MODULE

Structures of Globalization
3 The Global Economy

Lesson Objectives:
At the end of this lesson, you should be able to:
1. define economic globalization
2. identify the actors that facilitate economic globalization
3. define the modern world system
4. articulate a stance on global economic integration

Definition of Terms

 Economic globalization is the expansion of national economies, the global market driven by modern
technologies and institutional set ups that promote faster and easier flow of goods and capital (Sugden
and Wilson, 2005).
 Global economy denotes that the economies of various countries are more interconnected from
extraction, production, distribution, and consumption, to disposal of goods and services (Carfi and
Schilirò, 2018).
 International Financial Institutions are global financial institutions that support a country's economic
growth through support (i.e., loans, technical assistance) to governments and now other private
sectors (Wood, 2019).
 International Monetary Fund is an international organization with 183 member countries that
promotes international monetary cooperation and exchange stability to foster economic growth and
high employment and to provide short-term financial assistance to countries to help ease balance of
payments adjustments (IMF, 2019).
 Global Civil Society is a system of nongovernment institutions that operate across geographical
borders and organize and mobilize for a common issue or cause (Keane, 2003).
 Global Corporation is an “enterprise that engages in activities which add value (manufacturing,
extraction, services, marketing, etc.) in more than one country” (UCIC 1991).
 World System is based on the theory of Wallerstein (1974) that recognizes that social and economic
change is not only endogenous to a county, but is affected by its interaction to exogenous institutions
thus the focus on world systems (Chase Dunn, 2018).
 Economic Integration is a process of combining or increasing the interconnectivity of national
economies to the regional or global economies (Clark et al, 2018).

INTRODUCTION
As discussed in the earlier section, central to the discussion about globalization is its economic dimension.
The phenomenon of economic globalization includes greater integration of economic activities, products, and
systems across the world. As Szentes (2003 69) argues, globalization in economic terms extends economic
projects and relations transnationally and promotes economic interdependencies among different countries.

It is important to note that economic globalization goes beyond internationalization. Economic globalization
involves the integration of functions and processes of economic activities (Dicken 2004). This means that
economic integration requires not just having an international consumer or exporting goods from one country to
another, but also involves creating institutions for market integration and globalization.

In this section, we will deepen our discussion on economic globalization. Specifically, this lesson aims to
answer, "Who are the actors that drive economic globalization" and "What is the modern world system?" At the
end of this lesson the students should also express their stance on the ongoing global economic integration.

DEFINITION OF ECONOMIC GLOBALIZATION

Most of the definitions of globalization centers on its economic dimensions. Economic globalization is
driven by the “growing scale of cross-border trade of commodities and services.” (Shangquan, 2000.) Critical to
economic globalization is global economic integration. Economic integration means that separate production
operations are functionally related to each other and form a unified product or service This requires efficient
management of economic operations from different areas in the world. In current times, this is made possible by
innovations in transport logistics, modernization of communication and transport systems, policies supporting
integration of different process along the globe, among others.

The various definitions of the economic globalization focus on increasing economic trade interrelations
among countries (Steger, 2010; Al-Rodhan, et al., 2006; Shangquan, 2000) This is governed by neoliberal
principles with the role of the market as a central driver of economic activities with less government
interventions (Martin, Schumann & Camiller, 1997). Economic globalization entails global industrial restructuring
and readjustments where developed countries play a dominant role (Shangquan, 2000:3).

However, the process of global economic integration is not a modern phenomenon. The voyages of earlier
explorers including the formation of empire (i.e., Roman Empire) were critical in intercontinental trade and were
also a precursor of modern economic globalization. Chinese, and even earlier, trades in Asia also serve as first-
forms of economic expansion and later integration. Gills and Thompson (2006:1) argues that the globalization
processes “have been ongoing ever since Homo sapiens began migrating from the African continent ultimately
to populate the rest of the world.” Explorations in earlier times tend to focus on a relatively smaller target of
commodities of high value like spices tea, gold, or other precious metals. The difference now is the extent and
reach of economic globalization, restructuring of economic systems, and the dominant influence of the private
sector in the global economy (Shangquan 2000).

Who are the Actors that Facilitate Economic Globalization?

Globalization has opened the doors for other non-state authority and actors in driving economic
globalization (Madsen & Christensen, 2016; Sassen, 2006). Non-state actors include international economic
organizations, private sector led by multinational companies, central banks, and civil society. Let us discuss
how each actor contributes to economic globalization.

First are international economic organizations such as the International Monetary Fund (IMF), World Bank
and Organization for Economic Cooperation and Development (OECD). These organizations are critical in
developing and pushing for neoliberal policies among different countries. They also help facilitate trade and
development discussions among various states. Other examples are regional organizations such as the
Association of Southeast Asian Nations (ASEAN) and North American Free Trade Agreement (NAFTA). These
organizations promote regional agreements and standards that facilitate better trade and exchange of
knowledge, human resources, and regional cooperation. The Group of G8 and G20 are advisory organizations
that discuss current economic and political problems and transfer the ideas from the groups’ forum to national
legislative regulations (Shangquan, 2000:280).

Second are multinational companies (MNCs) which are considered to be the main carriers of economic
globalization (Shangquan 2000:2). In 1996, there were 44,000 MNCS in the world with 280,000 overseas
subsidiaries and branch offices (ibid). In 2006, there were 88,000 MNCS identified (UNCTAD 2007). In earlier
times, trade companies such as the Dutch and British East India, Muscovy Company, Royal African Company,
and Hudson Bay Company were precursor of the modern day MNCS (Hirst & Thompson 2002). MNCs started
to emerge during World War II when US industrial production increased by 44 percent (Strange, 1996).

Other prime movers of economic globalization are central banks. They are considered one of the most
powerful institutions in the world economy since they can lead economic development, and some authors
contend that central bank governors are more influential in their own national economy than some politicians
(Shangquan, 2000:280).

Lastly, is the global civil society as a major driver of economic globalization The global civil society has
made its mark in global development arena particularly during the UN Conference on Environment and
Development in 1992 (Keane, 2003). Global civil society seen as either composed of individuals or groups of
individuals disadvantaged by the effects of the globalization of the world economy, they protest and seek
alternatives while on the other hand, global social movement constituting a basis for an alternative to a new
world order (Gherghe, n.d.). Part of the global civil society are Transnational Advocacy Networks (TAN)
networks which are “organized to promote causes principled ideas and norms, and they often involve
individuals advocating policy changes that cannot be easily linked to a rationalist understanding of their
interests” (Keck & Sikking, 1998 8-9).
 International Monetary Fund (IMF)
The IMF is an international organization of 183 member countries to promote international monetary
cooperation and exchange stability; to foster economic growth and high employment; and to provide short-term
financial assistance to countries to help ease balance of payments adjustments (IMF 2019).

International Financial Institutions (IFIs)

The generic name given to all financial institutions operating on an international level, ranging from
development banks, such as the World Bank and the European Bank for Reconstruction and Development
(EDB) and monetary authorities, such as the International Monetary Fund. These organizations give loans to
governments for large-scale projects, restructuring and balance of payments on condition that they make
specific changes that IFIs believe will boost economic growth (Shangquan, 2000).

Transnational Corporations
“Enterprise that engages in activities which add value (manufacturing, extraction, services, marketing, etc.)
in more than one country (UCTC 1991).”

G8 and G20
These are group of nations that serve as an advisory organization that discuss current economic and
political problems and transfer the ideas from the forum in national legislative regulations (Weiss, 2018).

Global Civil Society

Either composed of individuals or groups of individuals disadvantaged by the effects of the globalization of
the world economy, they protest and seek alternatives while on the other hand, global social movement
constituting a basis for an alternative to a new world order (Gherghel, n.d.; Keane, 2003)

What is the Modern World System?

The seminal work of Immanuel Wallerstein on the world-system theory (1974) is a circular reference in the
theorization of globalization. In this work, he expounded on the theory on how the core came to dominate the
periphery areas particularly in the economic world system as a basis of his analysis. Thesis transgresses from
the traditional analysis of colonization with nation-state as starting point.

For Wallerstein, a world system constitutes a social system composed of boundaries, structures, member
groups, rules of legitimation, and coherence (Wallerstein, 2011). World economy, according to Wallerstein
(2011) is divided into core states and peripheral areas including semi-peripheral. According to the world system
theory, the peripherals are mostly where production or raw materials are sourced out, while the semi-
peripherals processed or distributed the products to the core areas – sites of major demands for goods and
services (Wallerstein 2011). There are significant and meaningful movements of resources, products, people in
different economies facilitated by modern transport and communication (Chase-Dunn, 2018).

Task:

1. How do you think economic globalization affects the community?

Make a survey in your barangay

1. Where are most of the services and community activities concentrated? How about the population?
2. Where do the people commonly source the food? Do they produce their own food or import from other
areas? If sourced out, how far from the city center are these food production centers?
3. Where do people usually work? What types of work are available in the city center? Nearby towns?

SUMMARY

This lesson sets out to answer the following questions “what is economic globalization?", “who are the
actors that drive economic globalization?”, and what is the modern world system?"
1. Economic globalization is the expansion of national economies the global market driven by modern
technologies and institutional set ups that promote faster and easier flow of goods and capital (Sugden &
Wilson, 2005) The global economy is a product of this economic globalization where each countries
economies are more interconnected and affected by each other.
2. There are different actors and institutions that drive economic globalization, most of which are non-state
actors. These include international economic organizations like IMF, WB, ADB; central banks; private
sectors led by MNCs; and civil society. These organizations affect trade and economic policies and serve
as source of support (funds, services, technical) for economic globalization.
3. The modern world system is based on the theory of Wallerstein (1974), which posited that the global
economy is divided into the core, semi periphery and periphery. The core is the center of economic
 activities where most of the population lives and economic institutions and services are based. However,
majority of the raw materials and productions are done or sourced out in the periphery. The semi-periphery
areas serve as distributors or add value to the raw materials by processing them for the core areas.

ASSESSMENT
For this lesson, you will participate in a debate that aims to provide a platform where you could voice your
beliefs and perceptions on economic globalization. This activity will be useful in understanding the nuances of
economic globalization to producers as well as consumers.

Divide yourselves into different groups. Each group will prepare their arguments for or against the motion,
“That global free trade has done more harm than good.”

Be familiar with debate rules prior the actual conduct of the debate. In this exercise, you will be able to
communicate as well as collaborate with your team members on researching about the topic and developing
arguments in behalf of the team.

Bases for Grading:

1. Students were able to incorporate key concepts discussed in this lesson.

2. Students were able to articulate clearly and logically their points.
3. Students were able to present evidence in their presentation.

This activity will be the TASK PERFORMANCE for MT.

Other details will be discussed during class discussion.