Globalization

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A historical process representing the result of human innovation and technological progress

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Economic Globalization

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Characterized by the increasing integration of economies around the world through the movement of goods, services, and capital across borders

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Economic Globalization

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Increased trade also means

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that investments are moving all over the world at faster speeds

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the oldest international trade route; a network of pathways in the ancient world that spanned from China to (what is now) the Middle East and to Europe

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The Silk Road

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Called as such because one of the most profitable products traded through this network was

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silk

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However, though international, the Silk Road was not entirely

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“global” because it had no routes to reach the Americas

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The galleon trade was part of the age of

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age of mercantilism

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during the age of mercantilism

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countries competed with one another to sell more goods to boost their income

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It was also common among these countries (or regimes) to sell their goods

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more cheaply and impose high tariffs

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Thus, mercantilism is a global system of trade mired

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with restrictions

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mercantalism also

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also forbade colonies to trade with other countries, restricted trade routes, and subsidized its exports

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In 1867, following the lead of the US, UK, and several other European nations, __________ This was made possible by the adoption of the

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• a more open trade system emerged

- gold standard (at an international monetary conference in Paris)

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the worst and longest recession ever experienced by the Western world

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The Great Depression

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The depression was said to have been caused

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by the gold standard (it limited the amount of circulating money, thus reducing demand and consumption)

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Soon enough, the gold standard was abandoned, for

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it proved to be a very restrictive form of globalizing trade

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With the abandonment of the gold standard,

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, the US gov’t was able to free up money to spend on reviving the economy

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– currencies that are not backed by precious metals and whose value is determined by their cost relative to other currencies

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Fiat Currencies

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Largely influenced by the ideas of John Maynard Keynes

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The Bretton Woods System

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Keynes believed

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hat economic crises happen not when a country doesn’t have enough money, but when money is not being spent

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When economies slow down

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gov’ts have to reinvigorate markets with infusions of capital

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Delegates at Bretton Woods agreed to create two financial institutions

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International Bank for Reconstruction and Development (IBRD, or World Bank) – established to fund postwar reconstruction projects

International Monetary Fund (IMF) – was to be the global lender to prevent individual countries from spiraling into credit crises

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In 1947, shortly after Bretton Woods, various countries also committed themselves to further global economic integration through the

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General Agreement on Tariffs and Trade (GATT)

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main purpose was to reduce tariffs and other hindrances to free trade

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GATT

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But during the early ‘70s, oil prices rose

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Cause: the Organization of Arab Petroleum Exporting Countries (OAPEC) imposing an oil embargo (to stabilize their economies)

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In 1973-1974

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the stock markets plunged (after the US stopped linking the dollar gold

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phenomenon in which a decline in economic growth and employment (stagnation) takes place alongside a sharp increase in prices (inflation)

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Stagflation

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new form of economic thinking was challenging Keynesianism

An economic thinking espoused

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by Friedrich Hayek and Milton Friedman

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Hayek and Friedman argued that

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gov’ts’ practice of pouring money into their economies isn’t effective

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Neoliberalism (or

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“Market Fundamentalism”)

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became the codified strategy of the US Treasury Department, the World Bank, IMF, and the WTO

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Neoliberalism

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The policies they forwarded came to be called the

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Washington Consensus

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The appeal of Neoliberalism

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was in its simplicity

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Neoliberalism was championed by

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US President Ronald Reagan and British Prime Minister Margaret Thatcher

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Features/ Effects of Globalization

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End of cold war and the ICT boom

Deregularization and privatization

Internationalization

Liberalization of foreign trade

Contractualization and flexible labor arrangements

Global production of goods

Global Cities

Knowledge and information society

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1971: invention of microprocessor
1989: fall of Berlin wall
1991: disintegration of Soviet Union

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rise of computers

intensified global trade

weakened resistance against capitalism

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requires gov’t to transfer full or partial ownership of enterprises to private companies
Implies no interference from the gov’t

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Deregularization

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comes from the belief the gov’ts are inept, weighed down by bureaucratic layers, and prone to corruption

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Idea of privatization

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A producer of certain goods need not to be limited to the number of goods and services to consumers in its country of origin

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Internationalization

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Foreign businesses can bring in their goods and services easily with lesser tariff duties (or tax) into a WTO member state

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Liberalization of foreign trade

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Global production of goods

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Global supply chain

Gives rise to call center industry

Global market knowledge and information

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Has multidimensional infrastructure of connectivity

Multicultural, multilingual

Taste and consumption patterns are influenced more by an emerging global culture rather than local factors

Prevalence of expatriates

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Global Cities

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Denotes right and freedom of private entities to conduct their affairs and be protected not only from oppression but also from any form of intervention

Promotes individualism

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NEOLIBERALISM

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This was due to the reduction of trade barriers led by the WTO, known as

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trade liberalization