SS 1D - Module 4 & 5 Flashcards
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Decision makingof private individuals - Economy under the will and interest of the individuals.
- Economic freedom to
purchase and sell products, services, and properties. - This condition is
not planned by a single person or groupthat has the ability to manipulate or direct the economy solely. - It
promotes competitionamong business and firms
MARKET ECONOMY
- A c
entral economic planning bodyhandles the entire decision making. - The
quality and quantity of goodsand services produced is based on the decision of the government. - Production quantity is dictated, consumer behavior is directed, and market operation is controlled by a single authority.
- Its objective is to
mobilize resourcesfor the common good of the public and for the interest of the nation. - Private individuals have no say in the economic operation.
COMMAND ECONOMY
Market-driven economies- Combination of market and command economies.
- Some sectors are under the directions of the private individuals while other aspects of the economy are left within the guidance of the government.
- State can take over the ownership and operation of a private company for the purpose of maintaining the interest of the nation.
MIXED ECONOMY
3 ECONOMIC SYSTEMS
Market Economy
* Hongkong
* New Zealand
* Australia
* Switzerland
Command Economy
* North Korea
* Cuba
* Russia
* China
Mixed Economy
* Philippines
* United States
* United Kingdom
* France
Is the process and the system when goods, commodities, services cross national economy, and boundaries in exchange for money or goods of another country (Balaam and Veseth, 2008).
International Trade
has grown dramatically since the post-cold war era because of increasing demand of goods and services and countries. This global norm reflects growing practice of internationalizing and globalizing local products and services.
Global trade
TRADE THEORIES
- Descriptive Theory
- Prescriptive Theory
- it deals with the
natural orderand themovement 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 best economic agents to solve the problems throughinvisible handrather than government policies. It also addresses the questions which product to trade, how much product to offer and produce, andwhich country to trade in the absence of government restrictions.
Descriptive Theory
- it 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.
Prescriptive Theory
3 PERSPECTIVES ON INTERNATIONAL TRADE
- Economic Liberals
- Mercantilists
- Structuralists
For David Ricardo, his influential work, Law of Comparative Advantage explains that free trade efficiency is attainable if two countries can produce more goods and trade products separately. The advantage of this theory in international trade is deriving principle of specialization and division of labor of Adam Smith (Nau, 2009). Counties have different resources and talents, they are better in performing in that economic activity than other economic activities.
Economic Liberals
explain the importance of free trade and the role of individual's preference in choosing economic activity. It includes making decision, and choices on comparing the costs of products to be produced and traded, the availability of the product, and the efficiency of producing and buying products.
Economic liberals
is an economic theory emerged from about 1500-1800. This period was the emerging eras of nation-states and the formation of more central governments. This system flourished due to the following reasons:
a. Higher Exports than Imports – Governments enforced policies to ensure exports exceeded imports, supporting trade goals and strengthening colonial rule.
b. Control Over High-Value Goods – Colonies were restricted from producing high-value goods, ensuring monopolization by colonial powers.
c. Colonial Benefits – Mercantilism maintained colonial power by controlling the economy and maximizing benefits for the ruling nation.
Mercantilism
The Modern World System (MWS) theory developed by Immanuel Wallerstein, explain the contact of economies between core, semi-peripheral, and peripheral countries in the world.
* The core states have the absolute advantage over the other through unequal exchange and extraction of raw materials from the periphery and semi-periphery. This system as part on the structure of the global capitalism, involves exploitation, and transformation in some ways.
Structuralists
Why Countries Engage in International Trade?
- Use of exess capacity in demand
- cost reduction and increase of profit
- cheaper suppies
- addiction to product line
- reduction of risk
- foreign policy tool
. The inadequate domestic demand pushes business organization to expand their market base outside the national territory. This is usually done by the firms and companies that have the resources and capacity to operate in transnational market. Giant brands like Nestle, Pepsi, McDonald’s, Toyota, and Starbucks are known for expanding their operations outside their home country.
Use of Excess Capacity in Demand
. A market leader for a particular good or service may garner a lower production cost by increasing its market in global rather than domestic. This enables a firm to increase its profit while reducing its operating costs.
Cost Reduction and Increase of Profit
. 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 an increase in the profit of businesses.
Cheaper Supplies
Economies usually aim for a variety of products and services available in market. It offers consumer to choose and by products that are competitive prices, degree of importance, and will offer higher satisfaction
Addiction to Product Line
. Importing products is seen as an alternative to countries that are vulnerable to supply shortage. These countries that have high volume of imported goods are economies that confront the demand and supply condition of the local market.
Reduction of Risk
. 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 market.
Foreign Policy Tool
The role of Multinational Corporation (MNCs) in the 21st is distinct and interesting to investigate. The movement of ideas, capital, investment, technology, and people are affected by the operations of MCNs. As the global economy is becoming complex and competitive, MCNs continue to offer innovations and new product and services. For several years, the term MCNs was used to refer to a firm operating in different countries around the world. Because of the magnitude of global production and networks, the term transnational corporation (TNC) became the more acceptable name. This refers to business organizations and firms that compete in regional or global markets. It operates in countries and makes investments in research, technology, facilities, distribution, and production.
Transnational Corporations
can control and monopolize the global market especially if it has huge pool of resources making it one of the most powerful economic actors in the world. The number of TNCs from north and west has business operations in the south where cheap labor and raw material are available. TNCs are very powerful economic institutions because of their global influence in investment and network distribution. Sometimes, TNC is being compared to states in terms of value and power.
Transnational Corporations
is designed to address and enhance the level of competitiveness of member economies in trade.
Free trade is the primary consideration of regional economic integrations.
Free Trade Area (FTA) is a trading bloc which involves the reduction of internal tariffs to zero of member economies while retaining different external tariffs. This policy aims to promote free flow of goods and services as well as to increase the volume of trade within the region.
However, there are criticisms on FTAs like the unfair trade practice. Unfair Trade is the conduct of trade by a business fir or government that violates and breaks the international trade agreements that are unjustifiable and discriminatory. Examples of common trade practices are issues relating to price, labor, wages, health, and environmental concerns that failed to meet the regulatory standards of the body.
formation of economic integration
In 1995, General Agreement on Tariffs and Trade (GATT) of the American government was replaced and succeeded by WTO with 151 members as of 2008 and accounts for 90% of the world’s trade. It is based in Geneva, Switzerland and leads by a director general selected by consensus among its members.
Primarily, WTO has the following main functions:
a. Implementation of the latest GATT agreements
b. A venue for trade negotiations
c. A dispute settlement body responsible for resolving trade problems
d. Review and assess national and international trade laws and policies
e. Assist members and developing economies by providing technical assistance and training programs
World Trade Organization (WTO)
Officially called the International Bank for Reconstruction and Development (IBRD), or ____________ is an international agency with 189 member-countries operating in 130 countries worldwide. Formed by Bretton Woods agreement in 1944 to finance the reconstruction of war-torn countries brought by the devastation of World War II.
World Bank is composed of four associated agencies:
a. International Development Association (IDA). This agency focuses on poor and third world economies in the world by providing financial assistance and load program.
b. International Finance Corporation (IFC).
c. Multilateral Investment Guarantee Agency (MIGA).
d. International Settlement Centre of Investment Disputes (ISCID).
World Bank
IMF was created as the flagship institution of Bretton Woods agreement with 189-member countries. IMF is responsible in supervising exchange rate system, providing loan programs to economies experiencing from another country as well as indicates the economic operation like what it produces, consumes, and buys with its money
International Monetary Fund (IMF)
is a political economic regional organization of 28 member-economies in Europe. Founded in 1985, European Economic Community (EEC) was formed by six countries: Belgium, Germany, France, Italy, Luxembourg, and Netherlands. Since then, other European countries joined the regional bloc making it as Europe’s most influential and powerful body.
EU is guided by its core values, considered as integral part in the way of life of its citizens. It believes on the following value orientation: (1) Human dignity, (2) freedom, (3) democracy, (4) equality, (5) rule of law, and (6) human rights.
European Union (EU)
was founded on August 1967 in Bangkok Thailand with Indonesia, Malaysia, Philippines, Singapore, and Thailand as its founding fathers. Brunei Darussalam, Vietnam, Myanmar, and Cambodia joined the organization making up today the 10 member-countries. The ASEAN Political-Security Community, ASEAN Economic Community, and ASEAN Socio-Cultural Community are the three main pillars of ASEAN.
As stated in the Treaty of Amity and Cooperation in South East Asia (TAC) of 2976. The ASEAN Community functions under its six fundamental principles (ASEAN.org).
a. Mutual respect for the independence, sovereignty, equality, territorial integrity, and national identity of all nations;
b. The right of every State to lead its national existence free from external interference, subversion or coercion;
c. Non-interference in the internal affairs of one another;
d. Settlement of differences or disputes by peaceful manner;
e. Renunciation of the threat or use of force; and
f. Effective cooperation among themselves
Association of Southeast Asian Nations (ASEAN)
refers to intensification and increasing level of interrelations among nations in the world. These structural processes raise the issue of state sovereignty, the growing implications of intergovernmental organizations, and the prospects of regional and international governance. (Steger, 2003). These features of globalization confront to the framework of the nation-state with the emergence of new conceptual views and grounds.
Political globalization
is a response on the actions of various stakeholders on finding out pressing global problems like climate change and issues on peace and security. The world has no global government and global authority. There are political and economic bodies operating worldwide but no single organization possesses a global authority in enforcing and compelling others to follow.
global government
. This term refers to domestic institutions and governments on how large-scale problems and public policy issues are being solved at a global level. It involves a range of actors including states, national and regional bodies that have the willingness and commitment to confront a specific problem (WHO, 2015). It involves management, authority, cooperation, and mechanisms that are aimed to attain certain goals. This international process is bounded by consensus and agreements where members are expected to perform based on the guidelines and policies.
global governance
THREE EXISTING GAPS AND ISSUES IN GLOBAL GOVERNANCE
- Jurisdiction Gap
- Incentive Gap
- Participation Gap
The lack of global governance in taking actions to problems affecting key sectors arises from the absence of authority. This involves the need to create power and jurisdiction to governments and international
organizations that have the commitment in confronting issues like unemployment, human rights, peace, and crimes.
Jurisdiction Gap
Global governance is formed with the participation of countries that have the interest to deal problem affecting their sovereignty. It is an issue between the rich and poor countries of the world because of uneven distribution of authority and control over decisions and policies.
Incentive Gap
Member-states sometimes disagree on issues that are harmful to their interests. They do not involve in decisions that are crucial to the economic and political welfare of their sovereignty
Participation Gap
means the system, or the form of practice employed by the state. Udayanskar (2012) identified two dimensions of political system.
* First, a country emphasizes the importance of individualism as opposed to collectivism.
* Second, a system in which a country is either democratic or totalitarian in its form of government.
Political System
- It is a political system that
values the significance of individualsover collective goals. - Freedom of the people is the primary consideration.
- Government values choices and preferences of its people at a very personal level.
- It is built in two elements: individual freedom and expression are important in the sense that individuals just like state have sovereignty; and the pursuit of economic interest among individuals.
Individualism
- It is a philosophy that stresses the
importance of the collective goalsover individual freedom and interests. - The state, as the primary economic manager, views collective action as the best strategy in establishing the welfare and interest of the nation.
- According to Plato, social stratification must be built in order for the society and the entire economy and the government be managed properly and orderly.
Collectivism
- Democratic institutions and governance
focus on the role individuals in political decision making. - The practice of direct participation in modern societies involves representation, where individuals periodically elect someone who has the ability to represent them in the government.
- In a representative democracy, competitive elections occur where candidates freely compete for votes through conduct of fair and honest election.
- Elected officials are accountable for their actions in the government and operation of the state.
- Constitutional laws are provided to safeguard the welfare and interest of the people.
Democracy
- It is built on the idea that
society and citizens have no right and freedom of expression. - Totalitarian countries do not recognize the conduct of fair and honest elections, the presence of media, and civil liberties.
- Decision making of the state is exclusively on a single political party if not a ruler who has full control in the political, economic, and social affairs of its government.
Totalitarianism
- is the
ultimate goal to contain and control other states and nationsthat do not enjoy much power are considered as powerless states in international arena. - Realists define it as capabilities of a country o state like population of its people, resources, territory, economic, and military strengths (Chomsky, 2006; Nau, 2008).
- In a typical discourse, it is described as the
abilityof a person, group, or institutionto affect the behavior of others against their will.
Power
- is a
policyor action where acountry acts independently, without consulting or seeking approval from others, especially in international affairs.
The economic growth experienced by China and other emerging economies in the world are dependent on the American market. On the political angle, American military power is considered as the most highly valued military force in the world with billions of dollars annually spent by the government. Its military presence in some countries in Asia and Pacific, Middle East and Africa, Europe and South America is a remarkable manifestation of its control in global
defense operation. However, the global stability of power enjoyed by the Americans can only be sustained if it will employ the liberal values of freedom, democracy, and human rights (Balaam, and Veseth, 2008)
Unilateralism
MULTILATERALISM
three powers in international system
- bipolar
- tri-polar or tri-polarity
- multi-polar or multi-polarity
- it happens if there are
only two great powers dominating the distribution of power. TheCold Warera is fitting example of bipolarity, the global power was highly contested between US and USSR.
Bipolar
- exists if there are only three states dominating the distribution if global order. United States, Japan, and Europe were considered as potential powers during the Second World War. They
controlled some areas under the respective military instruments and interests. In the area global economic power, Japan, China, and United States are the most favored nations identified by scholars as the three leading economic giants of modern time
Tri-polar or tri-polarity
- is situation when
more states are involved in the distribution of global power. This geological condition is described as analignment if the powerful and emerging powers in the world. The current situation of the globe could be described as Multipolar because of state
actors joining the prestige of superpowers.Europe, China, Japan, Russia, United States, and major alliances are key players in the distribution of
power.
Multipolar or multi-polarity
Isolationists believe that major powers and states exclude the use of force and military in the international system. War and attacking other nations are unethically acceptable in the international political economy. It is already enshrined in the international law. Realist-isolationist stresses that United States must disengage itself using military force over other military interests
Isolationism
is an international organization established in 1945 with the League of Nations as its original body. Currently, the organization
has 193-memberr states performing various capacities and divisions. As the world’s most powerful binding political organization, UN can act on the issues confronting humanity in the 21st century such as peace and security, climate change, sustainable development, human rights, disarmament, terrorism,
humanitarian and health emergencies, gender equality, governance, food production, and more. UN operates worldwide in providing aids and support services to global problems in countries where it is needed.
United Nations or UN
ORGANS OF UNITED NATIONS
- General Assembly
- Security Council
- Economic and Social Council
- International court of Justice
- The Secretariat
- Trusteeship Council
- this is
UNs main deliberative and decision-making bodyrepresented by all its 193 members. The assembly holds general debate fromSeptember - Decemberin its headquarters in New York.Two thirds of voteare required to decide range of issues like peace and security, budget, and admission if new members to the organization
General Assembly
- it is responsible in the
maintenance of peace and security. it has the power to impose sanctions or punish members or other bodies for the purpose of restoring international peace and security.
Security Council
. - commonly called as ECOSOC. its main function is to coordinate, review, and recommend policies relating to economic, social and environmental issues. It serves as the main agency of UN in monitoring and evaluating key results in sustainable development.
Economic and Social Council
- ICJ is the
principal body or court of UN. Its role includessetting legal disputesamong concerned states and provides opinions on legal matters. This is the only UN organ thatoperates outside United Stateswith headquarters in the Peace Palace, Netherlands
International Court of Justice
- it is
headed by the UN Secretary - Generalwho sits as its Chief Administrative Officer at the appointment of the secretary general is done through the recommendation of the Security Council for afive-year term. this organ is responsible for theday-to-day work and operationof the UN including its peacekeeping mission and thousands of international staff stationed in different countries.
The Secretariat
was formed initially as a political association, and not a military alliance. Realists argue that during its proposal in 1949, the idea of collective security arrangement was the main feature of NATO. Its purpose was not directed against the threat of Soviet Union but to strengthen political commitment of
governments in Western Europe. However, liberalists point out the belief that NATO was established to back up and save the economic and political problems of Europe from the damages of war. The economic alliances of Europe’s powerful countries transformed the region as a major hub in industrialization. Its development transformed NATO as a conventional military alliance and protected Europe from the threat of Soviet Union.
North Atlantic Treaty Organization
