SOCIO 101

THE CONTEMPORARY
WORLD

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Economic globalization refers to the mobility of people, capital, technology, goods and services
internationally. It is also about how integrated countries are in the global economy. It refers to how
interdependent different countries and regions have become across the world.

In the eighteen hundreds in the world economy generally, people and capital crossed borders with
ease, but not goods. In this century, people do not cross borders easily, but technologies, capital
and goods do.

Over the past two to three decades, under the framework of General Agreement on Tariffs and
Trade (GATT) and World Trade Organization, economic globalization has been expanding at a
much faster pace. Countries have rapidly been cutting down trade barriers and opening up their
current accounts and capital accounts.

When you buy a Toyota car, its parts have probably been produced in several different countries.
Toyota is one of hundreds of companies with globalized operations.

This rapid increase in pace has occurred mainly with advanced economies integrating with
emerging ones. They have done this by means of foreign direct investment and some cross-
border immigration. They have also reduced trade barriers.

In some regions of the world, such as the European Union, a large area almost the size of a
continent has opened up to the free movement of capital, labor, goods and services. The North
American Free Trade Agreement (NAFTA) opened up the free movement of goods and services,
but not labor.

Cuba and North Korea are among the most autarkic (self-sufficient) and isolated nations on the
planet. The two countries are the last bastions of the Soviet economic model.

Economic globalization linked to greater wealth and inequality

While becoming more integrated into the global economy tends to bring increased wealth to a
nation, globalization is commonly linked to greater inequality.

According to the United Nations:

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

Economic development, apart from GDP growth, also includes improvements in literacy, life
expectancy, and people’s well-being.

Factors Facilitate Economic Globalization

1. Technological Advancement and IT Development
2. Multinational Corporations
3. International Trade

Technological Advancement and IT Development

Nowadays, the advancement of technologies has greatly reduced the

cost of transportation and communication, making economic globalization
possible. With the quickening and intensifying flows of information and
communication, people can now access more information from all over the
world, all from the comfort of home

Multinational Corporations (MNCs)

Multinational Corporations are well known for being the main forces
behind economic globalization. They are believed to promote growth and
employment by creating new jobs, realizing new investments, bringing in new
technologies, and allowing host economies to integrate

International Trade

Classical liberals, such as Richard Cobden, believed that free trade

could bring about world peace by substituting commercial relationships among individuals for
competitive relationships between states. International trade enhances efficiency by allocating
resources to increase the amount produced for a given level of effort.

GLOBAL ECONOMIC INTEGRATION

➢ It is an agreement of countries within a geographic location to minimize

and eventually eliminate tariff and non-tariff barriers to the free
movement of products, services, and components of production among
them.

➢ It is the process by which two or more states in a geographical area reduce a variety of trade
barriers in order to protect economic goals.

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 WORLD BANK

The mission of the World Bank is to help developing countries

alleviate poverty and improve living standards. Although it is often
thought of as a single entity the World Bank group is an association
of five organizations.
KEY TAKEAWAYS

 The World Bank is an international organization that provides financing, advice, and
research to developing nations to help advance their economies.
 The World Bank and International Monetary Fund (IMF)—founded simultaneously under
the Bretton Woods Agreement—both seek to serve international governments.
 The World Bank has expanded to become known as the World Bank Group with five
cooperative organizations, sometimes known as the World Banks.
 The World Bank Group offers a multitude of proprietary financial assistance, products, and
solutions for international governments, as well as a range of research-based thought
leadership for the global economy at large.

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  The World Bank's Human Capital Project seeks to help nations invest in and develop their
human capital to produce a better society and economy.

Understanding the World Bank

The World Bank is a provider of financial and technical assistance to individual countries around
the globe. The bank considers itself a unique financial institution that sets up partnerships to
reduce poverty and support economic development.

The World Bank supplies qualifying governments with low-interest loans, zero-interest credits,
and grants, all to support the development of individual economies. Debt borrowings and cash
infusions help with global education, healthcare, public administration, infrastructure, and
private-sector development. The World Bank also shares information with various entities
through policy advice, research and analysis, and technical assistance. It offers advice and
training for both the public and private sectors

INTERNATIONAL MONETARY FUND

The International Monetary Fund (IMF) works to achieve sustainable growth

and prosperity for all of its 190 member countries. It does so by supporting
economic policies that promote financial stability and monetary cooperation,
which are essential to increase productivity, job creation, and economic well-
being. The IMF is governed by and accountable to its member countries.

The IMF has three critical missions: furthering international monetary

cooperation, encouraging the expansion of trade and economic growth, and
discouraging policies that would harm prosperity. To fulfill these missions, IMF
member countries work collaboratively with each other and with other
international bodies.

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The Organisation for Economic Co-operation and Development (OECD) is an international
organisation that works to build better policies for better lives. Our goal is to shape policies that
foster prosperity, equality, opportunity and well-being for all. We draw on 60 years of
experience and insights to better prepare the world of tomorrow.

Together with governments, policy makers and citizens, we work on establishing evidence-based
international standards and finding solutions to a range of social, economic and environmental
challenges. From improving economic performance and creating jobs to fostering strong education
and fighting international tax evasion, we provide a unique forum and knowledge hub for data
and analysis, exchange of experiences, best-practice sharing, and advice on public policies
and international standard-setting

Modern World System, a social system comprised of nations that are politically and
economically interdependent (Wallerstein 1974). Within the modern world system, nations are
hierarchically structured according to a world-wide division of labor in the world economy.

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Core nations determine the terms and conditions of trade.

Peripheral nations provide raw materials to core nations, who in turn, manufacture the
materials into value-added products that are sold back to the peripheral nations.

Semi-peripheral nations engage in a mixed system of raw materials extraction and

manufacturing. Wallerstein argues that while nations shift in position within the modern world
system (ie the rise and anticipated decline of the U.S. as the leading world power), the socio-
economic arrangement of nations in the modern world system is primarily tied to previous colonial
relationships when imperial powers extracted resources from occupied territories.

He points out that many of the former colonial European powers and settler countries are
positioned as core nations, while former colonies are positioned as peripheral nations.

As Andre Gunder-Frank (1972:3) has pointed out, ‘There is an identifiable social system, based on
wealth and power differentials, that extends beyond the nation-unit.’ What this means is that
similar to the way that social hierarchies exist within the population of a country, there is also a
hierarchical relationship among countries. Analysts have shown that the hierarchical relationships
between nations is reflected by the terms of international trade which are established by the more
powerful core nations and are oftentimes disadvantageous for less powerful peripheral nations
(Singer-Prebisch 1950; 1998).

Because of this, many political economists argue that economic integration into the modern world
system leads to economic dependency on core nations as peripheral nations come to rely on trade
with core nations in order to increase wealth through foreign exchange earnings. Unequal trade
relations weaken the economies of the peripheral nations which further increases dependency on
trade with core nations. This process is known as dependency theory.

The ideas set forth by dependency theory and the modern world system models offer important
contributions to understanding culture because the peoples and cultures living in peripheral (post-
colonial) areas are oftentimes blamed for the conditions of poverty created by unfair economic
policies.

In his book, Globalization and its Discontents (2002), former chief economist of the World
Bank, Joseph Stiglitz, blamed the unfair policies of the International Monetary Fund (IMF) and the

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lending practices of the World Bank for destablizing the economies in peripheral nations and
exacerbating poverty among their citizens.

According to Stiglitz, IMF policies and practices routinely fail to consider that peripheral nations
are entering into a competitive global economic arena at an uneven playing field. Fledgling nations
often lack the information resources, infrastructural resources and workable institutions that they
need in order to contend with the more powerful core players in the world market. As a result,
peripheral nations fall into a cycle of debt accumulation that further cripples the national
economy.

International Institutions

The political and economic relations between nations in the Modern World System is regulated by
international institutions created during the second half of the twentieth century. The most
notable institutions include the United Nations (UN), The World Bank Group, The International
Monetary Fund (IMF), and the World Trade Organization (WTO). The charter for these institutions
is based on a ‘peace through trade’ mission established by the Bretton-Woods Agreement in 1944.

National governments become a member of these institutions by signing charters and

agreements, and the institutions provide boundaries, structures and rules of legitimation for
international relations. The underlying idea set forth in the charters of international institutions is
the assumption that nations that are politically and economically inter-dependent will not engage
in war with one another, and that integration in the world economy will strengthen the national
economy in poor countries.

Political-economists have pointed out that contemporary policies and practices have deviated from
the original mission set forth by these organizations, a process known as organizational
slippage (Babb 2005).

Modernization and Development

The policies and programs implemented by international institutions are based on the assumption
that economic integration in the world economy is the solution to poverty and inequality. This
approach is rooted in modernization theory and development perspectives that assume that social
and economic restructuring will increase production and thereby increase national income and
eliminate poverty (Kottak 2012).

This idea is attributed, in large part, to the work of early functionalist sociologists and
anthropologists, such as Emile Durkheim and E.B. Tylor. As mentioned in the Socio-Historical
Contexts section, functionalist anthropological perspectives aim to identify the interconnected
roles of social institutions in maintaining ‘order’, and and scholars usually organized social orders
on a linear pathway from ‘primitive’ to ‘advanced’.
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 Today, international institutions and governments
implement Modernization and Development programs to transition so-called ‘primitive’ social
institutions toward so-called ‘advanced’ models, and the outcome of that transition is expected to
bring social benefits to people living in poverty.

John Bodley (2007) argues that the basic belief underlying modernization and development is
rooted in the same euro-centric ideologies that aimed to justify colonial occupation for several
centuries and now serve to justify the domination of the national economies of poorer countries.
The notion of ‘development’ is based on evolutionary models that position distinct economies on a
single pathway toward ‘advancement’ rather than considering each economy as a unique adaptive
strategy to different social and environmental circumstances aimed to meet the direct needs of
people in a society.

He argues that industrial economies are considered more ‘advanced’ because it is the economic
mode of production in core nations. In many cases, policy-makers in peripheral nations have
internalized the hegemonic perspectives of the core nations and implemented modernization and
development programs and policies directed at transitioning the national economy and society
toward European economic models. These programs and policies, known as structural adjustment
programs, are designed by international institutions and they are deeply embedded in
international economic restructuring that has come to define the global world economy.

Global Economic Restructuring

Although the Bretton-Woods agreement aimed to restructure the global economy into a unified
system after the second World War, the United States and the Soviet Union became engaged in a
struggle over the economic organization of the new globalized economy; this struggle is known as
the Cold War. During this time, the United States was building allies against the communist bloc,
and capitalist ideologies based on liberty, democracy, and private property were pitted against
state-centered communist ideologies based on authoritarianism, the redistribution of wealth, and
state-owned property.

As the documentary, States of Independence, pointed out, many newly independent post-colonial
nations were caught in the political and ideological tug-of-war that characterized the Cold War as
both the U.S. and the Soviet Union funded and aided political coups in order gain allies among the
newly independent nations. This caused a considerable amount of political instability in young
nations that were still recovering from the economic impact of long-term colonial occupation.

Neoliberalism

At the height of the Cold War, during the Reagan and Thatcher era, a series of neo-liberal policies
aimed to strengthen the global capitalist alliance against communism (Harvey
2005). Neoliberalism draws from the early economic philosophy called Liberalism established by
Adam Smith in his book, The Wealth of Nations (1776). Smith’s economic philosophy was based
on ideas of liberty and equality that became popular during the European and American
revolutions that overthrew the control of feudal monarchies during the 18th century.

He advocated against centralized economic activity and argued that individuals competing in a
free market would strengthen the economy and provide benefits for society. Smith’s notion of
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private property was quite different from contemporary ideas about capitalism and property. In
the feudal systems that characterized Smith’s time, peasants labored on land that was owned and
controlled by a monarch. According to Smith, the individual ownership of land was expected to
allow workers to gain direct access to the fruits of their labor.

Although Smith never referred to his economic philosophy as ‘capitalism’, his philosophy shaped
the guiding principles of small-scale mercantile capitalism in the 19th century. Nearly 200 years
after Smith, Friedrich von Hayek adapted Smith’s principles to the international economic struggle
between the U.S. and the Soviet Union in his book, Road to Serfdom (1944).

the foundation for international economic policies known as Thatcherism and

Reaganomics. The neo-liberal policies set forth by Margaret Thatcher (British Prime Minister)
and Ronald Reagan (U.S. President 1981-89) emphasized decreased government spending on
social services, increased spending on military budgets, privatization, and deregulation –
particularly Free International Trade. According to the neoliberal philosophy, the privatization of
property and the deregulation of trade will strengthen the economy, which will in turn provide
benefits and social services for society. From this perspective, everyone will benefit as the rich get
richer, because prosperity is expected to ‘trickle down’ from the wealthy to the poor. These
neoliberal assumptions were projected onto the world economy. After the fall of the Soviet Bloc in
1991, neo-liberalism restructured the economic organization of the Modern World System.

Regional Trade Agreements (1948-2000)

During this time, the World Trade Organization initiated

Free Trade Agreements (FTA), which are trade treaties between two countries (bilateral) or
between countries within a region (regional agreements). Free trade agreements usually remove
trade tariffs and allow the free flow of goods and investments, but not labor (people) across
international borders.

At the same time, the agenda of international institutions such as the World Bank and the IMF
shifted from humanitarian objectives to development-based missions aiming to incorporate
peripheral economies into a new neoliberal world order based on free trade (Babb 2007).

The International Monetary Fund established new guidelines and restrictions, or conditions, that
regulated the lending practices of the Word Bank. Conditional lending policies required the
governments of poor nations to restructure their economies by adopting neoliberal practices in
order to receive World Bank loans to build the infrastructure they needed to compete in the new
global economy. Institutions refer to the mission of structural adjustment as international
development.

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 ECONOMIC INTEGRATION

What Is Economic Integration?

Economic integration is an arrangement among nations that typically includes the reduction or
elimination of trade barriers and the coordination of monetary and fiscal policies. Economic
integration aims to reduce costs for both consumers and producers and to increase trade
between the countries involved in the agreement.1

Economic integration is sometimes referred to as regional integration as it often occurs among

neighboring nations.

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Economic Integration Explained

When regional economies agree on integration, trade barriers fall and economic and political
coordination increases.

Specialists in this area define seven stages of economic integration: a preferential trading area, a
free trade area, a customs union, a common market, an economic union, an economic and
monetary union, and complete economic integration.2 The final stage represents a total
harmonization of fiscal policy and a complete monetary union.

KEY TAKEAWAYS

 Economic integration, or regional integration, is an agreement among nations to reduce or

eliminate trade barriers and agree on fiscal policies.
 The European Union, for example, represents a complete economic integration.
 Strict nationalists may oppose economic integration due to concerns over a loss of
sovereignty.

Advantages of Economic Integration

The advantages of economic integration fall into three categories: trade creation, employment
opportunities, and consensus and cooperation.1

More specifically, economic integration typically leads to a reduction in the cost of

trade, improved availability of goods and services and a wider selection of them, and gains in
efficiency that lead to greater purchasing power.

Economic integration can reduce the costs of trade, improve the availability of goods and
services, and increase consumer purchasing power in member nations.1

Employment opportunities tend to improve because trade liberalization leads to market

expansion, technology sharing, and cross-border investment.

Political cooperation among countries also can improve because of stronger economic ties, which
provide an incentive to resolve conflicts peacefully and lead to greater stability.

The Costs of Economic Integration

Despite the benefits, economic integration has costs. These fall into three categories:

 Diversion of trade. That is, trade can be diverted from nonmembers to members, even if it
is economically detrimental for the member state.
 Erosion of national sovereignty. Members of economic unions typically are required to
adhere to rules on trade, monetary policy, and fiscal policies established by an unelected
external policymaking body.
 Employment shifts and reductions. Economic integration can cause companies to move
their production operations to areas within the economic union that have cheaper labor
prices. Conversely, employees may move to areas with better wages and employment
opportunities.1

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Because economists and policymakers believe economic integration leads to significant benefits,
many institutions attempt to measure the degree of economic integration across countries and
regions. The methodology for measuring economic integration typically involves multiple
economic indicators including trade in goods and services, cross-border capital flows, labor
migration, and others. Assessing economic integration also includes measures of institutional
conformity, such as membership in trade unions and the strength of institutions that protect
consumer and investor rights.

Real-World Example of Economic Integration

The European Union (EU) was created in 1993 and included 27 member states in 2022.3 Since
1999, 19 of those nations have adopted the euro as a shared currency. 4 According to data from
The World Bank, the EU accounted for roughly 18% of the world's gross domestic product in
2020.5

The World Bank Group. "GDP (Current US$) - European Union, World ."
The United Kingdom voted in 2016 to leave the EU. In January 2020 British lawmakers and the
European Parliament voted to accept the United Kingdom's withdrawal. The UK officially split
from the EU on January 1, 2021.

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What Is a Financial Institution (FI)?

A financial institution (FI) is a company engaged in the business of dealing with
financial and monetary transactions such as deposits, loans, investments, and currency
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exchange. Financial institutions include a broad range of business operations within
the financial services sector, including banks, insurance companies, brokerage firms,
and investment dealers.

Virtually everyone living in a developed economy has an ongoing or at least periodic

need for a financial institution's services.

KEY TAKEAWAYS

 A financial institution (FI) is a company engaged in the business of dealing with

financial and monetary transactions such as deposits, loans, investments, and
currency exchange.
 Financial institutions are vital to a functioning capitalist economy in matching
people seeking funds with those who can lend or invest it.
 Financial institutions encompass a broad range of business operations within the
financial services sector including banks, insurance companies, brokerage firms,
and investment dealers.
 Financial institutions vary by size, scope, and geography.

Understanding Financial Institutions (FIs)

Financial institutions often match savers' or investors' funds with those seeking funds, such as
borrowers or businesses seeking to trade shares of ownership for funds. Typically, this leads to
future payments from the borrower or business to the saver or investor. The tools for matching
all of these parties up include products such as loans, and markets, such as a stock exchange.1

At the most basic level, financial institutions allow people to access the money they need. For
example, although banks do many things, their primary role is to take in funds—called deposits—
from those with money, pool the deposits, and lend the money to others who need funds. Banks
are intermediaries between depositors (who lend money to the bank) and borrowers (who the
bank lends money to).This works well because while some depositors need their money
at any given moment, most do not. So banks can use deposits to make long-term
loans. This applies to almost every entity and individual in a capitalist system:
individuals and households, financial and non financial firms, and national and local
governments.2

Without financial institutions, businesses could not grow. And households could only
buy goods, education, and housing that the families have cash for today.

Financial institutions serve most people in some way as a critical part of any economy
—whether in banking, insurance, or securities markets. Individuals and companies rely
on financial institutions for transactions and investing. For example, the health of a
nation's banking system is a linchpin of economic stability. Loss of confidence in a
financial institution can easily lead to a bank run.

The Function of Financial Institutions in Capital Markets

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Capital markets are important for functioning capitalist economies because they
channel savings and investments between suppliers and those in need. Suppliers are
people or institutions with capital to lend or invest. Suppliers typically include banks
and investors. Those seeking capital are businesses, governments, and individuals.

Financial institutions play an important role in capital markets, directing capital to

where it is most useful. For example, a bank takes in deposits from customers and
lends the money to borrowers, ensuring capital markets' efficient function.

Regulation
Governments oversee and regulate banks and financial institutions because the
institutions play an integral economic role. Bankruptcies of financial institutions, for
instance, can create panic. Federal and state agencies can regulate financial
institutions. Sometimes, multiple agencies regulate the same institution.3

Federal Depository Regulators

Federal depository regulators oversee commercial banks, thrifts (savings associations),

and credit unions accepting customer deposits.

 U.S. Federal Reserve (The Fed): Regulator of Federal Reserve

System member state banks, foreign banking organizations operating in the
United States, and financial holding companies.
 Office of the Comptroller of the Currency (OCC): The OCC is responsible
for seeing that national banks and federal savings associations operate safely,
provide equal access to financial services, treat customers fairly, and comply
with applicable laws and regulations. It also regulates U.S. federal branches of
foreign banks and federally chartered thrift institutions.
 Federal Deposit Insurance Corporation (FDIC): The FDIC regulates
federally insured depository institutions, state banks that aren't members of the
Federal Reserve System, and state-chartered thrift institutions.
 National Credit Union Administration (NCUA): NCUA supervises and
insures federally chartered or insured credit unions.

The FDIC insures deposits in state-chartered banks and federal savings associations if
a bank fails. The FDIC insures regular deposit accounts of up to $250,000 per
depositor per institution. Offering this insurance reassures individuals and businesses
regarding the safety of their finances with financial institutions. Like the FDIC, the
NCUA insures deposit amounts of up to $250,000.

Federal Securities Markets Regulators

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Two federal institutions regulate products, markets, and market participants for
securities such as stocks, bonds, and derivatives.

 Securities and Exchange Commission (SEC): The SEC regulates securities

exchanges, broker-dealers, and corporations selling securities to the public;
investment funds, including mutual funds; investment advisers, including hedge
funds with assets over $150 million; and investment companies.
 Commodities Futures Trading Commission (CFTC): The CFTC regulates
futures exchanges, futures commission merchants, commodity pool operators,
commodity trading advisors, derivatives, clearing organizations, and designated
contract markets.

Government-Sponsored Enterprise (GSE) Regulators

These dedicated regulators exclusively oversee government-sponsored enterprises,

which are quasi-governmental entities established to enhance the flow of credit to
specific sectors of the U.S. economy.

 Federal Housing Finance Agency: The FHFA supervises, regulates, and

performs oversight of the Federal National Mortgage Association (Fannie Mae),
the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal
Home Loan Bank System.
 Farm Credit Administration: This agency regulates Farm Credit System
institutions and Farmer Mac, credit sources for eligible persons in agriculture and
rural America.7

Consumer Protection Regulator

Currently, the Consumer Financial Protection Bureau (CFPB) is the only national
consumer entity tasked with exclusively regulating consumer products. CFPB's purview
includes nonbank mortgage-related firms, private student lenders, payday lenders, and
other large “consumer financial entities,” as determined by the CFPB. CFPB is the
rulemaking consumer protection authority for all banks and has supervisory authority
for banks with more than $10 billion in assets.

State Regulators

States may regulate financial institutions in addition to or instead of federal regulators.

For example, there is minimal federal oversight of the insurance industry. Each state
government has a department that licenses and regulates insurance companies and
any company selling insurance products. States may also regulate banking, securities,
and consumer protections in addition to federal regulators who work in those areas.

Types of Financial Institutions

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Financial institutions offer various products and services for individual and commercial
clients. The specific services offered vary widely between different types of financial
institutions. Here are some of the types consumers are most likely to use:

Banks, Credit Unions, and Savings & Loans

These financial institutions accept deposits and offers checking and savings account
services; make business, personal, and mortgage loans; and provides basic financial
products like certificates of deposit (CDs). They may also act as payment agents
via credit cards, wire transfers, and currency exchange.

These types of financial institution can include:

 Commercial or private banks

 Savings and loans associations
 Credit unions
 Foreign banks
 Savings banks, industrial institutions, thrifts

Investment Companies, Advisors, and Brokers

Investment companies issue and invest in securities (stocks, bonds, mutual funds and
ETFs or exchange-traded funds).

Mutual funds are one example of a product offered by an investment company, where
many investors' money is pooled and invested in stocks, bonds, money market
instruments, other securities, or even cash in an ongoing manner..

Other examples of investment-related financial institutions include investment advisors

and brokers. Brokers accept and carry out orders to buy and sell investments (such as
securities) for customers.

Insurance Companies

Among the most familiar non-bank financial institutions are insurance companies.
Providing insurance for individuals or corporations is one of the oldest financial
services. Protection of assets and protection against financial risk, secured through
insurance products, is an essential service that facilitates individual and corporate
investments that fuel economic growth.

Insurance is primarily regulated at the state level, but the U.S. Treasury's Federal
Insurance Office (FIO) does monitor the industry and plays an advisory role.2

Why Are Financial Institutions Important?

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Financial institutions are essential because they provide a marketplace for money and
assets so that capital can be efficiently allocated to where it is most useful. For
example, a bank takes in customer deposits and lends the money to borrowers.
Without the bank as an intermediary, any individual is unlikely to find a qualified
borrower or know how to service the loan. Via the bank, the depositor can earn
interest as a result. Likewise, investment banks find investors to market a company's
shares or bonds to.

What Are the Different Types of Financial Institutions?

The most common types of financial institutions include banks, credit unions,
insurance companies, and investment companies. These entities offer various products
and services for individual and commercial clients, such as deposits, loans,
investments, and currency exchange.

Which Agency Oversees Banking Operations in the

United States?
Several agencies oversee banking operations in the U.S., including the Federal
Reserve, Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance
Corporation (FDIC), and the National Credit Union Administration (NCUA).\

What's the Difference Between a Commercial and

Investment Bank?
A commercial bank, where most people do their banking, is a type of financial
institution that accepts deposits, offers checking account services, makes business,
personal, and mortgage loans, and offers basic financial products like certificates of
deposit (CDs) and savings accounts to individuals and small businesses.
Investment banks specialize in providing services designed to facilitate business
operations. This might include raising money through financing and equity offerings,
including initial public offerings (IPOs). They also commonly offer brokerage services
for investors, act as market makers for trading exchanges, and manage mergers,
acquisitions, and other corporate restructurings.

Which Agency Regulates Investment Banking Firms?

The Securities and Exchange Commission (SEC) oversees the operations of investment
banks as these banks deal with securities.

SEC. "Rules and Regulations for the Securities and Exchange Commission and Major
Securities Laws ."

The Bottom Line

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Financial institutions help keep capitalist economies running by matching people who
need funds with those who can lend or invest it. They offer a wide range of business
operations within the financial services sector including banks, credit unions, insurance
companies, and brokerage firms. Regulatory agencies such as the OCC, the SEC, the
FDIC, and the Federal Reserve oversee the operations of financial institutions in the
United States.

What are the effects of globalization in the Philippine government?

Evidence suggests that globalisation has a positive effect on the country’s economic growth and
employment. In particular, trade openness and foreign portfolio flows have contributed to higher
per capita GDP growth in the Philippines, following the implementation of FX liberalisation
reforms.

What is the effect of globalization in developing countries?

Globalization helps developing countries to deal with rest of the world increase their economic
growth, solving the poverty problems in their country. In the past, developing countries were not
able to tap on the world economy due to trade barriers.

What is the role of government in Globalisation?

The government can play a major role in making globalisation fair: (i) By making policies that
protect the interests not only of the rich and the powerful but of all the people in the country. (ii)
It can ensure that labour laws are properly implemented and the workers get their rights.

What are the positive effects of globalization to national governments?

Promotes World Peace and Unity Globalization brings governments together so that they can
tackle common goals together. For example, due to globalization world leaders have seen the
impact of pollution and have resolved to tackle climate change together.

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DIFFERENCE BETWEEN GLOBALIZATION AND GOVERNMENT

Globalization is that process which accelerates the flow and exchange of products and services,
capital, technology, information, jobs etc. across the globe. It does not just encourage but also
improves the interaction amidst different countries and audiences around the world. It has
transformed the world economy into a more open and autonomous system.

Globalization is commonly contrasted with internationalization, but the two differs in their
meaning, in the sense that internationalization is when a firm seeks to expand beyond the
national market. This means that when the firm starts doing business on an international scale, it
refers to internationalization.

Internationalization of the companies and globalization of business, has given rise to

interdependency among firms and among countries. In this lesson, we will talk about all the
important differences between internationalization and globalization.

Difference Between
Internationalization and Globalization

Globalization is that process which accelerates the flow and exchange of products and services,
capital, technology, information, jobs etc. across the globe. It does not just encourage but
also improves the interaction amidst different countries and audiences around the
world. It has transformed the world economy into a more open and autonomous
system.

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Globalization is commonly contrasted with internationalization, but the two differs in
their meaning, in the sense that internationalization is when a firm seeks to expand
beyond the national market. This means that when the firm starts doing business on an
international scale, it refers to internationalization.

Internationalization of the companies and globalization of business, has given rise to

interdependency among firms and among countries. In this lesson, we will talk about
all the important differences between internationalization and globalization.

Comparison Chart

BASIS FOR
INTERNATIONALIZATION GLOBALIZATION
COMPARISON
Meaning Internationalization represents a process of Globalization refers to the mutual
developing products and services, to bring dependence of the countries across
about expansion into the foreign market. the world, facilitated by free trade
and remove of trade barriers.
Related to Firm and it's business Economy of the country and the
world
Affected by Taste, Preferences, Traditions, etc. Infrastructure, Telecom network,
logistics, etc.
Focus Expansion of the business. Free flow of goods and services,
people, and capital.
Results Increases the presence of the enterprise Removal of trade barriers, the
and pushes the world economy towards emergence of the open and free
globalization. market, increased migration, etc.

Definition of Internationalization

Internationalization refers to a process, to develop products in a manner which is capable of

fulfilling the requirements of customers of different countries. In
economics, internationalization implies a process in which an enterprise looks forward
to making its presence in different countries by opening branches or subsidiaries, so
as to cater to a wider area.

It includes all those activities which strengthen the bond between the company and the
international market. So, we can say that
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  Direct involvement of a domestic business enterprise in other countries and investment in
new trade, typically different from the existing one is called internationalization.
 It includes activities such as export, import, relocation of the business to a different
country, international transmission of know-how, foreign direct investment, etc.

It increases a firm’s trade and dealings at an international level. It is an expansion strategy used
by the companies who look for horizontal integration. The strategy is used when a company has
already tapped all the possible ideas to expand nationally, and now it takes steps to explore the
opportunities beyond the country’s geographical borders.

Although, there a number of obstacles in the path, which the country might encounter, at the time
of expansion, such as, it has to adhere to the strict international laws with respect to price,
quality, time-bound delivery and so forth.

Definition of Globalization

Globalization can be defined as an interactive and integrative process i.e. economic, social,
technological and cultural, which facilitates good relationship, among the individuals, firms and
governments, around the world, fostered by international trade and investment, assisted by
information and communication technology.

It involves the expansion and deepening of the economic system, in terms of free trade, free
market and free competition, at the level.

It explains the way in which trade and technology helped the world is becoming more connected
and interdependent. Further, it also determines the economic and social changes which occur due
to globalization. It has boosted the overall production and distribution of goods and services
worldwide. In this way, it increases economic activities, across the geographical boundaries,
without any barriers by the government of the countries.

Effects of Globalisation

 Rise in international trade.

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  Increase in multinational companies, i.e. now many companies have subsidiaries in
different countries.
 Free movement of goods and services, and capital.
 Higher dependence on the global economy.
 Access to the world market.
 Makes market homogenous by neutralizing the cultural differences in various societies.

The primary reasons to promote globalization is the improvement in transportation and

communication, free trade, availability of labour at low cost, etc. It tends to influence the
environment, culture, economic growth and development, political system, etc.

Key Differences Between Internationalization and Globalization

The difference between internationalization and globalization are discussed hereunder:

1. Internationalization is the process of developing adaptable products so that the products

can be viewed, distributed, purchased and consumed by a people belonging to different
cultures, which facilitates expansion. On the other hand, Globalization implies the
augmented geographical movements of the goods and services, money, knowledge,
cultural values, etc across the boundaries of the country.
2. Internationalization is all about the firm and its business because in this process the firm
aims to enter the international market and become a part of other countries. Conversely,
globalization has more to do with the world economy, as it tends to connect the economies
of the world for free trade and sync the rules and regulations of various nations.
3. Internationalization is highly affected by tastes, preferences, traditions, cultural and
religious values, climatic conditions, etc. of the country. As against, globalization,
telecommunication network, logistics, infrastructural development, availability of labour,
etc. are the important factors which affect globalization.
4. The primary aim of internationalization of business is expansion, whereas globalization aims
at free movement of goods and services, people, and capital.
5. Internationalization may result in increases in the presence of the enterprise and pushes
the world economy towards globalization. In contrast, globalization may result in the
removal of trade barriers, the emergence of the open and free market, increased migration,
etc.

Conclusion

The term ‘globalization’ refers to the growing interconnectedness and interdependence between
the world cultures and economies. On the other hand, when a firm sells its products cross border,
imports products from foreign countries, set up business in a foreign country, then the firm is said
to be in the process of internationalization.

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 THE ROLES AND FUNCTIONS OF UNITED NATION

Article 1 of the UN Charter states the following purposes:

1. To maintain international peace and security, and to that end: to take effective collective
measures for the prevention and removal of threats to the peace, and for the suppression
of acts of aggression or other breaches of the peace, and to bring about by peaceful
means, and in conformity with the principles of justice and international law, adjustment or
settlement of international disputes or situations which might lead to a breach of the
peace;
2. To develop friendly relations among nations based on respect for the principle of equal
rights and self-determination of peoples, and to take other appropriate measures to
strengthen universal peace;
3. To achieve international co-operation in solving international problems of an economic,
social, cultural, or humanitarian character, and in promoting and encouraging respect for
human rights and for fundamental freedoms for all without distinction as to race, sex,
language, or religion; and

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 4. To be a center for harmonizing the actions of nations in the attainment of these common
ends

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