countries’ lowering their labor standards,
including the protection of workers’ interest.
Governments weaken environmental
laws to attract investors, creating
fatal consequences on their
ecological balance and depleting
them of their finite resources like oil,
coil, and minerals.
Conclusion
International economic integration
 Central tenet of globalization
Economics
 One window into the phenomenon of globalization
Global culture is facilitated by trade.
International policymakers
should strive to think of Governments must also
ways to make trading deals continue to devise ways of
fairer. cushioning the most damaging
effects of economic
globalization, while ensuring
that its benefits accrue for
everyone.