Contemp World Module 2 Topics 1 4

Module 2: The Structures of Globalization

Table of Contents

Introduction 3
Paulinian Essential Elements 4
Paulinian Affirmation 4
Topic 1: The Global Economy 5

Learning Outcomes 5
Learning Activities 5
Introduction 5
Processing and Formation 6
What Does the Global Economy Mean? 6
How New Is the Global Economy? 6
The Reorganization of Production and Trade in the Global Economy 8
The Emergence of International Trade and Production Networks 9
Surpluses and Deficits 10
Slicing Up the Value Chain 10
Production Networks in the Global Economy 11
Industrial Upgrading and Global Production Networks 12
Outsourcing 13
The Globalization Backlash: Dilemmas of Governance and Developments 15
Synthesis 18
Assessments 19
Assignments 20
Topic 2: Market Integration 21

Learning Outcomes 21
Introduction 21
Economic Development During and After World War II 22
Bretton Woods and the Bretton Woods System 22
General Agreement on Tariffs and Trade (GATT) 25
World Trade Organization 26
International Monetary Fund (IMF) 27


World Bank (WB) 31

Changes in Bretton Woods Organizations 34
A Critique of the Bretton Woods System 35
Other Important Economic Organizations 38
MULTINATIONAL CORPORATION (MNC) 39
Transitional Capitalism 42
Assignments 45
Topic 3: The Global Interstate System 46

Introduction 46
Political Globalization 46
Political Institutions in International Relations 47
The Nation-State 48
Civil Society 49
Global Civil Society 51
International Nongovernmental Organization (INGOS) 53
Globalism 55
Globalization: Its Characteristics 56
Globalization: Its Causes 57
INFORMATIONALISM 58
The Network Society 60
The Genesis of the Network Society 61
Technology, Economy, and Culture 63
Assignments 67
Topic 4: The United Nations and Contemporary Global Governance 68

Introduction 68
What Is an International Organization? 69
The United Nations 71
Localizing the Material 73
Challenges of the United Nations 74

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ASEAN Integration 75

Success and Challenges within ASEAN Integration 76
Success of ASEAN Integration thus Far 77
Challenges That Have to Be Addressed 77
Conclusion 78
Synthesis 79
Assessments 83
Assignments 88
Reflection Guide 88
Expanded Opportunities 89
References 90

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Introduction

This module identifies how the global economy has been constructed analytically. The first
task is to define what is really "new" about the global economy. The increasingly seamless
web of international production and trade networks that girdle the globe appears to be a
distinctive feature of the last several decades, and it requires a new kind of organizational
perspective that has been growing rapidly. The second topic of this module takes a closer
look at how and why production and trade have been reorganized in the global economy in
the contemporary era and the complex network relationships that make up the global
economy, specifically global commodity chains. The third topic takes how a focus on global
production networks allows us to understand the process of industrial upgrading. The
fourth and concluding section of the chapter examines several of the emerging challenges
and dilemmas for governance and development in the contemporary global economy.

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Paulinian Essential Elements

Cutting-Edge, Resilient Visionaries, and Innovators who
● stay abreast of emerging social and technological trends and proactively pursue
fruitful ways of capitalizing on them, and
● devise and carry out programs and strategies that drive society toward consciously
preserving and improving the viability of our planet’s eco- and social support system.

Dedicated Transformative Supporters and Stewards of All Creation who
● promote and actively participate in initiatives that benefit and directly support the
right of all creatures to exist and flourish,
● devise and carry out program and strategies that drive society toward consciously
preserving and improving the viability of our planet’s eco- and social support
systems,
● mobilize others in advocating and implementing public policies and programs that
foster peace, justice, solidarity, and respect for life and cultures, and
● act decisively to inform and lead others to ways of tangibly reducing environmental
problems and improving the quality of life in their local and larger communities.

Paulinian Affirmation
“As a Christ-centered Paulinian, I am a reliable, productive expert, and implementer,
competently pursuing my mission in life.”

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Topic 1: The Global Economy

Learning Outcomes
During the learning engagement, you should be able to
● further explain economic globalization,
● determine the actors that facilitate economic globalizations, and
● articulate a stance on global economic integration.

Learning Activities

Introduction
The global economy has changed in very
significant ways during the past several decades,
and these changes are rooted in how the global
economy is organized and governed. These
transformations affect not only the flows of goods
and services across national borders but also the
implications of these processes for how countries
move up (or down) in the international system. The development strategies of countries
today are affected to an unprecedented degree by how industries are organized, and this is
reflected in a shift in theoretical frameworks from those centered on the legacies and actors
of nation-states to a greater concern with supranational institutions and transnational
organizations. Policymakers, managers, workers, social activists, and many other
stakeholders in developed as well as developing nations need a firm understanding of how
the contemporary global economy works if they hope to improve their position in it, or
forestall an impending decline.

The topic of the global economy is inherently interdisciplinary. No single academic field can
encompass it, nor can any afford to ignore it. Because of its vast scope, those pundits who
focus on the global economy are likely to be classified as academic interlopers; they run the

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risk of being too simplistic if they advance forceful hypotheses and too eclectic if they try to
capture the full complexity of their topic. Scholars in this field thus have to master what
economist Albert Hirschman has popularized as “the art of trespassing” (Hirschman 1981;
Foxley, McPherson, and O’Donnell 1986).

Processing and Formation

What Does the Global Economy Mean?
A global economy is an economic interdependence established between the most
influential countries that drives the worldwide economic environment. It is also the
aggregate economic output, movement, and influence of all countries. The global economy
can also be defined as each country’s economy added together, but that is not the only way
to portrait how the word economy works. The 20th largest economies account for 80% of
the world’s economic output, and the five biggest economies are big enough to impact the
whole world with their developments. If one of these five economies suffer from a natural
disaster or any event that causes an economic downturn, it will have sequels on the global
economy due to the interconnections caused by international trade.

On the other hand, global financial markets are
also ruled by the biggest economies since they
possess a big load of resources that can be used to
finance other country’s endeavours and projects.
These highly influential countries understand the
leverage they possess by having these huge
economic systems, and they often employ them to
push political agenda.

How New Is the Global Economy?
Much of the globalization debate has been fueled by different conceptions of what is
happening “out there” in the global economy and whether it really represents something
new. We need to distinguish the process of internationalization—which involves the mere
extension or geographic spread of economic activities across national boundaries—from

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globalization—which is qualitatively distinct because it involves the functional integration
of internationally dispersed activities (Dicken 2003, 12). How functional integration occurs is
a topic that we will deal with in more detail below in terms of the governance structures in
the global economy. However, one of the key actors that distinguish the global economy of
the latter half of the twentieth century from its predecessors is the transnational
corporation (TNC). The origins of a global economy can be traced back to the expansion of
long-distance trade during the period of 1450–1640, which Wallerstein (1979) has labeled
the “long sixteenth century.” From the fifteenth century onward, a number of chartered
trading companies emerged in Europe such as the East India Company and the Hudson’s
Bay Company, which created vast international trading empires. Although their activities
were worldwide in scope, their main purpose was trade and exchange rather than
production.

The development of a world trading system over a
period of several centuries helped to create the
tripartite structure of core, semi-peripheral, and
peripheral economic areas. According to
world-systems theory, the upward or downward
mobility of nations in the core, semi-periphery, and
periphery is determined by a country’s mode of
incorporation in the capitalist world-economy, and
these shifts can only be accurately portrayed by an
in-depth analysis of the cycles of capitalist
accumulation in the longue durée of history
(Wallerstein 1974, 1980, 1989; Arrighi 1994). The dynamics of the capitalist world-system laid
the foundation for a process of industrialization and new international divisions of labor on
a global scale. Originally, as defined by the eighteenth century political economist Adam
Smith ([1776] 1976), the “division of labor” referred simply to the specialization of workers in
different parts of the production process, usually in a factory setting. Quite early in the
evolution of industrial economies, the division of labor also acquired a geographical
dimension. Different areas began to specialize in particular types of economic activity.

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At the global scale, the “classic” international division of labor was between the industrial
countries producing manufactured goods, and the nonindustrialized economies that
supplied raw materials and agricultural products to the industrial nations, and that became
a market for basic manufactures. This relatively simple pattern no longer applies. During the
decades following World War II, trade flows have become far more complex, and so have
the relationships between the developed and developing nations of the global economy.

The Reorganization of Production and Trade in the Global Economy
The role of TNCs while the post-war international economic order was defined and
legitimized by the United States and the other core powers that supported it in terms of the
ideology of free trade, it was the way in which TNCs linked the production of goods and
services in cross-border, value-adding networks that made the global economy in the last
half of the twentieth century qualitatively distinct from what preceded it. TNCs have become
the primary movers and shakers of the global economy because they have the power to
coordinate and control supply chain operations in more than one country, even if they do
not own them (Dicken 2003, 198). Although they first emerged in the late nineteenth and
early twentieth centuries in the natural resource (oil, mineral, and agricultural) sectors, TNCs
did not play a central role in shaping a new global economic system until after World War II.

One of the central questions that generated great interest in TNCs was this: To what extent
have TNCs supplanted national governments, and in what areas? The attitude of many
researchers was that TNCs had the power, the resources, and the global reach to thwart the
territorially based objectives of national governments in both developed and developing
countries (see Bergsten, Horst, and Moran 1978; Barnet and Müller 1974). This was a key
tenet of dependency theory, one of the most popular approaches in the 1970s, which
argued that TNCs undercut the ability of nationstates to build domestic industries controlled
by locally owned firms (Sunkel 1973; Evans 1979; Gereffi 1983). Even the most balanced
scholarly approaches reflected the challenge to national autonomy captured by the title of
Raymond Vernon’s best-known book, Sovereignty at Bay (1971). The large size of TNCs,
whether measured in sales or by more sophisticated calculations of value added, still leads
to the conclusion that many TNCs are bigger than countries. However, the concentrated
power of vertically integrated, industrial TNCs has been diminishing for the past couple of
decades as a result of the tendency toward both the geographic and the organizational

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outsourcing of production. Thus, the original concern with how TNCs affect the sovereignty
and effectiveness of national governments needs to be reframed in light of the current shift
to a more network-centered global economy.

The Emergence of International Trade and Production Networks
The growth of world trade has probably received
the most attention in the globalization literature
because of its direct relevance to employment,
wages, and the rising number of free trade
agreements around the world. The most common
causes usually given to explain expanding world
trade are technological (improvements in
transportation and communication technologies)
and political (e.g. the removal of protectionist barriers such as tariffs, import quotas, and
exchange controls, which had restricted world markets from 1913 until the end of the World
War II). It is also important to acknowledge that the volume of international trade depends
to a considerable degree on how boundaries are drawn, both for different geographies of
production and according to whether trade covers final products only or whether it also
includes intermediate inputs.

However, even though the share of trade in world output surpassed its 1913 peak in the
1980s and 1990s, the sheer volume of trade is probably not sufficient to argue for a
qualitative break with the past. Of far greater significance are several novel features in the
nature of international trade that do not have counterparts in previous eras. These suggest
the need for a new framework to understand both patterns of competition among
international firms and the development prospects of countries that are trying to upgrade
their position in diverse global industries. The three new aspects of modern world trade
relevant here are (1) the rise of intra-industry and intra-product trade in intermediate
inputs; (2) the ability of producers to “slice up the value chain,” in Krugman’s (1995) phrase,
by breaking a production process into many geographically separated steps; and (3) the
emergence of a global production networks framework that highlights how these shifts have
altered governance structures and the distribution of gains in the global economy.

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Surpluses and Deficits
A good place to get a quick snapshot of global trade (Mann and Pluck, 2007: 1159–66), as
well as net economic flows in and out of a nation-state, is by looking at a nation’s trade
surpluses and deficits.

Of special interest and importance as far as trade surpluses and deficits are concerned are
the positions of the two global economic giants—the US and China—in terms of their trade
balances. On the one side is the US, which by the end of November 2007, had a trade deficit
of $701.6 billion (it ended the year at $738.6 billion) (Peters, 2007:C3). The deficit dropped
slightly in 2008 and dramatically in 2009 to about half the 2007 figure because of the Great
Recession. For its part, China announced that it had a record trade surplus of $177.47 billion
in 2006 (Peter, 2007:C3). China’s surplus was 75% greater than it had been in the previous
year (2005). Through November 2006, the Chinese surplus with the US was almost equal to
its surplus with all other countries in the world. The US deficit with China alone was $22.9
billion and that was just for the month of November 2006. The US has a larger deficit with
China than with any of the countries in the world. The US is negotiating with China over the
size of the deficit blaming it, at least in part on Chinese monetary policies that, in the US
view, artificially undervalue the yuan, thereby making Chinese exports less expensive and
therefore more affordable to Americans. Of course, there is much more to the American
attraction to Chinese products than their low prices traceable to China’s undervalued
currency. The fact is, many Chinese products are attractive because they are priced low,
mainly as a result of the low cost of labor there and because their quality is high, at least for
the price being paid.

The trade deficit with China has certainly hurt American industry, but it has greatly added
the American consumer who has access to a wide range of low-priced imports from China
and elsewhere. While only 7.5% of total US spending on consumer goods is on products
imported from China, it is much higher for certain products such as footwear (85%), toys
(80%), and clothing (40%) (Barboza 2008a: A1, A8).

Slicing Up the Value Chain
The notion of a value-added chain has been a useful tool for international business scholars
who have focused on the strategies of both firms and countries in the global economy.

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Bruce Kogut (1984, 151), a professor at the Wharton School of Business, University of
Pennsylvania, was one of the first to argue that value chains are a key element in the new
framework of competitive analysis that is needed because of the globalization of world
markets: “The formulation of strategy can be fruitfully viewed as placing bets on certain
markets and on certain links of the value-added chain…. The challenge of global strategy
formulation is to differentiate between the various kinds of economies, to specify which link
and which factor captures the firm’s advantage, and to determine where the value-added
chain would be broken across borders.” In a subsequent paper, Kogut (1985) elaborates the
central role of the value-added chain in the design of international business strategies,
which are based upon the interplay between the comparative advantage of countries and
the competitive advantage of firms. While the logic of comparative advantage helps to
determine where the value-added chain should be broken across national borders,
competitive (or firm-specific) advantage influences the decision on what activities and
technologies along the value-added chain a firm should concentrate its resources in.

Production Networks in the Global Economy
In the 1990s, a new framework, called GLOBAL
COMMODITY CHAINS (GCC), tied the concept of
the value-added chain directly to the global
organization of industries (see Gereffi and
Korzeniewicz 1994; Gereffi 1999, 2001). This
work was based on an insight into the growing
importance of global buyers (mainly retailers
and brand companies, or “manufacturers
without factories”) as key drivers in the
formation of globally dispersed production and distribution networks. Gereffi (1994a)
contrasted these buyer-driven chains to what he termed producer-driven chains. The latter
are the production systems created by vertically integrated transnational manufacturers,
while the former term recognizes the role of global buyers, highlighting the significance of
design and marketing in initiating the activities of global production systems.The GCC
approach drew attention to the variety of actors that could exercise power within global
production and distribution systems. It was the field-based methodology of GCC research, in
particular, that provided new insights into the statistics showing an increase in trade

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involving components and other intermediate inputs. The trade data alone mask important
organizational shifts because they differentiate neither between intrafirm and interfirm
trade nor between the various ways in which global outsourcing relationships are being
constructed.

A variety of overlapping terms have been used to describe the complex network
relationships that make up the global economy. Each of the contending concepts, however,
has particular emphases that are important to recognize for a chain analysis of the global
economy:

● Supply chain. A generic label for an input-output structure of value-adding activities,
beginning with raw materials and ending with a finished product International
production networks. A focus on the international production networks in which
TNCs act as “global network flagships” (Borrus, Ernst, and Haggard 2000).

● Global commodity chains. An emphasis on the internal governance structure of
supply chains (especially the producer-driven vs. buyer-driven distinction) and on the
role of diverse lead firms in setting up global production and sourcing networks
(Gereffi and Korzeniewicz 1994) French “filière” approach. A loosely knit set of studies
that used the filière (i.e., channel or network) of activities as a method to study
primarily agricultural export commodities such as rubber, cotton, coffee, and cocoa
(Raikes, Jensen, and Ponte 2000).

● Global value chains. Emphasis on the relative value of those economic activities that
are required to bring a good or service from conception, through the different
phases of production (involving a combination of physical transformation and the
input of various producer services), delivery to final consumers, and final disposal
after use (Kaplinsky 2000; Gereffi and Kaplinsky 2001).

Industrial Upgrading and Global Production Networks
Major changes in global business organization during the last several decades of the
twentieth century have had a significant impact on the upgrading possibilities of developing
countries. This section will illustrate how the reorganization of international trade and

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production networks affects the capability of developing countries in different regions of the
world to improve their positions in the value chains of diverse industries. Industrial
upgrading refers to the process by which economic actors—nations, firms, and
workers—move from low-value to relatively high-value activities in global production
networks. Different mixes of government policies, institutions, corporate strategies,
technologies, and worker skills are associated with upgrading success. However, we can
think about upgrading in a concrete way as linked to a series of economic roles associated
with production and export activities, such as assembly, original equipment manufacturing
(OEM), original brand name manufacturing (OBM), and original design manufacturing (ODM)
(Gereffi 1994b, 222–24). This sequence of economic roles involves an expanding set of
capabilities that developing countries must attain in pursuing an upgrading trajectory in
diverse industries. In the remainder of this section, we will look at evidence from several
sectors to see how global production networks have facilitated or constrained upgrading in
developing nations.

Outsourcing
Outsourcing is defined as the act of obtaining semifinished products, finished products, or
services from an outside company if these activities were traditionally performed internally.
In the previous sentence, the word product may be replaced by service. The company that
outsources is called buyer whereas the company that provides the service is known as the
vendor. Note that outsourcing leads to a significant rapprochement between the vendor
and the buyer. An important flow of technical and organizational information inevitably
occurs between the protagonists. We shall see later that this can lead to significant
problems.

Confusions are frequent between outsourcing, offshore outsourcing, off-shoring, and
subcontracting.

We speak of offshore outsourcing when the vendor is located in a country different from
that of the buyer. Therefore, only the location of the seller differentiates the two concepts.

When a company is fully relocated to a country other than his home country, we speak of
off-shoring. This situation is relatively rare because it is risky.

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Managers sometimes confuse outsourcing and subcontracting. The latter concept means
that part of the work is transferred to another company that has special skills or resources
that allow it to perform tasks clearly specified in better conditions. In other words, a
subcontractor works for the buyer in specific limits, while a seller cooperates with a buyer.
Subcontract involves only the transfer of the specifications of the product or service.

We still will use the term core competencies. This concept was first introduced by Prahalad
and Hamel (1990) and used by many authors including Dekkers (2000). According to the
authors, the core competencies can be defined as the collective knowledge of the
production system concerned, in particular knowledge of procedures and how to best
integrate and optimize them. More simply, one could say that the concept encapsulates the
expertise of the company with regard to its "strengths," that is to say, the activities that
make the company ranked ahead of the competition.

In their article, Quinn and Hilmer (1994) give a more detailed definition of core
competencies. In their view, the core competencies are defined as follows:
● Have a range of expertise that crosses traditional functions horizontally
● Have the capacity to adapt to changes in long-term demands of clients
● Must be limited in number (as a matter of effective management)
● Dominate the competitors with regard to these skills
● Close to customers in order to be recognized as a leader
● Able to continue and even improve the domination of the competitors

emember
R

Is outsourcing a good or a bad strategy?

We are in a period in which some companies that had previously
decided to outsource part of their production are backtracking on
their decision. It is also during this period that we find in the
literature more and more communications that take for granted the

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positive aspect of outsourcing, to the point of not even ask the
question that introduced this section (see for example the following
sentence in (Yao et al., 2010). While outsourcing may enhance a
client’s firm’s value in several ways, such access core competency,
current research finds that cost reduction ranks the highest among
other outsourcing benefits.

Fig. 1 E
volution of Outsourcing to China

Our goal is to give voice to the supporters and opponents of outsourcing in order to have a
balanced perspective on this key issue.

The Globalization Backlash: Dilemmas of Governance and
Developments
In recent decades, a strong anti-globalization movement has emerged. As markets have
gone global, many people sense that globalization means greater vulnerability to unfamiliar
and unpredictable forces that can bring economic instability and social dislocation, as well
as a flattening of culture in the face of well-financed global marketing machines and “brand
bullies” (Rodrik 1997; Klein 2000; Ritzer 2000). In addition, there is a growing imbalance in

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global rule-making: on the one hand, the rules favoring market expansion have become
stronger and more enforceable (such as intellectual property rights for software and
pharmaceutical companies, or the restrictions on local content provisions and export
performance requirements in the WTO); on the other hand, rules that favor other valid
social objectives, such as human rights, labor standards, environmental sustainability, or
poverty reduction, are lagging behind. These perceived problems and others have provided
the fuel for anticorporate campaigns worldwide.

Government policy alone is inadequate to handle these grievances: they are transnational in
scope, and they deal with social demands in areas where regulations are weak, ill defined,
or simply absent. A variety of new “private governance” responses or certification
institutions are emerging (Gereffi, Garcia-Johnson, and Sasser 2001), such as individual
corporate codes of conduct; sectoral certification schemes involving nongovernmental
organizations (NGOs), firms, labor, and other industry stakeholders; third-party auditing
systems, such as SA 8000 for labor standards or the Forest Stewardship Council (FSC)
certification for sustainable forestry practices; and the United Nations’ Global Compact, an
initiative that encourages the private sector to work with the United Nations, in partnership
with international labor and civil society organizations, to move toward “good practices” in
human rights, labor standards, and environmental sustainability in the global public
domain.

Private governance in multi-stakeholder arrangements seeks to strengthen oversight in
global supply chains by charting a course that goes beyond conventional top-down
regulation based on uniform standards, on the one hand, and reliance on voluntary
initiatives taken by corporations in response to social protest, on the other. Some argue that
a continuous improvement model based on “ratcheting labor standards” upward would
work well in a highly competitive, brand-driven industry such as apparel (Fung, O’Rourke,
and Sabel 2001). Others propose a “compliance plus” model that pushes beyond the basic
floor of minimum standards set by most codes, and seeks an “inside-out” approach to
ethical sourcing based on training and empowerment initiatives that address the needs and
interests of factory-based stakeholders (Allen 2002). In either instance, sustainable and
meaningful change requires a shift in organizational cultures and expectations regarding
improvement of social and environmental conditions.

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Governance has become a central theoretical issue in the global economy. Institutional
paradigms and local or regional frameworks centered on the nation-state are being
superseded by approaches that emphasize transnational governance structures, with an
emphasis on power, networks, and the uneven distribution of gains from globalization.
Much still needs to be done in this area. The inability of the neoliberal agenda to redress the
most serious development problems in the world is leading to fresh thinking on the role of
the state and civil society institutions in developing nations (Wolfensohn 1998; IDB 1998,
2000; Garretón et al. 2003). Transnational corporations are being pressured to comply with
a broad range of social objectives in multi-stakeholder institutions of private governance
that can have an impact on public policies in the developed as well as the developing world.
The challenge in research on the global economy is to create theory and carry out insightful
empirical studies that provide tools to understand the constantly changing reality we seek
to apprehend and change.

Process Questions
1. What is global economy?

2. Discuss how the development of the world trading system changed over a period of
several centuries.

3. Does outsourcing in the Philippines contribute to its economic development?

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Synthesis
● Simple observation reminds us that our consumption of goods has a strong
international character.
● The global economy affects not only the flows of goods and services across national
borders, but also the implications of these processes for how countries move up (or
down) in the international system.
● Global financial markets are also ruled by the biggest economies as they possess a
big load of resources that can be used to finance other country’s endeavours and
projects.
● At the global scale, the classic international division of labor was between the
industrial countries producing manufactured goods, and the nonindustrialized
economies that supplied raw materials and agricultural products to the industrial
nations and that became a market for basic manufactures.
● Basically a change in geographical pattern of specialization at the global scale is
constantly changing and very dynamic.
● Production chains may be very localized but increasingly are global in scale to take
advantage of international division of labor.
● Institutional paradigms and local or regional frameworks centered on the
nation-state are being superseded by approaches that emphasize transnational
governance structures, with an emphasis on power, networks, and the uneven
distribution of gains from globalization.
● The value chain concept has recently gained popularity as an overarching label for
this body of research because it focuses on value creation and value capture across
the full range of possible chain activities and end products (goods and services), and
because it avoids the limiting connotations of the word commodity, which to some
implies the production of undifferentiated goods with low barriers to entry.
● Global value chain (GVC) analysis accepts many of the observations made
previously on geographical fragmentation, and it focuses primarily on the issues of
industry (re)organization, coordination, governance, and power in the chain
(Humphrey and Schmitz 2001). Its concern is to understand the nature and
consequences of organizational fragmentation in global industries.

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● The GVC approach offers the possibility of understanding how firms are linked in the
global economy, but also acknowledges the broader institutional context of these
linkages, including trade policy, regulation, and standards.
● More generally, the global production networks paradigm has been used to join
scholarly research on globalization with the concerns of both policymakers and social
activists, who are trying to harness the potential gains of globalization to the
pragmatic concerns of specific countries and social constituencies that feel
increasingly marginalized in the international economic arena.

Assessments
Direction: Fill in the blanks with the correct words given below.
WORLD SYSTEM THEORY GLOBAL VALUE CHAINS
DIVISION OF LABOR INDUSTRIAL UPGRADE
TRANSNATIONAL CORPORATION OUTSOURCING
SUPPLY CHAINS CAPITALIST WORLD-SYSTEM
GLOBAL COMMODITY CHAINS CORE COMPETENCIES

1. A ___________ is an economic interdependence established between the most
influential countries that drives the worldwide economic environment.
2. ______________ is defined as the act of obtaining semi-finished products, finished
products or services from an outside company if these activities were traditionally
performed internally.
3. According to _____________ theory, the upward or downward mobility of nations in the
core, semi-periphery, and periphery is determined by a country’s mode of
incorporation in the capitalist world-economy.
4. The _____________ can be defined as the collective knowledge of the production
system concerned, in particular knowledge of procedures and how to best integrate
and optimize them.
5. ______________ referred simply to the specialization of workers in different parts of the
production process, usually in a factory setting.
6. The _____________ is a chain that emphasizes on the relative value of those economic
activities that are required to bring a good or service from conception, through the
different phases of production.

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7. _______________ have become the primary movers and shakers of the global economy
because they have the power to coordinate and control supply chain operations in
more than one country, even if they do not own them.
8. ______________ is a chain that emphasizes on the internal governance structure of
supply chains and on the role of diverse lead firms in setting up global production
and sourcing networks.
9. ______________ is a chain that has a generic label for an input-output structure of
value-adding activities, beginning with raw materials and ending with a finished
product International production networks.
10. ______________ refers to the process by which economic actors—nations, firms, and
workers—move from low-value to relatively high-value activities in global production
networks.

Assignments
Research on the following topics:
● Market Integration
● Economic Development During and After World War II
● Bretton Woods and the System
● General Agreement on Tariffs and Trade (GATT)
● World Trade Organization (WTO)
● International Monetary Fund
● World Bank

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Topic 2: Market Integration

Learning Outcomes
● explain the role of international financial institutions in the creation of a global
economy,
● understand and explain the history of global market integration in the twentieth
century, and
● identify and explain the attributes of global corporations through analysis of related
realistic scenarios.

Learning Activities

Introduction
Have you heard the statement “When the American economy sneezes, the rest of the world
catches a cold”? This means that world economies have been brought together by
globalization. But it is important to remember that it is not just the economy of the United
States that has the significant impact and global market and finance. This is clear, for
example, in the global impact of the financial crisis that struck Asia and Russia in the 1990s.
However, it remains the case that the more powerful the economy, the greater the effect of
its crisis on the rest of the world. In the same manner, crises on weaker economies have
less effect on other countries. For example, Argentina’s serious financial crisis in the late
1990s and 2000s has a comparatively small impact on the global economy.

This shows the contribution of different financial and economic institutions facilitated the
growth of the global economy. As we discuss the history of the creation, interaction, and
characteristics of these institutions, we will be able to see their significance as well as the
controversies in which they became involved. We will also take a look at the multinationals
that are emerging in today’s world economy.

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Economic Development During and After World War II
Frieden sees the development of economic globalization after WWII in the context of the
prior epoch of economic globalization, as well as its collapse as a result of WWI, the
Depression, and WWII. All of these events had negative effects on almost all major
economies (the US economy was a major exception, at least in effect of the two world wars).
Of particular importance in the 1930s was the movement of many countries—notably fascist
Italy and Germany—in the direction of autarky, or the turn inward of a nation in order to
create as much economic self-insufficiency as possible. Such a turn inward is, of course,
anathema to globalization, which requires that various entities—including nation-states—be
outward-looking, rather than inward-looking, not only in the way they view the world but
also in their actual dealings with order parts of the world. For its part, the US in the 1930s
had a strong tendency toward isolationism although such an orientation was not quite as
antithetical to economic globalization as autarky, largely because it was more political than
economic.

A great fear was the recurrence of the Depression after the end of WWII, especially because
of the difficulties those societies would have in absorbing the massive manpower created by
the demobilization of the military when the war ended. There was also fear of a resurrection
of barriers to trade and the free flow of money that had become commonplace prior to
WWII. The focus of the planners was on reducing trade barriers and on creating conditions
necessary for the free flow of money and investment. Another concern was creation of
conditions needed for financial stability around the globe. This was the background for a
meeting in July 1944 at the mount of Washington Hotel in Bretton Woods, New Hampshire,
which led to the beginning of the “Bretton Woods System” by the end of the three-week
meeting.

Bretton Woods and the Bretton Woods System
A key factor in the depression was thought to be a lack of cooperation among
nations-states. That lack of cooperation was associated with high tariffs and other import
restrictions and protectionist practices, as well as the propensity of governments to devalue

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their currencies in order to gain an edge in global trade over other countries. The latter also
made exchange rate wars among the nations involved more likely.

Those concerns were the backdrop for the creation of the Bretton Woods system and its five
key elements (Bordo and Eichengreen 1993; Boughton 2007:106-7). Firstly, each
participating state would establish a “par value” for its currency expressed in terms of gold
or (equivalently) in terms of the gold value of the US dollars as of July 1944 (Boughton
2007:106). For example, the US pegged its currency at $35 per ounce of gold, while, to take
one example, the figure for Nicaragua was 175 cordobas per ounce. This meant that the
exchange rate between the two currencies was 5 cordobas for one dollar.

Secondly, two official monetary authorities in each country (a central bank or its equivalent)
would agree to exchange its own currency for those of other countries at the established
exchange rates, plus or minus one-percent margin (Boughton, 2007:106-7). This made
international trade possible at or near the exchange rate for the currencies of the countries
involved without the need for any outside intervention.

Thirdly, the international Monetary Fund (IMF) was created (Babb 2007:128-64) to establish,
stabilize, and oversee exchange rates. Forty states became IMF members in 1946 and were
required to deposit some of their gold reserves with the IMF. The IMF was empowered to
approve the par values of currencies and member states could not change that value by
more than 10 percent. If a currency was destabilized, the IMF was prepared to lend member
states the money needed to stabilize their currency.

Fourthly, the member states agreed to eliminate, at least eventually, all restrictions on the
use of its current for international trade (Boughton2007:107).

Finally, the entire system was based on the US dollar (at the end of WWII, the US had about
three-fourths of the world gold supply and accounted for over one-fifth of world exports).
The US agreed to make the dollar convertible into other currencies of gold at the fixed far
value. The dollar became, in effect, a global currency. Of course, as a Bretton Woods system
came into existence and had a chance to develop, it changed dramatically over time. Bretton

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Woods had its most powerful effects on global trade, the global monetary order, and global
investment (Peet 2003).

In terms of global trade, a key was an idea of the “unconditional most-favored-nation” which
“required governments to offer the same trade concessions (reduction in trade barriers,
non-discrimination against a nation’s product) to all” (Frieden 2006:288). Restrictions on
international trade were reduced over the years through various meetings (rounds) under
the auspices of General agreement on Tariffs and Trade (GATT) and later the WTO.

In terms of the monetary order, it was the IMF that took center stage. The goal was to
provide security, as well as flexibility, to the monetary order. What emerged between 1958
and 1971 was a system in which the US could not change the value of its dollar, while all
other countries could, but as infrequently as possible. This made exchange rates stable
enough to encourage international trade and investment which otherwise would have been
discouraged by dramatic fluctuation in rates.

In terms of global investment, a key role was envisioned for the World Bank, but massive US
aid through the Marshall Plan and rapid European post-war recovery made its work in that
period of much less significance than had been anticipated. A key development in terms of
investment involved MNCSs, especially American-based firms in fields like automobiles and
computers, constructing their own plants and/or investing in indigenous companies in other
countries. This kind of investment took center stage because the industries involved
required very large, often global, organization in order to function effectively. In addition,
this kind of investment made it possible to get around trade barriers by opening plants with
the countries with such barriers.

The global openness encouraged by Bretton Woods also contributed to the emergence or
expansion of social welfare programs, indeed the welfare state, in many countries. Welfare
states sought to deal with various problems-recessions, layoffs, reduction in wages, and
bankruptcies of uncompetitive firms. The creation of the social safety net within a given
country served to protect it and its citizens from these problems, at least to some degree. In
the process, it gave a nation and its entrepreneurs the cover they needed to be actively
involved in the global marketplace.

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The combination of all of these aspects and dimensions of Bretton Woods satisfied many
different nation and constituencies and in the process,” oversaw the most rapid rates of
economic growths and most enduring economic stability in modern history” (Frieden
2006:3ooP).

Given this background on Bretton Woods, let us now look in more detail at some of the
economic organizations spawned by it either directly or indirectly.

General Agreement on Tariffs and Trade (GATT)
The General Agreement on Tariffs and Trade (GATT) was the system for the liberalization of
trade that grew out of Bretton Woods and came into existence in 1947 (Hudec 1975). It
operated until 1995 when it was superseded by the World Trade Organization (WTO). While
GATT focused on trade and goods, the WTO also took responsibility for the increasingly
important trade in service. While GATT was simply a forum for the meetings of
representatives of countries, the WTO is an independent organization. GATT was deemed
more acceptable than the International Trade Organization (ITO) by the US and other
countries; and in 1947, a number of initial trade agreements were negotiated by 23 nations.
Since then, multinational trade agreements have been negotiated under GATT’s (and later
the WTO’s) institutional umbrella. Over the years, a number of “rounds” of negotiation were
completed. It was out of the Uruguay Round (1986–1983) that an agreement was reached to
create the WTO.

While GATT has been superseded by the WTO, many of its elements were incorporated into
the WTO, although they continue to change and evolve as a result of changing global
economic realities. Negotiations on trade have continued under the auspices of WTO and as
of this writing the highly disputatious Doha Round has just ended in failure. Over the years
WTO negotiations have dealt with such issues as reducing tariffs on the trading of goods,
dealing with non-tariff barriers (e. g., quotas, national subsidies to industry and agriculture),
and liberalizing international trade and agriculture.

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More recently, attention has shifted to such issues as “international trade” in service,
trade-related international property rights (TRIPS), and trade-related investment measures
(TRIMS) (House 2007:477-9).

Trade-Related aspects of Intellectual Property Rights (TRIPS) (Correa 2000) was negotiated
through the WTO, as a result of the 1986–1994 Uruguay Round of negotiations. This involves
intangible ideas, knowledge, and expressions that require their use to be approved by their
owner. Involved here is a wide range of intellectual property, such as movies books, music
recordings, and computer software, which exist or whose value lies largely in the realm of
ideas. There are many material products, such as pharmaceuticals and advanced
technologies that are also viewed as having a significant intellectual component.

Trade-Related Investment Measures (TRIMs) are arrangements of operating or performance
measures that host-country governments inform foreign firms to keep them from having a
distorting effect on trade in goods and services (Grimwade 2007:1178). There are a number
of specific restrictions and constraints of foreign firms that can be including under this
heading, including requirements, for minimum amount of local content or sourcing, how
much of a foreign producer’s output must be exported, and limits of the value of goods
imported by a foreign firm I a relation to the amount it exports, and so on (Grimwade
2007:178-80).

World Trade Organization
The WTO is a multilateral organization headquartered in Geneva, Switzerland with 152
member nations as of 2008 (Krueger 2000; Trachman 2007:1308-15). Its focus on trade
places it at the heart of economic globalization and makes it a magnet for those who
opposed either to the broader passes of trade liberalization and promotion or to some
specific aspects of WTO operations. The WTO encompasses much of what was GATT’s
mandate, but has moved onto other issues and areas such as services intellectual property
and so on.

Each member state in the WTO has an equal vote. To a large extent, the WTO is the
organization of these member states and not (with some exceptions) a supranational

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organization. Agenda items to be voted on generally flow from a number of more informal
groups.

There are stresses and strains between developed and developing nations in WTO that
manifest in and between these groups, as well as in the WTI as a whole. One bone of
contention has meetings of the larger trading powers in the so-called” Green Room” and the
exclusion of smaller powers from these meetings. Protests over such matters have led to
greater transparency of the internal operations of the WTO. There is also no mechanism for
involvement of international nongovernmental organization (INGOs) in WTO’s
decision-making and this has led INGOs to stage regular protests and demonstrations
against the WTO.

While GATT focused on tariff reduction, the WTO has come to focus more of
nontariff-related barriers to trade. One example is the differences between nations in
relation to regulations on such items as manufactured foods or food. A given nation can be
taken to task for such regulations if they are deemed to be an unfair restraint to the trade in
such items. However, the WTO has been criticized for not going far enough in countering
the trade barriers retained by developed countries in such domains as agricultural products
and some services.

Of course, the WTO continues to be concerned with tariff barriers, as well as restrictions on
trade in services. The WTO also deals with other types of protectionism. Overall, WTO
operations are premised on the neoliberal idea that all nations benefit from free and open
trade and it is dedicated to reducing and ultimately eliminating barriers to such trade. While
there are winners under such a system, there are also losers.

International Monetary Fund (IMF)
The goal of the IMF is macroeconomic stability for both member nations and the global
economy (Cardem de Cavalho 2007:658-63). More specifically, the IMS deals with exchange
rates, balance of payments, international capital flows, and the monitoring of the member
states and their macroeconomic policies.

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The IMF is a lightning rod for critics who see it as supporting developed countries and their
efforts to impose their policies on less developed countries. Its supporters see it as key to
emergence and further development of the global economy.

As a result of changes of the global economy, the nature and functions of the IMF have
changed since its creation in 1944. In the beginning, it managed the exchange rate system
created in Bretton Woods. The IMF closely watches a nation’s balance in order to be sure it
could sustain the agreed upon exchange rate for its currency. If there were problems in the
latter, the IMF concerned itself with two matters. The first was policy errors by the nation,
which presumably could be corrected. The second was fundamental economic problems
(relating, for example the productivity). Above all, the IMF wanted to be sure that a nation
did not use such problems as an excuse to lower its exchange rate and therefore improve
its competitive position vis-à-vis other nations. If a fundamental disequilibrium occurred, the
IMF had the power to authorize a change in the exchange rate of the nation’s currency.

The IMF could also give the adjustment loans to nations (initially, largely developed
countries) in disequilibrium so that they are able to meet their international member
obligations. The fund was created on the basis of quotas for member nations. The quota for
each was related to the limits on its borrowing (should it become necessary) as well as its
voting power in the IMF. When the fixed, albeit adjustable, exchange rate-system collapsed
in the early 1970s, the first of the IMF’s functions changed so that it was in charge of the
much more amorphous goal of seeking stable exchange rate in order to prevent exchange
rates war among its member nations. By the end of the 1970s, developed nations had fully
recovered from WWII and ceased seeking adjustment loans; such loans were now given to
developing countries for balance-of-payments problems. With a new clientele, the
conditions for such loans change and become more stringent, including the demand of
structural adjustments in such nations. Among such adjustments were demands for a tight
monetary policy and fiscal austerity, more specifically, the IMF might demand “currency
devaluation, measures to reduce government spending or (more rarely) increase taxation,
deregulation of interest rates and foreign exchange transaction, slower expansions, slower
expansion of domestic credit creation, and measures to manage and reduce external
indebtedness” (Killick 2007:1095). This policy was caused by inflationary policies and
processes (i.e.., “loose” monetary policy, expansionist fiscal policies) in a given nation.

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Structural adjustments were designed to reign in such tendencies toward inflation and
became conditions (“conditionalities”) of help from the IMF. A nation receiving help agreed
to alter its policies in order to achieve a balance for payments in a short period of time.

As the IMF became the lender of last resort for developing countries in the late 1970s and
1980s, it underwent further changes. Such countries were unlikely to be able to achieve a
balance of payments in a short period of time. Thus, longer-term structural adjustment
programs were required. The IMF adopted a general model of requirements for the
operation of a market economy and these tended to be imposed on developing economies
without regard for the differences among and between their economies. These structural
adjustments not only took the IMF into uncharted waters and new directions, but they also
became highly controversial and ultimately a target of groups opposed to globalization, at
least as it was conceived and practiced by the IMF.

Such protests were also related to the IMF governance structure, which is dominated by the
US with about 17% of the total IMF vote and veto power over any strategic decision;
developed nations control more than 50% of the votes. (Votes are functions of a fixed
number for each nation plus additional voting power based on each nation’s quota of
contributions of the fund.)

The managing director of the IMF usually comes from Western Europe; the deputy
managing director from the US. In order to cope with criticisms of this structure, the IMF has
been moving in the direction of greater transparency in its dealings with member nations,
dealing more with non Governmental Organizations (NGOs), and being more concerned
with social issues in its dealings with developing nations.

The changing nature of the global economic crisis in the 20th century led to further changes
in the IMF. It shifted from an interest of balance-in-payments issues that were related to
current accounts to capital account movements of financial assets. This led to the creation
of a Capital Market Department to monitor financial markets and to suggest ways of
stabilizing them.

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In the 1990s, the IMF was actively involved in helping resolve the economic crisis in Latin
America, Asia, and Russia. It loaned large amounts of money, but as the countries involved
repaid their loans, income to the IMF declined and by 2007, with interest income declining, it
found itself running a deficit (about $400 million a year). It cut 380 members of its staff (it
employed about 4,000 people in 2007) and saved a considerable amount of money as a
result (Economist 2008; february7). There was even some talk that it would need to sell its
gold billion reserves (about $72 billions). A new managing director (Dominique
Strauss-Kahn) from France took office in October 2007. He indicated that the very existence
of the IMF might be in jeopardy.

The IMF increasingly seemed marginal or irrelevant. It had about $300 billion it reserves and
credit lines, but it confronted a global economy where trillions of dollars flowed throughout
the world everyday in light of its increasingly marginal economic position, the IMF began to
focus on other issues such as working to ”prevent crisis, monitoring the global economy
and providing technical assistance” (Weisman 2007b:C1). Others thought it should focus on
data gathering and the dissemination of financial information in order to forestall economic
surprises.

The IMF faced other problems such as protests from the rest of the world over the
continuing dominance of the IMF by the western powers (in addition to the new IMF director
from France, the new [in 2007] World Bank director Robert B. Zoellick was from the US).
Further, the countries bailed out in the 1990s had become powerful economically and
increasingly resented being dictated to by the Fund. There were also lingering resentments
over IMF interventions that demanded austere budgets and other fiscal lightening in
exchange for loans. As the Russian IMF representative described it, the resentment was over
the traditional approach of the IMF—“you need our money, we tell you what to do”
(Weisman 2007b:C5).

However, the Great Recession brought about a dramatic change in the fortunes of the IMF.
A number of economies were on the brink of disaster (Iceland, for example), or close to it
(Hungary, Ukraine), and they gladly accepted funds from the IMF (Economist 2008). Even
healthy economies (Brazil, South Korea) were receiving economic help from the IMF (Landler
2008). The long decline of the IMF was at an end, at least for the time being, and there were

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calls, even from former critics, for a massive increase in the lending capacity of the IMF to
help deal with the global economic meltdown (Economist 2009).

World Bank (WB)
The World Bank, officially the International Bank for the Reconstruction and Development
(IBRD) is the most important element of the World Bank Group (WBG) (Gilbert and Vines
2000; Bradlow 2007:1262-7). The IBRD or the bank was established in 1944 at Bretton
Woods and began operations in 1946.

Membership is open to all member states of the IMF, and as of this writing, it includes 184
nations. It provides funds to government-sponsored or guaranteed programs in so-called
Part II countries (member states that are middle income or creditworthy poorer nations). It
also provides advice and analytical services to such states. Among the missions of the bank
are as follows:
● Encouraging development of productive facilities and resources in less developed
countries.
● Funding for productive purposes when private capital cannot be obtained or
reasonable terms
● Encouraging international investment in order to promote international trade and
development and equilibrium in balance of payments
● Helping member countries improve their productivity, standard of living, and labor
Conditions (Bradlow 2007:1264)

Over the years, the bank has expanded for beyond its original focus on project involving
physical infrastructure (e.g., transportation, telecommunication. And water projects, among
others) capable of generating income. It now deals with a broad range of issues related to
economic development including “population, education, health, social security,
environment, culture… aspects of macroeconomic policy and structural reform… [and]
poverty alleviation” (Bradlow 2007:1265). In addition, it now makes loans to deal with a
variety of governance matters such as “public sector government, corruption, legal and
judicial reform, and some aspects of human rights and broader policy reforms” (Bradlow
2007:1265). Support is also given to help women deal with gender inequality and

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discrimination. The bank continues to expands its range of concerned and activities. NGOs
and affected people have grown increasingly involved in projects finance by the Banks.

Decisions are supposed to be made on purely economic, not political grounds in the Bank
and are not supposed to intervene in the political affairs of the member states. However,
exactly what is deemed political is not defined and it is often difficult to ascertain whether,
and to what degree, political considerations have been involved in bank decisions.

All of the member states have a say in WBG, but a state’s number of votes varies depending
on its size and its importance in the world economy. Each member states appoint a
governor to the board of governors, who meets once a year. There is also a 24-member
Board of Executive directors empowered to handle the most important functions of the
larger and more unwieldy Board of Governors. The president of the bank is chief of the
Banks operating staff. The Board officially appoints the president to a five-year renewable
term, but by tradition, the president is appointed by the President of the US. This was much
in the news in 2007 when the then president of the bank, Paul Wolfowitz, a prominent
neo-conservative and neoliberal; a close advisor to President George W. Bush who had
nominated him to the post, was forced by the board to resign.

The resources of the Bank include both a relatively small sum paid in by member countries
and, if necessary, a much larger amount that can be called in by the Bank from the
members. The Bank uses its potential access to the latter to issue highly rated bonds and
this way, raises about $25 billion per year. It is this money that provides the bulk of the
funds that is used to finance loans of various sorts. Countries that receive the loans benefit
from the fact that the bank offers low interest rates. Since its money is borrowed, the Bank
depends on the ability of nations to which it has loaned money to pay back those loans. Its
lending decisions are based on a given country’s ability to repay loans.

Over the years, especially since the 1980s, the operations of the Bank have become
increasingly controversial. First, the Bank is seen as dominated by rich developed nations,
and less developed countries and non-states have little say in it. Second, there are concerns
that the Banks serve certain interests (e.g., the nation-state, international capital, and
wealthy nations) and thereby adversely affects those of others especially the poor and less

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developed nations. Third as a result of its expanded mandate described above, the bank is
seen as having lost focus and encroaching on the activities of other agencies.

In late 2007, a controversy arose over the bank's annual World Development Report that
was devoted to agriculture. Given its mandate to use funds from rich nations to reduce
poverty in poor ones, the report was a shocker since it said that the Bank had long
neglected agriculture in sub-Saharan Africa. This neglect occurred in spite of the fact that
sub-Saharan Africa is one of the poorest regions in the world and one that is almost totally
dependent on agriculture. In the fact, in 1980s and 1990s, the bank had help push the public
sector in sub-Saharan Africa—which was seen as inefficient and dominated by the poor
management practices—out of agriculture on the neoliberal assumption that agriculture
would improve if privatization and market forces (e.g., through the decontrol of prices) were
allowed to operate.

However, the private sector has not filled the void and this has had disastrous
consequences for agriculture in the region (e.g., farmers find it to get credit). As one
economist put it “market can’t step in and won’t step in when people have nothing. And if
you take help away, you leave them to die” (quoted in dugger 2007:A3). Another economist
commented, “Here’s your most important client, Africa with its most important sector,
agriculture, relevant to the most important goal—people feeding their families—and the
bank has been caught with two decades of neglect” (quoted in dugger 2007:A3). While some
observers felt that the bank was not given enough credit for its positive contributions and
much of the blame lay with African governments, the bank itself acknowledged its mistakes
in this domain.

With the 2007 World Development Report, the bank announced its intention to return a
focus on agriculture on developing nations, especially in Africa. It is late in doing so since
both the bill in Melinda Gates and the Rockefeller foundations have already been focusing
on this issue in Africa. While many of the details are to worked out and negotiated with
African governments, the Bank has decided to shift back to an earlier focus on agriculture
from later concerns with such issues as health (e.g., AIDs). And primary education (Dugger
2007:A6). Of course , the Bank like the IMF, has become deeply immersed in the economic
issues produced by the Great Recession and that might sidetrack it, at least for a time. Even

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before the Recession, the Bank was following and concerned about debt levels, especially of
developing countries.

In spite of a wide range of difficulties, the bank is an important force globally. First, it is a
forum for a vast number of nations to discuss developments. Second, it remains a
significant source of funds for developing countries. Third, it is an important source of
information on development and provides valuable advice and support to the nations that
are its members.

Changes in Bretton Woods Organizations
In the twenty-first century, the organization that was spawned by Bretton Woods—the
World Bank, the International Monetary Fund, and the World Trade Organization—are
undergoing dramatic changes (Weisman 2007a:C1 C8). A former US Secretary of Treasury
commented: “The Bretton Woods System has become outmoded... It has served us very well
for a long time, but these institutions haven’t changed with the time. They need to be
rethought and restructured” (Weisman 2007a:C8).

Recent changes in the organization is traceable to several major forces including
globalization, major trade disputes, especially in Asia. In terms of the latter, the World Bank
has been loaning large sums of money to countries whose economies did not need such
loans (e.g., China, including $710 million in early 2009 to help rebuild areas hit by a 2008
earthquake). In fact, of the Bank’s $23 billion in loans in 2006, $13 billion went to
“middle-income” countries rather than to poor countries. Even in terms of the funds that go
to poor countries, the World Bank is an increasingly small player in comparison to various
international and private organizations. As a result, one professor said “…it’s hard to see
what good it (the World Bank) has done anywhere” (quoted in Weisman 2007a:C8). The Bank
argues it is helping large numbers of the poverty-stricken in less developed countries, while
its critics say it is the opening of markets there, and not banks loans, that has helped in
poverty reduction.

Then there is an issue of the leadership of these organizations, especially to preeminent
positions occupied by the US. This has become increasingly controversial for various

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reasons including the fact that the US is not contributing as much money as it used to, at
least in comparison to other nations.

The IMF saddled with such problems as relentless criticism of past austerity programs
imposed of poor countries in exchange for bailouts, and the bailouts themselves for
legitimating and supporting bad policies by countries receiving them; a shift in global power
away from the US and Europe and toward countries like China; and the fact that the IMF has
been rendered increasingly less relevant by a growing global economy. Thus, former US
Secretary of State George Schulz said “if it disappeared tomorrow, I don’t think people would
miss it very much”. On the other hand, there are those who argue that although things are
relatively calm for the moment, the IMF will be needed during the next global financial crisis.

The biggest problem facing the WTO is the possibility that the failure of the Doha Round
could lead to a reversal of the long trend toward more open trading systems. The fear is a
new era of protectionism, which in return, would lead to a slowdown in the global economy.
The bear was exacerbated in the Great Recession as one began to hear outcries in the US to
“buy American.” Similar calls were being heard elsewhere in the world.

A Critique of the Bretton Woods System
One of the most effective critics of Bretton Woods Era organizations is the noted economist
Joseph E. Stiglits. His critique is especially powerful because he had great practical
experience as a member of President Bill Clinton’s council of economic advisors and as chief
economist at the world Bank. Thus, he was able to view the operations of the global
economic system not only for the inside, but also for the prominent positions within
powerful institutions within that system. It is the fact that this is critique from within rather
than from those who are on the periphery of the system and who feel they are being
exploited by it, that gives Stiglitz”s argument so much power.

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For Stiglitz (2002:ix), globalization is defined as “the removal of barriers to free trade and the
closer integration of national economies.” It should be clear, therefore, that he is falling into
the familiar trap, especially common among, but not restricted to economists, defining
globalization as economic globalization. It should also be clear that to Stiglitz, economic
globalization is neoliberal economic globalization (especially “closer integration” and the
removals of barriers”), but he takes this position at the same time that he is a critic of it.

Stiglitz argues that economic globalization can be a positive force and can enrich everyone
in the world, including the poor. However, this has not been the case because of the way of
globalization, and especially international trade agreements had been managed including
their imposition on less developed nations. As a result, stiglitz sees an increase in global
poverty as well as a growing gap between the global rich and the global poor. In this way
globalization has not fulfilled its promise. Furthermore, globalization has not provided the
global economic stability that many thought it promised. Stiglitz refers not only to the Asian
financial crisis, but also to the other crisis in Russia and Latin America.

Stiglitz accepts various criticisms of the West. For example, he agrees with the argument
that the West has been hypocritical in seeking the elimination of trade barriers in other
parts of the world, while maintaining its own barriers to trade. He also accepts the idea that
the West has been the driving force in an economic agenda that has furthered in its interest
while disadvantaging less developed parts of the world. In terms of the IMF, Stiglitz sees
several major changes since its creation at Bretton Woods in 1944. The IMF was created on
the basis of the belief that markets often market supremacy.

It was founded on the idea of the need to pressure developing countries to expand
economically ( e.g., increase expenditures, reduce taxes, lower interest rates –all designed to
stimulate the economy), but now it well provide funds to developing countries only if they”
engage in policies like cutting deficits, raising taxes, or raising taxes or, or raising interest
rates that a lead to a contraction of the economy” (Stiglitz 2002:12-13, italics added). Stiglitz
attributes this about-face in the IMF and the World Bank became missionary institutions
pushing neoliberal , “Washing Consensus” ideas such as market liberalization ( the removal
of barriers), fiscal austerity, and privatization on developing countries that were inclined to
go along with them because they badly needed funds from this institutions.

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Originally, the IMF was to maintain global stability by dealing with macroeconomic issues
such as a “government’s budget deficit, its monetary policy, its inflation, its monetary policy,
its inflation, its inflation, its trade deficit, its borrowing from abroad“ (Stiglitz 2002:14). In
short the task of the IMF was to be sure a nation was living within its means. The World bank
was supposed to eradicate poverty by dealing with structural issues such as “what the
country governments spent money on, the country’s financial institutions, its labor markets,
its trade policies.”

Still another criticism of the IMF is the lack of transparency in its decision making and its
operations. Those countries served by it do not know how it operates or the basis for its
decisions. Further, the IMF is not accountable to those nation-states.

Stiglitz offers a long list of more specific IMF errors and blunders:
1. The privatization of state-run systems (e.g., steel mills) was often done too quickly
and the new privatized businesses were often ineffective, in part because they
weren’t ready to operate on their own. As a result consumers suffered, as did
workers as privatization brought with it job loss. Privatization often also went hand-in
with corruption.
2. To push to liberalize financial and capital markets, and to reduce barriers to trade,
often hurt small emerging countries and contributed to the financial crisis of the
1990s.
3. The emphasis on foreign investment often adversely affected indigenous businesses
in less developed countries.
4. The IMF failed in the sequencing and pacing of the changes: “forcing liberalization
before safety nets were put in place, before there was adequate regulatory
framework before the countries could withstand the adverse consequences of the
sudden changes of the market sentiment that are part and parcel of modern
capitalism.
5. The IMF failed to deal with a variety of issues such as job creation, land reform,
improved education and health services, and helping workers adversely affected by
its policies.

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Other Important Economic Organizations
The Organization for Economic Cooperation and Development (OECD) is a broad group of,
at the moment, 30 developed nations. The OECD is "the most encompassing club of the
world's rich countries" (Ougaard 2007:914-71). While the OECD has little formal power, it is
highly influential.

The European Union (EU) is a product of the post-WWII era, as well as the Bretton Woods
era, and now encompasses 27 member states. It is the largest domestic market in the
developed world (soon to be surpassed by China), with over 500 million citizens. The Euro
Zone encompasses those nations in Europe that have adopted the euro as their basic
currency. Most, but not all nations that use the euro, are members of the EU. Some Western
European nations (e.g., Great Britain, Sweden, and Denmark) have never expected the euro,
and retain their traditional currencies. There is also growing opposition to the euro in some
of the nations that have accepted it (Italy, France, the Netherlands) on a variety of grounds
(e.g., it is believed to have led to an increase in prices and to have depressed economic
growth rates because of the policies of European Central Bank which sets policies for
EuroZone nations). The criticisms of the euro are mounting, and as I write, it is being
threatened by economic problems in Greece and looming difficulties in Portugal and Spain.

The North American Free Trade Agreement (NAFTA) came into effect on January 1, 1994. It
was based on the idea that the US, Canada, and Mexico were to eliminate most barriers to
trade and investment over the ensuing 15 years (Andersom 2007:887-91). The US, especially
under former President George W. Bush sought to expand the idea to include all 34
countries in the Western hemisphere except Cuba in the Free Trade Area of the Americas
(FTAA). This idea has not only caught on, but has also encountered increasing opposition
from Latin American leaders such as Hugo Chaves of Venezuela.

Mercosur, sometimes called the Southern Common Market, was created by the Treaty of
Asuncion in 1991 with the goal of a common market in South America by 1995 ( Roett 1999).
The Organization of Petroleum Exporting Countries (OPEC) was formed in 1960 and
included the major oil exporters of the day - Iran, Iraq, Kuwait, Saudi Arabia, and
Venezuela (there are now 11 members : Indonesia, Algeria, Libya, Nigeria, Qatar, and the
United Arab Emirates have been added). It was motivated by the comparatively low price

38


being paid for oil at the time and the fact that oil prices had long failed to keep up with
inflation. OPEC has succeeded in greatly increasing the price of oil and its member nations
have growth rich, some (e.g., Saudi Arabia) incredibly rich.

MULTINATIONAL CORPORATION (MNC)
By most accounts, the other major player in economic globalization (beyond the
nation-state and the organizations discussed above) is the multinational corporation (MNC).
Also of importance are transnational corporations (TNCs). While TNCs involve operations in
more than one country, MNCs operate in more than two countries. We will generally use the
term MNC in this book to encompass both MNCs and TNCs. There are many who believe
that the MNC has grown more powerful, perhaps much more powerful, than the
nation-state and any of the organizations described above that are based on nation-states.
For example, dela Dehesa (2006:85) argues: “We have to get used to the fact that, thanks to
the globalization process, companies rather than states will be the lead in g actors in the
world economy. "

There is no question that MNCs are increasingly important on the global scene. Adapting
Dicken's (2007:106) definition of a TNC, an MNC is "a firm that has the power to coordinate
and control operations" in more than two countries, "even if it does not own them.” This
means that they operate in an array of economic, political, social and cultural environments.
While MNCs have proliferated and grown in recent years, companies that operate, have
interests, and have activities outside a home country are not new,and this was exemplified
by, among others, the East India Trading Company and the Hudson's Bay Company.

Defined in this way, MNCs are hard to quantify, but if we rely on ownership data—a more
restrictive criterion than those posed in the definition above—there are about 61,000 MNCs
in the world today carrying out production through over 900,000 affiliates. They account for
about a tenth of the world's Gross national Product (GNP) and about a third of total world
exports. While there are many MNCs, the fact is that a relatively small number of "global
corporations" (e.g., Toyota and IBM) predominate. And the vast majority, 96 of the top 100,
is in the developed world (Dicken 2007). However, as we will see, MNCs from developing
countries are increasing in number and importance.

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MNC activity is usually measured by foreign direct investment (FDI). This involves
investments by one firm in another firm that exists abroad in a different nation-state, with
the intention of gaining control over the latter's operations. It can also involve setting up a
branch (subsidiary) operation in another country. FDI has grown substantially in recent
years and this is a major indication of the growth of MNCs. More than two-thirds of the
world's FDI is directed toward developed not less developed countries.

Another form of MNC activity is portfolio investment. This involves the purchase of equity in
companies in other countries, but the motivation is financial gain and not to obtain control
over those companies.

Why do companies become multinational or transnational? One set of reasons relates to
market-oriented investments made necessary by the geographic unevenness of markets. A
company may reach a saturation point in its domestic market by
● identifying new markets that require its direct presence,
● finding that, unless it becomes transnational or multinational, it will have its markets
restricted because of political regulations;
● finding a foreign market so idiosyncratic that it can deal with it only by being
physically present in it, or
● discovering that there are strong cultural and political reasons for it to be present in
other countries.

There are also reasons relating to market-oriented investment necessitated by the
geographic unevenness of assets. A company in these circumstances may invest in another
country in order to access natural and human resources. The latter can involve accessing
human resources with high skill and knowledge and or low-paid personnel with little in the
way of skill or knowledge whose attraction is their low cost. Dicken outlines various ways in
which corporations become transnational or multinational. One is “greenfield investment”
which involves the building of totally new facilities in another country. This is obviously
favoured by host countries, but is highly risky from the point of view of the MNC. A second is
merger and acquisition (e.g., the acquisition of America’s Chrysler Corporation by the
German Daimler-Benz- now dissolved). A third is strategic collaborations, which, while they
have existed for quite some time, have grown in number, increased in scale, and become

40


increasingly central to a firm’s transnational strategy. Strategic collaborations among
companies in different countries have various objectives, such as gaining access to specific
markets and technologies, sharing the risks associated with market entry, sharing other
costs and uncertainties, and achieving economies associated with synergy. There are, of
course, risks involved in this, such as losing control over key technologies and the great
complexity involved in running strategic collaborations.

However they are created, MNCs lead to the development of far more complex networks.
For a start, the firm’s internal network now needs to be tied into networks in other
countries. These larger , more complex networks are inherently more difficult to control.
There are difficulties involved in finding a balance between centralized control and local
sensitivity; economies of scale in production and responsiveness to local market conditions;
core and peripheral knowledge; and global integration and local responsiveness. Then there
are more specific issues such as the location of corporate headquarters (usually the home
country); core research and development centers (also usually the home country); sales and
marketing (usually dispersed globally); and production activities (also usually dispersed).

In terms of production activities, there are various possibilities:
● Globally concentrated production in a single location produces economies of scale,
but it maximize transportation costs and doesn’t make use of local expertise
● Production specifically for a local or national market limits economies of scale
● Production of a specialized product for a regional market (e.g. the EU)
● Segmenting production and locating different parts in different geographic locations,
producing a form of transnational vertical integration

There is great variation in MNCs, but interestingly, Dicken argues that few of them are
actually truly global. They are more likely to be regional (e.g . Europe, North America, or East
Asia). However, they do vary in terms of size and shape.

There are always tensions as well where MNCs are involved, including those with
nation-states, local communities, labor, and consumers and civil society organizations.
MNCs have also helped lead to the creation of counter-forces such as multi-scalar
regulatory systems (e.g. the WTO), international institutes of technical standards (e.g. the

41


ISO [International Organization for Standardization]), and the resurgence of the
nation-state.

While most observers emphasizes the power of MNCs and their increasing ascendancy over
the nation-state, Dicken demurs. He sees the nation-state as of continuing importance and
as having various advantage over the MNC (e.g. their control over continuous territories
versus the discontinuous territories under the MNC’s control). The Dicken, MNCs are not the
“unstoppable juggernauts” they are to other observers and critics, especially vis-à-vis the
nation-state. Dicken’s perspective also runs counter to the dominant view that the global
world is increasingly placeless or defined by non-places (Auge 1995; Ritzer 2007).

Dicken contends that as far as MNCs are concerned, place and geography still matter. He
contends that MNCs continue to evidence various characteristics traceable to their home
base and place of origins, including their cognitive, cultural, social, political, and economic
traits. As he puts it, no matter how transnational they become, MNCs continue to evince the
“aroma of native land.” Thus, he sees little evidence that these organizations are “converging
toward a single model” (Dicken 2007:135). He also rejects the view of various perspectives
that argue that MNCs throughout the world are becoming standardized, homogenized.

Transitional Capitalism
Leslie Sklair (200) made a distinction between two systems of globalization. Capitalist system
of globalization is now the predominant one. The other one is the socialist system. It is not
yet an existence but is indicated by current anti-globalization movements, especially those
oriented toward greater human rights throughout the world.

These antiglobalization movements came out of frustrations to the dominant system. The
capitalist system, as being argued, causes further inequality in the world heightens
environmental degradation.

Economic transitional practices are able to transcend geographical boundaries. This
eventually undermined the status of nation-states as the key players in a globalized system.
Although the nation-states remain important, Sklair focuses on transitional practices that
are able to cut across boundaries—including those created by states—with the implication

42


that territorial boundaries are of declining importance in capitalist globalization. As a
Marxist, Sklair accords priority to economic transnational practices, and it is the context that
the transnational—corporations—one of the central aspects of his analysis predominant.

The second transitional practice of great importance is political, and here, the transnational
capitalist class predominates. However, it is not made up of capitalists in the traditional
Marxian sense of the term; the transnational capitalist class does not necessarily own the
means of production. Sklair differentiates among four “fractions” among the transitional
capitalist class. (1) The local affiliates; (2) a state fraction composed of globalizing state and
interstate bureaucrats and politicians; (3) a technical fraction made up of globalizing
professionals; and (4) the consumerist fraction encompassing merchants and media
executives. This is obviously a very different group than Marx thought of when
conceptualizing the capitalist.

The third transnational is culture-ideology, here sklair accords great importance to the
culture-ideology of consumerism in capitalist globalization. Although the focus is on culture
and ideology, the emphasis of consumerism ultimately involves the economy by adding an
interest in consumption to the traditional concern with production and transnational
corporations in economic approaches in general and Marxian theories in particular. In this
realm, the ability to exert ideological control over people scattered widely throughout the
globe has increased dramatically, primarily through the greater reach and sophistication of
advertising and the media and the bewildering array of consumer goods that are marketed
by and through them.

As a Marxist, Sklair is interested not only in critically analyzing capitalist globalization but
also articulating an alternative to it and its abuses. He sees some promising signs in the
protectionism of some countries that see themselves as exploited by transnational
corporations. Also hopeful are new social movements such as the green movement seeking
a more sustainable environment and the various anti-globalization groups that have sprung
up in recent years. He is particularly interested in various human rights movements in
which, he believes, can be found the seeds of the alternative to capitalist
globalization—socialist globalization. He predicts that this and other movement will gain

43


momentum in the twenty-first century as they increasingly resist the ways in which
globalization has been appropriated by transnational corporations.

Process Questions
1. What is the relevance of Bretton Woods’ institutions such as the IMF and the World
Bank in today’s globalized world?

2. What does the history of the Bretton Woods tell us? How far shall we trust its
institutions given the criticism and blunders provided by Stiglitz?

3. How do you analyze the “global” nature of multinational corporations?

4. Examine the role of regional coalitions in the global economic system.

5. What do you think would be the role of the nation-state with respect to the changes
in the world economic system?

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Assignments
Do the following items:

1. Research on the Global Interstate System topics:
a. Political Globalization
b. Political Institution in International Relations
c. The Nation State
d. Civic Society
e. Global Civil Society
f. International Nongovernmental Organization (INGOS)

2. Answer the following:
a. Examine the interaction between the nation-state and civil society,
differentiating between local and global civil society.
b. Do civil society and INGOs strengthen or undermine the role of the
nation-state in international relations? Why?

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Topic 3: The Global Interstate System

Learning Outcomes
● explain the effects of globalization on governments,
● identify the institutions that govern international relations, and
● delineate informationalism from industrialism through analysis of real scenarios
depicting technological existence in the society.

Learning Activities

Introduction
The focal concern in this chapter is the political structures involved in globalization.
However, these structures, like all structures, are often better seen as flows or as
encompassing sets of flows. For example, a nation-state or a bureaucracy is often thought
of as a structure, but in the main it is the sum of the processes that take place within it. To
put this way, structures can be seen as “congealed flows.” In that sense, the bulk of this
chapter also deals with political processes (and flows). However, before we get to our focus
on political structures, we need to be more explicit about the political flows themselves.


Political Globalization
While the focus in this chapter will be on the development and nature of a wide range of
political structures relevant to globalization, there certainly are a number of separable
political flows of various sorts that are relevant to an understanding of contemporary
globalization. In fact, it could be argued that virtually all of the flows discussed throughout
this book are political and of great relevance to political structures of all sorts. Some are of
more direct political relevance than others.

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● The global flow of people, especially refugees and illegal immigrants, poses a direct
threat to the nation-state and its ability to control its borders.
● The looming crisis associated with dwindling oil and water supplies threaten to lead
to riots and perhaps insurrections that could lead to the downfall of extant
governments.
● The inability of the nation-state to control economic flows dominated by MNCs, as
well as the current economic and financial crisis that is sweeping the world, also
poses a profound threat to the nation-state (e.g., in Eastern Europe).
● Environmental problems of all sorts, especially those related to global warming, are
very likely to be destabilizing politically.
● Borderless diseases, especially malaria, TB, and AIDs in Africa, pose a danger to
political structures.
● War is the most obvious global flow threatening the nation-states involved, especially
those on the losing side.
● Global inequalities, especially the profound and growing North-South split, threaten
to pit poor nations against rich nations.
● Terrorism is clearly regarded as a threat by those nations against which it is waged,
hence, the so called “war on terrorism” in the US.

Thus, a significant portion of this book deals with political processes or with many processes
that are directly or indirectly related to politics. In addition, there is a discussion of various
efforts to deal with global problems, many of which are political in nature such as trade
protection and liberation and efforts to increase political transparency and accountability.

Finally, political structures initiate a wide range of global flows. Example of this is the
violence sponsored by Robert Mugabe’s government in Zimbabwe that led to the mass
migration of millions of people from the country.

Political Institutions in International Relations
This section will describe the different institutions that govern international relations. We
will begin with the nation-state with emphasis on its conceptualization from the link of its
two components: nation and state. The next discussion will be devoted to civil society and

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international nongovernmental organization (INGOs). How these actors interact with one
another shapes the global interstate system.

The Nation-State
The Treaty of Westphalia (1648)
ended the Thirty Years' War and the
Eighty Years' War in Europe and
instituted an international system
which recognized sovereign states at
its core. Thus, it is not sovereign
states that were new (absolutist
states, for example, had long existed),
but rather the recognition accorded them at Westphalia. The treaty was widely interpreted
as giving states the right to political self-determination, to be considered equal from a legal
point of view and as prohibiting them from intervening in the affairs of other sovereign
states. Critics of the traditional interpretation of Westphalia contend that none of these
things were inherent in the original treaty, but were read into it later by those who wanted
to buttress the state system. Furthermore, it is argued that this interpretation set in motion
an anarchic and conflictive relationship between states and perhaps set the stage for
interstate wars, especially WWI and WWII. Nevertheless, nation-state remained preeminent
until the current era of globalization when global flows began, at least in the eyes of many
observers (including mine), to undermine the nation-state (Hayman and Williams
2006:52-41).

The nation-state has two basic components: nation and state. Nation "refers to a social
group that is linked through common descent, culture, language, or territorial contiguity"
(Cerny 2007:854). Also important in this context is national identity, the "fluid and dynamic
form of collective identity, founded upon a community's subjective belief that the members
of the community share a set of characteristics that make them different from other
groups'' (Guibernau 2007:849-53). While the notion of a nation was highly circumscribed in
the Middle Ages from the seventeenth century on the idea of nation was broadened and
enlarge by a number of forces (political leaders, bureaucrats, the bourgeoisie, the

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proletariat, intellectuals, etc.) that pushed for "nationalism," a doctrine and/or political
movement that seeks to make the nation the basis of a political structure, especially a state.

The state emerged as a new institutional form in the wake of the demise of the feudal
system. The state offered a more centralized form of control (in comparison to, say,
city-states) and evolved an organizational structure with "relatively autonomous
office-holders outside other socioeconomic hierarchies, with its own rules and resources
increasingly coming from taxes rather than from feudal, personal, or religious obligations"
(Cerny 2007:855). Also coming to define the state was its claim to sovereignty. This involved
the ability to engage in collective action both internally such as collecting taxes and
externally such as dealing with other states, to engage in warfare, among others. The
nation-state can therefore be seen as an integration of the subgroups that define
themselves as a nation with the organizational structure that constitutes the state.

Civil Society
While civility and civil society have ancient roots and
examples (e.g., in Aristotle), John Keane (2003) traces what
we now consider civil society to the appearance of the West
on the global stage beginning around 1500. Until the
nineteenth century (Lipshutz 2007:304-8), civil society was
not distinguished from a state dominated by laws. The
philosopher G. W. F. Hegel played a key role in redefining
civil society as that which exists between the family and the
state; a realm that is not only separated from them, but one
where an individual can participate directly in various social institutions. To Hegel, like Marx,
Engels and Keane, the economy was considered part of civil society.

The major figure in social theory associated with the idea of civil society is Alexis de
Tocqueville. Tocqueville lauded the early American propensity to form a wide range of
associations that were not political in nature and orientation. Such civil associations also
allowed people to band together and act. Without such associations, they would be isolated
and weak in large-scale contemporary societies (Tocqueville 1825-1840/1969:513,515).

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The distinction between the market and civil society is a twentieth-century innovation
usually associated with the Italian Marxist thinker Antonio Gramsci (1192). In his view, to
challenge the hegemony of the state (controlled by the market which, in turn, dominated
the family), the opposition had to gain positions in civil society in order to generate their
own ideas to counter the hegemonic ideas emanating from the capitalist economic system.
While the West often conquered the world through uncivilized, even violent means, it "gave
birth as well to modern struggles for liberty of the press, written constitutions, religious
toleration, new codes of 'civil manners' (often connected with sport), nonviolent
power-sharing, and talk of democracy and human rights, whose combined 'ethos' gradually
spawned the growth of civil society institutions" (Keane 2003:44). A robust civil society was
already in existence by the nineteenth and early twentieth centuries (e.g., peace societies,
cooperatives, workers' movements), but it was soon set back dramatically by the two world
wars. It was largely in the aftermath of WWII that the modern civil society movement took
shape and expanded dramatically.

Mary Kaldor (2003, 2007:153-7), accords central importance to the 1970s and 1980s,
especially in Latin America and Eastern Europe. In both regions, there was opposition to
military dictatorship and efforts to find an autonomous and self-organizing base outside of
the state in order to oppose the military. It was also during this period that civil society
became increasingly global as improved travel and communication made linkages among
various civil society groups throughout authorities and were able to create a global political
space for themselves where they argued for, and helped bring about international
agreements on such issues as human rights.

Of great importance in the 1990s was the emergence of transnational networks of activists
who came together on particular issues, including landmines, human rights, climate change,
dams, HIV/AIDS, or corporate responsibility (Kaldor 2007:155). Much of the contemporary
globalization from below or “alter-globalization,” movement is now an integral part of global
civil society.

Following Kalor (2007:154), civil society is defined as the process through which individuals
negotiate, argue, struggle against, or agree with each other and with the centers of political
and economic authority. It is a realm in which people can engage each other more or less

50


directly and in which they can, among other things, analyze and criticize their political and
economic institutions. People can do this, and thereby act publicly through “voluntary
associations, movements, parties, and unions” (Kaldor 2007:154). Thus, civil society involves
both settings and actions that take place within those settings. It also represents an ideal
toward which many people and groups aspire-an active, vital, and powerful civil society that
can influence, and act as a counterbalance to, potent forces in the realm of the polity and
the economy (Seckinelgin 2002:357-76). It is particularly the case that civil society stands as a
counterbalance and an alternative to both the nation-state and the economic market,
especially the capitalist market.

While historically civil society was nation-state-centered, that is, linked to groups and actions
within states, in more recent years it has been associated with more global actions and
therefore with a somewhat different set of organizations including “social movements,
nongovernmental organizations(NGOs), transnational networks, religious organization, and
community groups”(Kaldor 2007:153). In other words, we have moved increasingly toward
the notion of a global civil society (Alexander 2006), although civil society remains a force
within states and societies, as well (Smith and West 2005:621-52).

Global Civil Society
John Keane (2003:8) offers a definition of global civil
society as a dynamic nongovernmental system of
interconnected socio-economic institutions that straddle the
whole earth, and that have complex effects that are felt in
its four corners. Global civil society is neither a static object
nor a fait accompli. It is an unfinished project that consists
of sometimes thick, sometimes thinly stretched networks,
pyramids and hub-and-spoke clusters of socio-economic
institutions and actors who organize themselves in new
ways. These nongovernmental institutions and actors tend
to pluralize power and to problematize violence; consequently, their peaceful or civil effects
are felt everywhere, here and there, far and wide, to and from local areas, through wide
regions, to the planetary level itself. This definition emphasizes five tightly linked
characteristics of global civil society: it is nongovernmental, a form of society composed of

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interlinked social processes, oriented to civility (nonviolence), pluralistic (including the strong
potential to reduce conflict), and global.

Keane gives us a good feel for global civil society, as well as both its unfinished and varied
character. However, one of the things that sets Keane’s view on civil society apart is his
argument that the economic market is deeply implicated in civil society. While many see civil
society as distinct from both the nation-state and the market, Keane (2003:76) puts forth the
‘“o market, no civil society’ rule.”

Civil society could not survive without the market, money, and the money economy. Indeed,
there is no clear dividing line between civil society and the market; the market is embedded
in civil society and vice versa. For example, those who work in the market draw upon the
civil society’s norms of sociability such as “punctuality, trust, honesty, reliability, group
commitment and non-violence” (Keane 2003:77).

Keane (2003:78) draws three basic conclusions from this relationship:
1. Market is an intrinsic empirical feature, a functionally intertwined prerequisite, of the
social relations of actually existing global civil society.
2. Global civil society as we know and now experience it could not survive for more
than a few days without the market forces unleashed by turbo capitalism.
3. The market forces of turbo capitalism could themselves not survive for a day without
other civil society institutions, like households, charities, community associations and
linguistically shared social norms like friendship, trust and cooperation.

Civil society is not a reality that is ever, or could ever be, completed. Rather, it is an ongoing
and ever-present project. This is especially the case in the era of globalization where civil
societies that were created in nation-state now must be extended to the global level. In fact,
it could be argued that without a global civil society, the promises of national civil society
may die. The challenges and the dangers of today’s world have become global with the
result that civil society must itself become global if it is to have any chance of countering
them and, more generally, of creating a true civil society.

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In practice, civil society has been dominated for decades by critical agents and agencies, but
more recently neoliberalism and neoliberal organizations have picked up on the idea to
create organizations (NGOs), often funded by government and international agencies
oriented to reforming the market and government. Some see these NGOs as compromising
the very notion of civil society and argue that they should not be thought of as part of it.

A variety of movements and organizations have come together since the 1990s to become
significant components of the global civil society. One type involves various groups of
transnational activists participating in efforts to deal with global warming, AIDs, landmines,
and so forth. Then, there is the global alter-globalization movement as well as the anti-war
movement, especially its most recent iterations spurred by the invasion of Iraq. Of growing
significance in the realm of global civil society is the wide range of organizations dealing
primarily with issues that relate to the environment, human rights, and economic
development. Among the most notable of these are INGOS, CARE International, Worldwide
Fund for Nature, Greenpeace, Amnesty International, Friends of the Earth, Medecins Sans
Frontieres, Oxfam, and so on. Perhaps of greatest importance today in thinking about civil
society are groups that represent the poor, especially those in less developed countries, and
their efforts to improve the position of the poor within the global economy.

International Nongovernmental Organization (INGOS)
It is an international not-for-profit organization that performs public functions but is not
established or run by nation-states. INGOs are advocates for any number of things, but they
also “routinely influence the domestic policies of states, participate in multilateral forums
and institutions, promote interstate cooperation, and facilitate political participation on the
part of governments and the public” (Warkentin 2007:883-7).

The first modern INGOs are traceable to the nineteenth century (the International Red Cross
was founded in Switzerland in 1865), but they have boomed in recent years. As their
number, influence, and power have grown, they have become highly controversial. Some
see them as the harbingers of a future democratic civil society. Others are highly critical of
them. While many INGOs have grown highly influential, their power does not involve
rational-legal authority (Weber 1921;1968) such as having their leadership elected, but
rather comes from rational-moral authority (Thomas 2007:84-102).

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This stems from the fact that they claim that they represent and express universal human
interest, are democratic both as organizations and in terms of their goals, and are
committed to global progress and the creation of a more rational world. Their great moral
power also comes from their neutrality: their disinterestedness. At the most general level,
they serve to frame global policy issues in areas such as women's rights, population,
education, and the environment. As moral powers, they exist less as actors on the world
stage, and more to advise states, firms, and individuals on how they ought to act on various
issues and under an array of circumstances. INGOs have several characteristics that make
them valuable in the global arena. First, they are often grassroots organizations and
therefore are much more in touch with the needs and interest of their membership than
larger, more formal, and more bureaucratized organizations associated with nation-states
or the international community. Second, they are often more effective in achieving their
goals than other types of organizations, for example, they are often able to get relief faster
to people in poor countries or to victims of disasters. Third, they are very good at garnering
media attention in efforts to force more formal organizations into action. One of the most
notable successes of INGOs was an international treaty spearheaded by the International
Campaign to Ban Landmines (ICBL).

The treaty was signed in 1997 by 122 nations, which agreed to stop selling and using
landmines. On the surface, the fact that so many nation-states were involved in signing the
treaty would seem to indicate that this was an accomplishment linked to the old
state-centered system. In fact, however, much of the credit went to the approximately one
thousand NGOs that had been involved in lobbying in about 60 countries for such a treaty
(Bond 2000). However, there are negative sides to the growth of INGOS and civil society.

Fundamentally, INGOs are special interest groups and therefore they may not take into
consideration wider sets of concerns and issues. In addition, they are not democratic, often
keep their agendas secret, and are not accountable to anyone other than their members.
They are elitist (many involve better-off and well-educated people from the
North)-undemocratic-organizations that seek to impose inappropriate universal plans on
local organizations and settings. Thus, they have the potential to be "loose cannons" on the
global stage. They are seen as annoying busybodies that are forever putting their noses in
the business of others (Thomas 2007:84-102).

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They often pander to public opinion and posture for the media both to attract attention to
their issues and to maintain or expand their power and membership. As a result, they may
distort the magnitude of certain problems (e.g., overestimating the effects, and misjudging
the causes of an oil spill) in order to advance their cause and interests. Their focus on one
issue may adversely affect the interest in, and ability to deal with, many other important
issues. The nature of the focus, and indeed the very creation, of an INGO may be a function
of its ability to attract attention and to raise funds. As a result, other worthy, if not more
worthy issues (e.g., soil erosion, especially in Africa) may fail to attract much attention and
interest. In some cases, well-meaning INGOs conflict with one another, such as those
wishing to end certain practices (e.g. logging) versus those that see those practices as
solutions (e.g. logging producing wood as a sustainable resource that is preferable to fossil
fuels).

The North's control over INGOs has actually increased, leading to questions about their
relevance to the concerns of the South. However, perhaps the strongest criticism of INGOs
is that they "seem to have helped accelerate further state withdrawal from social provision"
(Harvey 2006:52). In that sense they can be seen as neo-liberalism's Trojan horses,
furthering its agenda while seeming to operate against some of its worst abuses. Thus,
global civil society is extremely broad and includes organizations and parties that may well
be in conflict with one another (e.g., the Western neoliberals who dominate the major
INGOs and the often non-Western critics of neoliberalism, including radical religious
fundamentalist.

Globalism
Globalism, at its core, seeks to describe and explain nothing more than a world which is
characterized by networks of connections that span multi-continental distances. Without
science, neither globalism nor globalization would be conceivable; without technology they
would not be practical possibilities. The extent to which the internal ethics of science and
the codes of behavior of various engineering professions influence globalism and
globalization, or the degree to which independent ethical assessments should be brought to
bear on all science, technology, and globalist synergies, remains open to critical discussion.
What follows is an analysis that aims to provide a background for such considerations.

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The terms globalism and globalization came into use during the last half of the twentieth
century. The question of when, and by whom, is contentious. But irrespective of origins the
two terms are used in distinct ways. Globalization refers to a multidimensional economic
and social process beginning in the late 1970s and early 1980s and that embraces a variety
of interlinked economic, communicational, environmental, and political phenomena.
Globalism, although it has older roots as a synonym for internationalism, has come to be
used as the name of a broad ideological commitment in favor of the process of
globalization—that is, of a view that sees the process of globalization as entirely or
predominantly positive in its implications for humankind (Steger 2002).

Globalists are people who wish the process of globalization to continue, and indeed
intensify, although they may also wish to have it politically regulated or controlled in various
ways. Globalists are often (though not always) also convinced that globalization, whatever its
implications for human welfare, is an inevitable process that cannot, and should not, be
reversed. They are often contrasted with "localists," who seek to escape or overcome the
problems posed by globalization through small-scale forms of economic and cultural
development and political organization that minimize involvement in the global economy
(Mandle 2003).

In short then, there are theorists and writers on globalization both for and against the
process they are analyzing, but those in favor of the process are generally called "globalists"
or advocates of "globalism." In the early twenty-first century, enthusiasts for globalization do
not call themselves "globalists" (this terminology is used only by globalization's opponents),
although there is the potential for this to change as the debate unfolds further.

Globalization: Its Characteristics
There are innumerable definitions of the term globalization in the academic literature, but
all, in one way or another, refer to essentially the same phenomena.
These are as follows:
● The increased depth of economic integration or interdependence in the world
economy as a whole. Increased depth here usually refers to the integration of
different parts of the world and different working populations in the world in the
process of economic production itself (Dicken 2003).

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● The central role played by electronic means of communication and information
transmission in facilitating this new deep integration of the world economy.
● The much increased importance of global markets in both money and capital in the
world economy as a whole (Thurow 1996).
● The historically unprecedented scale of international population migration occurring
in the world economy in response (primarily) to new work opportunities created by
the development of a genuinely global economy. Sharply increased economic
inequalities both within and between different parts of the globe occurring primarily
as a result of the very social and spatial "unevenness" of the globalization process.

Globalization: Its Causes
There is broad unanimity on the origins and causes of globalization. As an economic process
globalization dates from the mid- or late 1970s when the postwar "long economic boom"
came to an end. The ending of the boom, and the initiation of a much slower growth
trajectory for the world economy as a whole, created much more competitive conditions for
all firms operating in that economy. The most common firm responses to these heightened
competitive conditions were to
● reduce labor costs by increased automation and "technologization" of production,
● subcontract or "outsource" design, transport, customer service, and even some
managerial functions to "independent" consultancy or other firms, thereby reducing
"core" labor and payroll costs, and
● transfer labor-intensive production activities, that could not be automated to lower
wage regions, either in the "home" country or outside the home country altogether.

In practice, therefore, debates and disputes over globalization are most often focused, not
on entirely "undoing" its economics, but on the possibility and desirability of politically
regulating it so as to reduce its economic volatilities, inequalities, and negative
environmental impacts. The central issue at the heart of such debates (aside from whether
such regulation is desirable or possible at all) is whether nation-states can continue to be
the prime political regulators of the global economy or whether globalization has passed
beyond the regulatory capacity of states, so that the task must be turned over to
supranational economic and political bodies such as the International Monetary Fund (IMF),
World Bank, World Trade Organization(WTO), and International Labor Organization (ILO).

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But if the latter are to do so, many believe that their responsibilities and powers will have to
be enhanced. Advocates of the supranational regulation of globalization are often (though
not always) also advocates of a more or less radical restructuring of such bodies in order to
make them more genuinely responsive to global public opinion and not simply to the views
and preferences of the richest and most powerful states in the world (Stiglitz 2002).

The latter notion recalls the original post-World War II understanding of globalism as a
promotion of internationalism in response to the threat of nuclear warfare. Proposals for
the international control of nuclear weapons were, for instance, often promoted and
stigmatized as one-worldism. To what extent, one may ask, were mid-twentieth century
efforts such as the creation of the United Nations and the formulation of the Universal
Declaration of Human Rights the foundations for subsequent economic globalization or
institutions and ideals that may help guide it.

INFORMATIONALISM
Technology, understood as material culture, is a fundamental dimension of social structure
and social change (Fischer, 1992: 1-32). Technology is usually defined as the use of scientific
knowledge to set procedures for performance in a reproducible manner. It evolves in
interaction with the other dimensions of society, but it has its own dynamics, linked to the
conditions of scientific discovery, technological innovation, and application and diffusion in
society at large. Technological systems evolve incrementally, but this evolution is
punctuated by major discontinuities, as Stephen J. Gould convincingly argued for the history
of life (Gould, 1980).

These discontinuities are marked by technological revolutions that usher in a new
technological paradigm. The notion of paradigm was proposed by Thomas Kuhn (1962) to
explain the transformation of knowledge by scientific revolutions, and imported into the
social and economic formations of technology by Christopher Freeman (1988) and Carlota
Perez (1983).

A paradigm is a conceptual pattern that sets the standards for performance. It integrates
discoveries into a coherent system of relationships characterized by its synergy that is by
the added value of the system vis a vis its individual components. A technological paradigm

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organizes a series of technological discoveries around a nucleus, and a system of
relationships that enhance the performance of each specific technology.

Informationalism is the technological paradigm that constitutes the material basis of early
21st century societies. Over the last quarter of the 20th century of the common era it
replaced and subsumed industrialism as the dominant technological paradigm.
Industrialism, associated with the Industrial Revolution, is a paradigm characterized by the
systemic organization of technologies based on the capacity to generate and distribute
energy by human-made machines without depending on the natural environment - albeit
they use natural resources as an input for the generation of energy. Because energy is a
primary resource for all activities, by transforming energy generation, and the ability to
distribute energy to any location and to portable applications, humankind became able to
increase its power over nature, taking charge of the conditions of its own existence (not
necessarily a good thing, as the historical record of 20th century barbarian acts shows).

Around this energy nucleus of the industrial revolution, clustered and converged
technologies in various fields, from chemical engineering and metallurgy to transportation,
telecommunications, and ultimately life sciences and their applications. A similar
structuration of scientific knowledge and technological innovation is taking place under the
new paradigm of informationalism. To be sure, industrialism does not disappear. It is
subsumed by industrialism.

Informationalism presupposes industrialism, as energy, and its associated technologies, are
still a fundamental component of all processes. Informationalism is a technological
paradigm based on the augmentation of the human capacity of information processing and
communication made possible by the revolutions in microelectronics, software, and genetic
engineering. Computers and digital communications are the most direct expressions of this
revolution. Indeed, microelectronics, software, computation, telecommunications, and
digital communications at large, are all components of one same and integrated system.
Thus, in strict terms, the paradigm should be called “electronic
informational-communicationalism”. Reasons of clarity and economy advise however, to
keep the concept of informationalism, as it is already widely employed, and resonates in
close parallel to industrialism. Because information and communication are the most

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fundamental dimensions of human activity and organization, a revolutionary change in the
material conditions of their performance affects the entire realm of human activity.

The Network Society
A network society is a society whose social structure is made of networks powered by
microelectronics-based information and communication technologies. By social structure I
understand the organizational arrangements of humans in relationships of production,
consumption, reproduction, experience, and power expressed in meaningful
communication coded by culture. A network is a set of interconnected nodes. A node is the
point where the curve intersects itself.

A network has no center, just nodes. Nodes may be of varying relevance for the network.
Nodes increase their importance for the network by absorbing more relevant information,
and processing it more efficiently. The relative importance of a node does not stem from its
specific features but from its ability to contribute to the network´s goals. However, all nodes
of a network are necessary for the network´s performance. When nodes become
redundant or useless, networks tend to reconfigurate themselves, deleting some nodes, and
adding new ones. Nodes only exist and function as components of networks. The network is
the unit, not the node. “Communication networks are the patterns of contact that are
created by flows of messages among communicators through time and space” (Monge and
Contractor, 2003: 39) So, networks process flows. Flows are streams of information between
nodes circulating through the channels of connection between nodes. A network is defined
by the program that assigns the network its goals and its rules of performance. This
program is made of codes that include valuation of performance and criteria for success or
failure. To alter the outcomes of the network a new program (a set of compatible codes) will
have to be installed in the network—from outside the network.

Networks cooperate or compete with each other. Cooperation is based on the ability to
communicate between networks. This ability depends on the existence of codes of
translation and interoperability between the networks (protocols of communication), and on
access to connection points (switches). Competition depends on the ability to outperform
other networks by superior efficiency in performance or in cooperation capacity.

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Competition may also take a destructive form by disrupting the switchers of competing
networks and/or interfering with their communication protocols.

Networks work on a binary logic: inclusion/exclusion. Within the network, distance between
nodes tends to zero, as networks follow the logic of small worlds´ properties: they are able
to connect to the entire network and communicate networks from any node in the network,
on the condition of sharing protocols of communication. Between nodes in the network and
outside the network, distance is infinite, since there is no access unless the program of the
network is changed. Thus, networks are self-reconfigurable, complex structures of
communication that ensure at the same time the unity of the purpose and the flexibility of
its execution, by the capacity to adapt to the operating environment. Networks, however,
are not specific to 21st century societies or, for that matter, to human organization.
Networks constitute the fundamental pattern of life, of all kinds of life. As Fritjof Capra
writes “the network is a pattern that is common to all life. Wherever we see life, we see
networks” (2002: 9).

In social life, social networks analysts have investigated, for a long time, the dynamic of
social networks at the heart of social interaction and the production of meaning, leading to
the formulation of a systematic theory of communication networks (Monge and
Constructor, 2003). Furthermore, in terms of social structure, archeologists and historians of
antiquity have forcefully reminded us that the historical record shows the pervasiveness
and relevance of networks as the backbone of societies, thousands of years ago, in the most
advanced ancient civilizations in several regions of the planet. Indeed, if we transfer the
notion of globalization into the geography of the the ancient world, as determined by
available transportation technologies, there was globalization of a sort in antiquity, as
societies depended for their livelihood, resources, and power, on the connectivity of their
main activities to networks transcending the limits of their locality (La Bianca, ed. 2004).

The Genesis of the Network Society
Every new social structure has its own genesis, dependent on spatio-temporal contexts.
Naturally, there is a relationship between the historical process of production of a given
social structure, and its characteristics. However, it is analytically possible to analyze this
social structure as a given, without considering in detail the processes that led to its

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upbringing. In fact, this is the option taken in this chapter, that is focused on the theory of
the network society rather than on its history. Nonetheless, I will summarize some of the
analysis of the genesis of the network society, presented in my earlier writings (Castells,
1996, 2000a, 2000b) with one specific purpose: to dispel the notion that either technology or
social evolution led inevitably to the network society, as the later incarnation of modernity,
in the form of postmodernity, or as information/knowledge society as the natural outcome
of a long evolution of the human species.

We have ample evidence that there is no predetermined sense of history, and that every
time and every power, claims ethnocentrically and historicentrically its right to be the
supreme stage of human evolution. What we observe throughout history is that different
forms of society came and went by accident, internal self-destruction, serendipitous
creation, or, more often, as the outcome of largely undetermined social struggles. True,
there has been a long term trend towards technological development that has increased the
mental power of humankind over its environment. But the jury is still out to judge the
outcome of such process measured in terms of progress, unless we consider minor issues
the highly rational process of mass murder that led to the holocaust, the management of
large scale incarceration that created gulag out of the hopes of workers’ liberation, the
nuclear destruction of Hiroshima and Nagasaki to finish off an already vanquished nation,
or the spread of AIDS in Africa while pharmaceutical corporate labs and their parent
governments were discussing the payment of their intellectual property rights.

And if we remain in the analytical ground, nothing predetermined the trajectory taken by
the information and communication technology revolution. Personal computers were not in
the mind of governments and corporations at the onset of the revolution: people did it. And
the crucial technology of the network society, the Internet, would have never come to be a
global network of free communication if ATT had accepted in 1970 the offer of the Defense
Department to give it free to that corporation; or if Vint Cerf and Robert Kahn would have
not diffused over the net the source code of the IP/TCP protocols on which the Internet is
still based.

Historical evolution is an open ended, conflictive process, enacted by subjects and actors
that try to make society according to their interests and values, or more often, produce

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social forms of organization by resisting the domination of those who identify social life with
their personal appetites enforced through violence. So, how did the network society come
to be? At its source there was the accidental coincidence, in the 1970s, of three independent
processes, whose interaction constituted a new technological paradigm, informationalism,
and a new social structure, the network society, inseparably intertwined.

These three processes were (1) the crisis and restructuring of industrialism and its two
associated modes of production, capitalism and statism; (2) the freedom-oriented, cultural
social movements of the late 1960s and early 1970s; and (3) the revolution in information
and communication technologies, as described above. Given the analytical purpose of this
chapter I will not enter in the detail of the analysis of these three complex historical
processes, taking the liberty to refer the reader to earlier writings on the matter.

Technology, Economy, and Culture
The effects of technological change on the global economic structure are creating immense
transformations in the way companies and nations organize production, trade goods, invest
capital, and develop new products and processes. Sophisticated information technologies
permit instantaneous communication among the far-flung operations of global enterprises.
New materials are revolutionizing sectors as diverse as construction and communications.
Advanced manufacturing technologies have altered long-standing patterns of productivity
and employment. Improved air and sea transportation has greatly accelerated the
worldwide flow of people and goods.

All this has both created and mandated greater interdependence among firms and nations.
The rapid rate of innovation and the dynamics of technology flows mean that comparative
advantage is short-lived. To maximize returns, arrangements such as transnational mergers
and shared production agreements are sought to bring together partners with
complementary interests and strengths. This permits both developed and developing
countries to harness technology more efficiently, with the expectation of creating higher
standards of living for all involved.

Rapid technological innovation and the proliferation of transnational organizations are
driving the formation of a global economy that sometimes conflicts with nationalistic

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concerns about maintaining comparative advantage and competitiveness. It is indeed a time
of transition for firms and governments alike. This book provides a broad overview of these
issues and seeks to shed light on such areas as the changing nature of international
competition, influences of new technologies on international trade, and economic and social
concerns arising from differences in national cultures and standards of living associated
with adoption and use of new technologies.

Today, globalization is constant and even irreversible. Globalization influences changing
cultural patterns too. In addition, there is a mutual penetration of various trends in art and
their exchange. Globalization describes the acceleration of the integration of nations into
the global system. It contributes to the expansion of cultural ties between the peoples and
human migration. But there is a disadvantage too. Preferring a unified type of art,
unfortunately, is sometimes forgotten in their own culture. Young people no longer take an
interest in their own culture. In addition, less attention is paid to the development of the art
of the country in its own unique way. Art also begins to serve the interests of the economic
market. In connection with this, it becomes important to study the interaction processes of
globalization and culture.

The concept of globalization is in modern science the most popular term for the analysis of
social processes. The term “globalization” in sociology refers to a broad range of events and
trends: the development of world ideologies, intense struggle for the establishment of world
order; spike in the number and influence of international organizations, the weakening of
the sovereignty of nation states, the emergence and development of transnational
corporations, the growth of international trade, intensive mass migration and the formation
of multicultural communities, the creation of planetary mass media and the expansion of
Western culture in all regions of the world, etc. The analysis of relevant theories of
globalization trends shows that they have become a kind of synchronous social change in
the early - mid XX century, and there was this transformation so that it can be characterized
as a social and cultural shift (Arystanbekova, 2007). The last decade of XX and beginning of
XXI centuries, characterized by major events in international relations, which affected all the
European and Eurasian region. The ends of the «cold war», the emergence of a unipolar
world, the new world order of globalization and the development of standards for the

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United States and other Western countries have wrought profound changes in the political
situation in Europe and the world in general.

Globalization, as an integration event, as the main line and the trend of world development
is an objective process. This groove at the global level information, financial, economic,
trade and exchange, and this process of global economic, political and cultural integration
and unification (Lebedeva, 2007). The main consequence of this is the international division
of labor, the international movement of capital, human and industrial resources,
standardization of legislation, economic and technological processes, as well as
convergence and fusion of cultures of different countries. This is an objective process that is
systemic, that is, covering all aspects of society. As a result of globalization, the world is
becoming more connected and more dependent on all his subjects. Is the increase in the
number of common groups of problems, and expanding the number and types of
integrating subjects? Background study is determined by several factors, among which, first
of all, you need to call that globalization is today a determining factor in the world's
economic, political and cultural development. It covers the most important processes of
social and economic development in the world, helping to accelerate economic growth and
modernization, and cultural exchange. At the same time, globalization creates new
contradictions and problems in the world economy. Today, all countries of the world are
covered in varying degrees of globalization. One of the areas in which activity showed the
impact of globalization is culture.

Technology and culture are two forces that greatly influence one another. As new
technology is introduced into a society, the culture reacts in a positive or negative way and is
thus changed forever. Consequently, as cultures change so does the technology they
develop. “Anthropologists have noted that culture consists of all learned beliefs and
behaviors, the rules by which we order our lives, and the meanings that human beings
construct to interpret their universes and their place in them” (Robbins, 2008). The
technology created to make life better often has negative effects on cultures even if it
initially appears to provide benefits. Ultimately, advances in technology directly affect how
cultures evolve; thus, when cultures evolve, they tend to create new technology.

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Process Questions
1. Examine the interaction between the nation state and civil society, differentiating
between local and global civil society.

2. Do civil society and INGOs strengthen or undermine the role of the nation-state in
international relations? Why?

3. Is the civil society truly separated from the market? Can its "global" feature aid in its
separation from the market or not?

4. Compare and contrast globalism and informationalism.

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Assignments
1. Do advance reading on the following topics:
a. International Organization
b. The United Nations
c. Challenges of the United Nations

2. Then answer the following questions:
a. Why is global governance multi-faceted?
b. How do international organizations take on “lives of their own?”
c. What are the challenges faced by the United Nations in maintaining global
security

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Topic 4: The United Nations and Contemporary Global

Governance

Learning Outcomes
● define global governance,
● identify the roles and functions of the United Nations, and
● determine the challenges of global governance in the twenty-first century.

Learning Activities

Introduction
Although many internationalists like Bentham and Kant imagined the possibility of a global
government, nothing of the sort exists today. There is no one organization that various
states are accountable to. Moreover, no organization can militarily compel a state to obey
predetermined global rules. There is, however, some regularity in the general behavior of
states. For example, they more or less follow global navigation routes and more often than
not respect each other’s territorial boundaries. Moreover, when they do not- like when
Russia invaded Crimea in 2014- it becomes a cause for global concern and debate. The facts
that state in an international order continue to adhere to certain global norms means that
there is a semblance of world order despite the lack of a single world government. Global
governance refers to the various intersecting processes that create this order.

There are many sources of global governance. States sign treaties and form organizations,
in the process legislating public international law (international rules that govern
interactions between states as opposed to, say, private companies). International
non-governmental organizations (NGOs), though not having formal state power, can lobby
individual states to behave in a certain way (for example, an international animal protection
NGO can pressure governments to pass animal cruelty laws). Powerful transnational
corporations can likewise have tremendous effects on global labor laws, environmental

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legislation, trade policy, etc. even ideas such as the need for “global democracy” or the
clamor for “good governance” can influence the ways international actors behave.
One lesson will not be able to cover the various ways global governance occurs. As such, this
lesson will only examine how global governance is articulated by intergovernmental
organizations. It will focus primarily on the United Nations (UN) as the most prominent
intergovernmental organization today.


What Is an International Organization?
When scholars refer to groups like the UN or institutions like the IMF and the World Bank
(see lesson 2), they usually call them international organizations (IOs). Although
international NGOs are sometimes considered as IOs, the term is commonly used to refer to
international intergovernmental organizations or groups that are primarily made up of
member-states.

One major fallacy about international organizations is that they are merely amalgamations
of various state interests. In the 1960s and 1970s, many scholars believed that IOs were just
venues where the contradicting, but sometimes intersecting, agendas of countries were
discussed- no more than talk shops. What has become more evident in recent years,
however, is that IOs can take on lives of their own. For example, as seen in lesson 2, the IMF
was able to promote a particular form of economic orthodoxy that stemmed mainly from
the beliefs of its professional economists. IOs can thus become influential as independent
organizations. International relations scholars Michael N. Barnett and Martha Finnemore
listed the following powers of IOs.

First, IOs have the power of classification. Because IOs can invent and apply categories, they
create powerful global standards. For example, it is the UN High Commissioner for Refugees
(UNHCR) that defines what a refugee is. And since states are required to accept refugees
entering their borders, this power to establish identity has concrete effects.

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Second, IOs have the power to fix meanings. This is a broader function related to the first.
Various terms like “security” or “development” need to be well-defined. States,
organizations, and individuals view IOs as legitimate sources of information. As such, the
meanings they create have effects on various policies. For example, recently, the United
Nations has started to define security as not just safety from military violence, but also
safety from environmental harm.

Finally, IOs have the power to diffuse forms. Norms are accepted codes of conduct that may
not be strict law, but nevertheless produce regularity in behavior. IOs do not only classify
and fix meanings; they also spread their ideas across the world, thereby establishing global
standards. Their members are, as Barnett and Finnemore emphasized, the “missionaries” of
our time. Their power to diffuse norms stems from the fact that IOs are staffed with
independent bureaucracies, who are considered experts in various fields. For example,
World Bank economists come to be regarded as experts in development and thus carry
some form of authority. They can, therefore, create norms regarding the implementation
and conceptualization of development projects.

Because of these immense powers, IOs can be sources of great good and great harm. They
can promote relevant norms like environmental protection and human rights. But, like other
entrenched bureaucracies, they can become sealed-off communities that fail to challenge
their beliefs. For example, the Nobel Prize winning economist Joseph Stiglitz famously
criticized the IMF for using a “one-size-fits-all” approach when its economists made
recommendations to developing countries.

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The United Nations

Fig. 2 The main headquarters of the United Nations in New York

Having examined the powers, limitations, and weaknesses of IOs, the spotlight will now fall
on the most prominent IO in the contemporary world, the United Nations (UN). After the
collapse of the League of Nations at the end of World War II, countries that worried about
another global war began to push for the formation of a more lasting international league.
The result was the creation of the UN. Although the organization is far from perfect, it
should be emphasized that it has so far achieved its primary goal of averting another global
war. For this reason alone, the UN should be considered a success.

The UN is divided into five active organs. The General Assembly (GA) is UN’s “main
deliberative policymaking and representative organ.” According to the UN charter:
“Decisions on important questions, such as those on peace and security, admission of new
members, and budgetary matters, require a two-thirds majority of the General Assembly.

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Decisions on other questions are done by simple majority. Annually, the General Assembly
elects a GA President to serve a one-year term of office.” All member states (currently at
193) have seats in the GA. The Philippines played a prominent role in the GAs early years
when Filipino diplomat Carlos P. Romulo was elected GA President from 1949-1950.

Fig. 3 U
nited Nations General Assembly

Although the GA is the most representative organization in the UN, many commentators
consider the Security Council (SC) to be the most powerful. According to the UN, this body
consists of 15 member states. The GA elects ten of these 15 to two-year terms. The other
five- sometimes referred to as the Permanent 5 (P5)- are China, France, Russia, the United
Kingdom and the United States. These states have been permanent members since the
founding of the UN, and cannot be replaced through election. The SC takes the lead in
determining the existence of a threat to the peace or an act of aggression. It calls upon the
parties to a dispute to settle the act by peaceful means and recommends methods of
adjustment or terms of settlement. In some cases, it can resort to imposing sanctions or
even authorizing the use of force to maintain or restore international peace and security.
Because of these powers, states that seek to intervene militarily in another state need to
obtain the approval of the SC. With the SC’s approval, a military intervention may be
deemed legal. This is an immense power.
Much attention has been placed on the SC’s P5 due to their permanent seats and because
each country holds veto power over the council’s decisions. It only takes one veto vote from
a P5 member to stop an SC action dead in its tracks. In this sense, the SC is heir to the
tradition of “great power” diplomacy that began with the Mitternich/Concert of Europe

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system (see the previous lesson). It is especially telling that the P5 consists of the major
Allied Powers that won World War II. The Security Council will be further discussed in the
next section.

The third UN organ is the Economic and Social Council (ECOSOC), which is “the principal
body for coordination, policy review, policy dialogue, and recommendation on social and
environmental issues, as well as the implementation of internationally agreed development
goals.” It has 54 members elected for three-year terms. Currently, it is the UN’s central
platform for discussions on sustainable development.

The fourth is the International Court of Justice whose task “is to settle, in accordance with
international law, legal disputes submitted to it by states and to give advisory opinions
referred to it by authorized United Nations organs and specialized agencies.” The major
cases of the court consists of disputes between states that voluntarily submit themselves to
the court for arbitration. The court, as such, cannot try individuals (international criminal
cases are heard by the International Criminal Court, which is independent of the UN), and its
decisions are only binding when states have explicitly agreed to place themselves before the
court’s authority. The SC may enforce the rulings of the ICJ, but this remains subject to the
P5’s veto power.

Localizing the Material
Did you know that Filipinos played a significant role in the creation of human rights
arbitration rules in the United Nations? In the late 1960s, the diplomat Salvador P. Lopez
was chairman of the United Nations Commission on Human Rights. Lopez and other
Filipinos helped design the system whereby any citizen of any state may petition the UN to
look into human rights violations in a country. That system exists until today. Human rights,
therefore, are not foreign impositions. They are part of our national heritage.

Finally, the secretariat consists of the “Secretary-General and tens of thousands of
international UN staff members who carry out the day-to-day work of the UN as mandated
by the General Assembly and the organization’s other principal organs.” As such, it is the
bureaucracy of the UN, serving as a kind of international civil service. Members of the
secretariat serve in their capacity as UN employees and not as state representatives.

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Challenges of the United Nations
Given the scope of the UN’s activities, it naturally faces numerous challenges. Chief among
these are the limits placed upon its various organs and programs by the need to respect
state sovereignty. The UN is not a world government, and it functions primarily because of
voluntary cooperation from states. If states refuse to cooperate, the influence of the UN can
be severely circumscribed. For example, the UN Council on Human Rights can send special
rapporteurs to countries where alleged human rights violations are occurring. If a country
does not invite the rapporteur or places conditions on his/her activities, however, this
information-gathering mechanism usually fails to achieve its goals.

However, perhaps the biggest challenge of the United Nations is related to issues of
security. As mentioned, the UN Security Council is tasked with authorizing international acts
of military intervention. Because of the P5’s veto power, it is tough for the council to release
a formal resolution, much more implement it. This became an issue, for example, in the late
1990s when the United States sought to intervene in the Kosovo war. Serbian leader
Slobodan Milošević was committing acts of ethnic cleansing against ethnic Muslim Albanians
in the province of Kosovo. Hundreds and thousands of Albanians were victims of massacres,
mass deportations, and internal displacement. Amid this systematic terror, members of the
North Atlantic Treaty Organization (NATO, see lesson 5), led by the United States, sought SC
authorization to intervene in the Kosovo war on humanitarian grounds. China and Russia,
however, threatened to veto any action, rendering the UN incapable of addressing the crisis.
In response, NATO decided to intervene on its own. Though the NATO intervention was
largely a success, it, nevertheless, left the UN ineffectual.

Today, a similar dynamic is evident in Syria, which is undergoing a civil war. Russia has
threatened to veto any SC resolution against Syria; thus, the UN has done very little to stop
state-sanctioned violence against opponents of the government. Since Syrian President
Bashar al-Assad is an ally of Russian dictator Vladimir Putin, the latter has shied away from
any policy that could weaken the legitimacy of the former. As a result, the UN is again
ineffectual amid a conflict that has led to over 220,000 people dead and 11 million
displaced.

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Despite these problems, it remains important for the SC to place a high bar on military
intervention. The UN Security Council has been wrong on issues of intervention, but it has
also made right decisions. When the United States sought to invade Iraq in 2001, it claimed
that Iraq’s Saddam Hussein had weapons of mass destruction (WMD) that threatened the
world. However, UN members Russia, China and France were unconvinced and vetoed the
UN resolution for intervention, forcing the United States to lead a small “coalition of the
willing” with its allies. It has since been discovered that there were no weapons of mass
destruction, and the invasion of Iraq has caused problems for the country and the region
that last until today.

ASEAN Integration

Fig. 4 T he 10 ASEAN Member Countries

The ASEAN Community started when five Southeast Asian leaders decided to form a union
to foster the bond within their respective nations. This union of Southeast Asian nations was
created through the ASEAN Bangkok Declaration. The countries included in this union are
Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Over the past years, more

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countries have joined the ASEAN union including Brunei Darussalam, Vietnam, Laos,
Myanmar, and Cambodia.

This union aims to help strengthen and stabilize each country’s economic growth and
development. Basically, the ASEAN union was created to help Southeast Asian countries to
develop economic growth, Socio-cultural development and Political-Security. All of the plans
made by the ASEAN union for the betterment of each member country are integrated in the
ASEAN Economic Blueprint. Supposedly, the leaders of the ASEAN union have envisioned
the completion of their goals by the year 2020 but they changed it to 2015 instead, to make
sure that they can fast track the growth and development of their countries.

Through ASEAN integration, member countries support each other in preventing the likes of
rampant piracy, terrorism and drug trafficking. This initiative also aims to foster economic
development meaning more job opportunities, more investors to develop industries,
promote social responsibilities in times of disaster and more opportunities for education.

Success and Challenges within ASEAN Integration
Since its inception on the 8th of August 1967, ASEAN has made tremendous strides in
promoting peace and stability in the region. This is carried out through an abiding of the
rule of law and adherence to the principles of the United Nations Charter, which allow for all
member states to subscribe to its respective aims, principles, and purposes under the
banner of a united regional association. As such, economic cooperation is fundamental to
the progress of this collective, and with a combined Gross Domestic Product (GDP) of
US$2.5 trillion thus far, ASEAN is the seventh largest economy in the world. It is projected to
jump to fourth spot in 2050.

The creation and implementation of the ASEAN Economic Community (AEC) in 2015 was a
crucial initiative to integrate the ten-member countries as a single market and production
base, with investments, services, free movement of goods, skilled labour, and flow of capital
among its key underpinnings. Its extension is the ASEAN Economic Community Blueprint
2025 which strives to build a regional monolith that has the ability to compete with other
blocs across the globe.

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Success of ASEAN Integration thus Far
An apparent positive outcome of ASEAN integration is the gradual increase of cumulative
GDP within the region. Through the implementation of the ASEAN Economic Blueprint 2025,
an ASEAN-wide Self-Certification Scheme has been created. This scheme helps facilitate the
utilization of ASEAN Trade in Goods Agreement by allowing exporters to issue origin
declarations which will cut transaction costs.

Fig. 5 ASEAN Member States: Selected Key Indicators 2018
(Source: A
SEAN Economic Integration Brief. Jakarta: ASEAN Secretariat, June 2019)

The development of infrastructure in the region, based on a mutual learning process from
member states has seen numerous success stories. An example of this is the Myingyan
power plant in Myanmar (225-megawatt gas-fired) which is the nation’s first competitively
tendered independent power producer. It has attracted world-class project developers and
financing from leading multilateral development banks (MDBs), as well as commercial banks
offering their first loans in Myanmar.

Challenges That Have to Be Addressed
According to Victoria Kwakwa, the Vice President of the World Bank for East Asia and the
Pacific, ASEAN’s infrastructure needs are projected to hit US$3.4 trillion between 2013 and
2030. ASEAN needs the aforementioned amount in the next five years to keep abreast with
economic growth, and to meet the targets of eradicating extreme poverty as well as
boosting shared prosperity. Access to reliable and affordable infrastructure is important for
any economy to facilitate job securement and promote sustainability in the long run. It is
unfortunate to note that current development spending in Southeast Asia falls far short of
what is needed to meet the global goals by 2030.

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Based on the ASEAN Economic Integration Brief, another downside risk is the heightened
volatility in global financial markets due to faster-than-expected normalization of monetary
policy in the advanced economies, specifically in the United States of America and the
Eurozone. To add to this list is the problem of sharp capital flow reversals that have the
potential to trigger substantial currency shifts and even prolonged currency depreciation.
This might have an adverse effect on economies with relatively high foreign debts.
In order to first hit the trillion mark for the aforesaid infrastructure needs, the policy,
regulatory, financial and market conditions must be right. This implies that more effort is
needed in upstream work to create a policy climate that promotes commercially viable
projects. According to NenaStoiljkovic, the International Financial Corporation Vice President
for Asia and the Pacific, multilateral development banks (MDBs) e.g. the World Bank Group,
are already increasing efforts to harness private funds through funding packages,
risk-mitigation tools and more efforts in upstream work to establish markets and set the
conditions to get market forces moving in the right direction.

The challenges facing ASEAN integration might not be substantial enough to rub off the
gloss from its successes so far. However, if the association seeks to achieve its goals by 2025
(or prior), the measures pointed out have to be applied, with a concerted effort from all
member states, a requirement that needs no further explanation.

Conclusion
Global governance is such a complex issue that one can actually teach an entire course in
itself. This lesson has focused on the IOs and United Nations in particular. International
organizations are highlighted because they are the most visible symbols of global
governance. The UN, in particular, is the closest to a world government. What is important
to remember is that international institutions like the UN are always in a precarious
position. On the other hand, they are groups of sovereign states. On the other, they are
organizations with their own rationalities and agendas. It is this tension that will continue to
inform the evolution of these organizations.

However, note that there are many institutions, groups, and ideas that hold international
and global politics together. In your own time, you may want to explore these topics on your
own.

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Process Questions
1. Why is global governance multifaceted?

2. How do international organizations take on “lives of their own”?

3. What are the challenges faced by the United Nations in maintaining global security?

Synthesis
● Development of economic globalization after WWII in the context of the prior epoch
of economic globalization, as well as its collapse as a result of WWI, the Depression,
and WWII. development of economic globalization after WWII of the context of the
prior epoch of economic globalization, as well as its collapse as a result of WWI, the
Depression, and WWII.
● A key factor in the depression was thought to be a lack of cooperation among
nations-states. That lack of cooperation was associated with high tariffs and other
import restrictions and protectionist practice, as well as the propensity of
governments to devalue their currencies in order to gain an edge in global trade ov
General Agreement on Tariffs and Trade (GATT) was the system for the liberalization
of trade that grow out of Bretton Woods and came into existence in 1947 (Hudec
1975). It operated until 1995 when it was superseded by the World Trade
Organization (WTO). While GATT focused on Trade and Goods, the WTO also took
responsibility for the increasingly important trade in service. While GATT was simply

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a forum for the meetings of representatives of countries, the WTO is an independent
organization. er other countries.
● The WTO is a multilateral organization headquartered in Geneva, Switzerland with
152 member nations as of 2008 (Krueger 2000; Trachman 2007:1308-15). Its focus on
trade places it at the heart of economic globalization and makes it a magnet for
those opposed either to the broader passes of trade liberalization and promotion or
to some specific aspects of WTO operations. While GATT focused on tariff reduction,
the WTO has come to focus more on nontariff-related barriers to trade. One example
is the differences between nations in relation to regulations on such items as
manufactured foods or food.
● The goal of the IMF is macroeconomic stability for both member nations and the
global economy (Cardem de Cavalho 2007:658-63). More specifically, the IMS deals
with exchange rates, balance of payments, international capital flows, and the
monitoring of the member states and their macroeconomic policies.
● Decisions are supposed to be made on purely economic, not political grounds in the
Bank and are not supposed to intervene in the political affairs of the member states.
However, exactly what is deemed political is not defined and it is often difficult to
ascertain whether, and to what degree, political considerations have been involved in
bank decisions. resources of the Bank include both a relatively small sum paid in by
member countries and, if necessary, a much larger amount that can be called in by
the Bank from the members. The Bank uses its potential access to the latter to issue
highly rated bonds and this way, raises about $25 billion per year.
● In terms of the latter, the World Bank has been loaning large sums of money to
countries whose economies did not need such loans (e.g., China, including $710
million in early 2009 to help rebuild areas hit by a 2008 earthquake). In fact, of the
Bank’s $23 billion in loans in 2006, $13 billion went to “middle-income” countries
rather than to poor countries.
● There are many who believe that the MNC has grown more powerful, perhaps much
more powerful, than the nation-state and any of the organizations described above
that are based on nation-states. For example, dela Dehesa (2006:85) argues: “We
have to get used to the fact that, thanks to the globalization process, companies
rather than states will be the lead in g actors in the world economy.”

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● There are always tensions as well where MNCs are involved, including those with
nation-states, local communities, labor, consumers and civil society organizations.
MNCs have also helped lead to the creation of counter-forces such as multi-scalar
regulatory systems (e.g. the WTO), international institutes of technical standards (e.g.
the ISO[ International Organization for Standardization]), and the resurgence of the
nation-state.
● Marxist, Sklair is interested not only in critically analyzing capitalist globalization but
also articulating an alternative to it and its abuses. He sees some promising signs in
the protectionism of some countries that see themselves as exploited by
transnational corporations. Also hopeful are new social movements such as the
green movement seeking a more sustainable environment and the various
anti-globalization groups that have sprung up in recent years. He is particularly
interested in various human rights movements in which, he believes, can be found
the seeds of the alternative to capitalist globalization—socialist globalization. He
predicts that this and other movements will gain momentum in the twenty-first
century as they increasingly resist the ways in which globalization has been
appropriated by transnational corporations.
● The Global Interstate System – the modern world-system is structured politically as
an interstate system—a system of competing and allying states. Political Scientists
commonly call this the international system, and it is the main focus of the field of
International Relations.
● Political Globalization – the development and nature of a wide range of political
structures relevant to globalization; there certainly are a number of separable
political flows of various sorts that are relevant to an understanding of contemporary
globalization.
● Nation-State – can therefore be seen as an integration of the subgroups that define
themselves as a nation with the organizational structure that constitutes the state.
● Civil Society – a realm in which people can engage each other more or less directly
and in which they can, among other things, analyze and criticize their political and
economic institutions.
● Global Civil Society – neither a static object nor a fait accompli. It is an unfinished
project that consists of sometimes thick, sometimes thinly stretched networks,

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pyramids and hub-and-spoke clusters of socio-economic institutions and actors who
organize themselves in new ways.
● International Nongovernmental Organization – an international not-for-profit
organization that performs public functions but is not established or run by
nation-states.
● Globalism – seeks to describe and explain nothing more than a world which is
characterized by networks of connections that span multi-continental distances.
Without science neither globalism nor globalization would be conceivable; without
technology they would not be practical possibilities.
● Informationalism – the technological paradigm that constitutes the material basis
of early 21st century societies. Over the last quarter of the 20th century of the
common era it replaced and subsumed industrialism as the dominant technological
paradigm.
● Network Society – a society whose social structure is made of networks powered by
microelectronics-based information and communication technologies. By social
structure I understand the organizational arrangements of humans in relationships
of production, consumption, reproduction, experience, and power expressed in
meaningful communication coded by culture. A network is a set of interconnected
nodes. A node is the point where the curve intersects itself.
● Technological, Economic, and Culture – the effects of technological change on the
global economic structure are creating immense transformations in the way
companies and nations organize production, trade goods, invest capital, and develop
new products and processes. Technology and culture are two forces that greatly
influence one another. As new technology is introduced into a society, the culture
reacts in a positive or negative way and is thus changed forever. Consequently, as
cultures change so does the technology they develop.
● Global governance is a purposeful order that emerges from institutions, processes,
norms, formal agreements, and informal mechanisms that regulate action for a
common good. Global governance encompasses activity at the international,
transnational, and regional levels, and refers to activities in the public and private
sectors that transcend national boundaries. In this conception of global governance,
cooperative action is based on rights and rules that are enforced through a
combination of financial and moral incentives. In the absence of a single

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authoritative institution or world government structure, global governance consists
of elements and methods from both the public and private.
● United Nations originally composed of 51 countries committed to preserving peace,
the United Nations was founded by Charter on 24 October 1945. Today, membership
includes nearly all nations in the world, ie. 192 countries. The United Nations is not a
world government and does not make laws. The purposes of the UN are: to maintain
international peace and security; to develop friendly relations among nations; to
cooperate in solving international, economic, social, cultural, and humanitarian
problems and in promoting respect for human rights and fundamental freedom; and
to be a center for harmonizing the actions of nations. The UN family of organizations
provides technical assistance and help in mostly all economic and social areas.
● ASEAN has been establishing itself as a regional platform for Asian integration and
cooperation, working with other Asian nations to: promote, unity, prosperity and
sustainability; and pursue measures in resolving disputes.

Assessments
A. Choose the letter of the best answer.

1. It is a wide range of political structures relevant to globalization. There certainly are a
number of separable political flows of various sorts that are relevant to an
understanding of contemporary globalization.
a. Political Institutions in International Relations
b. Political Globalization
c. Globalization
d. Nationalism

2. This refers to a social group that is linked through common, descent, culture,
language, or territorial continuity.
a. Global
b. State
c. Nation
d. Nation State

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3. It is a dynamic nongovernment system or interconnected socioeconomic institutions
that straddle the whole earth, which have complex effects felt in its four corners.
a. Global Civil Society
b. Civic Society
c. Civil Society
d. None of the above

4. They are private, voluntary, and nonprofit and most are oriented to bringing about
some sort of social and or political change.
a. International Government Organization
b. Political Globalization
c. Political Institutions in International Relations
d. International Nongovernment Organizations

5. “Networks of connections spanning multi-continental distances, drawing them close
together economically, socially, culturally and informationally."
a. Nationalism
b. Globalism
c. Nation
d. Global

6. "Technological paradigm that constitutes the material basis of early twenty-first
century societies."
a. Informalism
b. Informationalism
c. Only B
d. Both A and B

7. They operate in an array of economic, political, social, and cultural environments.
a. International Monetary Fund
b. World Bank
c. Multinational Corporation
d. World Trade Organization

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8. MNC activity is usually measured by
a. International Government Organizations
b. International Nongovernmental Organizations
c. Foreign Direct Investment
d. Bretton Woods

9. Is a lightning rod for critics who see it as supporting development countries and their
efforts to impose their policies on less developed countries.
a. International Monetary Fund
b. Multinational Corporation
c. World Trade Organization
d. World Bank

10. He set up a new system of rules, regulations, and procedures for the major
economies stability.
a. Bretton Woods and Bretton Woods System
b. Joseph E. Stiglitz
c. Dicken's
d. None of the above

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B. Match the given word(s) below with each statement that follows.

General Agreement on Tariffs and Trade (GATT)
World Trade Organizations (WTO)
International Monetary Fund (IMF)
International Bank for Reconstruction and Development (IBRD)
World Bank
Civil Society
Nation State
Nationalism
State
Portfolio Investment
Changes in Bretton Woods Era Organizations
Multinational Corporations (MNC)
Noted economist Joseph E. Stiglitz.
Organizations for Economic Cooperation and Development (OECD)
Stiglitz

1. It was a system for the liberalization of trade that grew out of Bretton Woods and
came into existence in 1947.
2. This encompasses much of what GATT's mandate, but has moved onto other issues
and areas such as service. Its operations are premised on the neoliberal idea that all
nations benefit from free and open trade and it is dedicated to reducing and
ultimately eliminating barriers to such trade.
3. Its goal is macroeconomic stability for both member nations and the global
economy.
4. It is the most important element of the World Bank Group (WBG.
5. An international financial institution that provides loans and grants to the
governments of poorer countries for the purpose of pursuing capital projects
6. It consists of groups or organizations working in the interest of the citizens but
operating outside of the government and for profit sectors.
7. An integration of the subgroups that define themselves as a nation with the
organizational structure that constitutes the states

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8. A doctrine and/or political movement that seek to make the nation the basis of a
political structure, especially a state
9. Emerged as a new institutional form in the wake of the demise of the feudal system
10. Another form of MNC activity
11. The organizations that were spawned by Bretton Woods—WB, IMC, and WTO are
undergoing dramatic changes.
12. A firm that has the power to coordinate and control operations in more than two
countries, even if it does not own them
13. One of the most effective critics of Bretton Woods Era of Organization
14. The most encompassing "club" of the world's rich countries and has little formal
power; it is highly influenced
15. He defined globalization as "the removal of barriers to free trade and the closer
integration of national economies.

C. Fill in the blanks.

__________1. The biggest challenge of the United Nations is related to issues of.
__________2. After the collapse of the league of Nations at the end of the World War ll,
countries that worried about another global war began to push for the
formation of a more lasting international league.
__________3. Because of ______ it is tough for the council to release a formal resolution,
much more implement it.
__________4. The third UN organ is "the principal body for coordination, policy review,
policy dialogue, and recommendation on social and environmental issues, as
well as the implementation of internationally agreed development goals.
__________5. When scholars refer to a group like the UN or institutions like the IMF and the
WB, they usually call them.

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Assignments
Watch videos at home about “Global Divides: The North and the South, First and Third
Worlds, and Latin America and the Philippines under Globalization.” Then answer the
following questions:
1. What does the contrast between the slums and metro manila and the capital’s posh
village signify?
2. Why are the terms first world and third world, and global north and global south
used interchangeably? It is justifiable to use them as such?
3. How can the global south catch up with the global north?
4. Which contemporary proofs of economic dependency in the Philippines and Latin
American are observable? How do these proofs pose a challenge to the mainstream
conceptualization of globalization?
5. Do globalization and regionalization converge? How and when do they converge?
6. In your opinion, what is the most pressing concern that developing countries should
address globalization? How should it be addressed?

Reflection Guide

1. What have I LEARNED this day that has helped me do all aspects of this better?

2. What have I DONE this week that has made me better at doing all aspects of this?

3. How can I IMPROVE at doing all aspects of this?

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Expanded Opportunities

For Topic 1:

A. Answer the following questions:
1. What is the relevance of Bretton Wood Institutions such as the IMF and the World
Bank in today’s globalized world?
2. What does the history of the Bretton Woods tell us? How far shall we trust its
institution given the criticism and blunders provided by the stiglitz?

B. Do the following:
1. Present a downloaded video depicting the different contributions of the country in
the production process.
2. Make a collage showing the different contributions of the country in world trade and
discuss comprehensively the collage output.

For Topic 2:
Do the following:
1. Make the timeline of events on the history of global market integration in the
twentieth century.
2. Conceptualize the attributes of global corporations by making a short video clip.

For Topic 3:
Do the following:
1. Watch the video on Youtube showing the different scenarios of the society.
2. Write a position paper on ASEAN integration.

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For Topic 4:
Do the following:
1. Research on the challenges of global governance in the twenty-first century.
2. Answer the following activity table:

Country Challenges Overcoming the Challenges
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Module 2: The Structures of Globalization

Topic 1: The Global Economy 5

Topic 2: Market Integration 21

Module 2: The Structures of Globalization

World Bank (WB) 31

Topic 3: The Global Interstate System 46

Topic 4: The United Nations and Contemporary Global Governance 68

Module 2: The Structures of Globalization

ASEAN Integration 75

Reflection Guide 88

Expanded Opportunities 89

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Paulinian Essential Elements

Module 2: The Structures of Globalization

Topic 1: The Global Economy

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Topic 2: Market Integration

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Module 2: The Structures of Globalization

Topic 3: The Global Interstate System

Module 2: The Structures of Globalization