Global Economy

The Structures Of Globalization

Learning Objectives
 Understand the key drivers of the global economy, including
factors such as trade, technology, and geopolitics
 Analyze the impact of global economies and trends on
individual countries and regions
 Evaluate the role of international organization like the IMF,
World Bank in shaping the global economic landscape
 Unit Two of the course delves into the complex structures that
shape international political and economic relations. It explores the
work of Susan Strange, who identified four foundational structures in
the international political economy: production and trade, money and
finance, security, and knowledge and technology. These structures are
described as intricate webs of rules, conventions, and norms
governing interactions among state and non-state actors. The unit also
examines institutions like the IMF, WB, GATT/WTO, and the UN,
their historical evolution, and the groups seeking to alter these
structures.
What is Globalization?
 Globalization involves the “broadening and depending of independence among
people and states” (Cohn, 2011: 6). It leads to an extension of geographic
linkages, encompassing societies and states also affect distant ones .

 Globalization is multidimensional phenomenon comprised of political, economic

and cultural feature To dismiss the multifaceted nature of globalization would be
inappropriate, the same goes as to how it would be incorrect to dismiss the
essential and crucial role that economic dimension plays in as much as it is a
driving force of globalization (Bencze 2014).

 Szentes (2003) defines economic globalization as the process of transforming the

world economy into an interconnected system, involving the spread of
transnational economic activities and interdependence among nations. Benczes
(2014) echoes this definition, emphasizing that understanding current economic
trends requires considering the global context of an integrated world economy.
Additionally, non-state actors, such as international organizations, NGOs, and
multinational corporations, play substantial roles in shaping international
economic processes.
The Post-World War II Economic System
The post-World War II economic system emerged from the Bretton Woods
Conference in 1944. Delegates from 44 nations gathered to create key
international economic organizations: the International Monetary Fund (IMF),
the World Bank, and the General Agreement on Tariffs and Trade (GATT).
These entities, collectively known as the Bretton Woods Institutions, aimed to
address issues like trade protectionism and exchange controls that had
contributed to the Great Depression and World War II. They played central
roles in global trade, development, and international relations, evolving over
time to adapt to contemporary monetary challenges. The Bretton Woods
institutions were known as keystone international economic organizations
(KIEOs) due to their central role in trade, development, and relations (Cohn,
2011: Jacobson and Oksenberg, 1990). The functions of these institutions will
be discussed in detail, as well as how their roles have changed contemporary
period.
The International Monetary Fund (IMF)
The International Monetary Fund (IMF), established in 1945, initially aimed
to maintain global monetary cooperation and stability by overseeing fixed
exchange rates linked to gold and the U.S. dollar. Its purpose was to prevent
competitive currency devaluations that led to trade conflicts in the interwar
period. When countries faced balance-of-payments deficits, they devalued their
currencies to boost exports and reduce import. The IMF's role involved offering
short-term loans to prevent devaluation and maintain fixed exchange rates during
temporary balance-of-payment deficits, promoting international financial
cooperation and trade. However, its role shifted in 1971 when the fixed-
exchange-rate system collapsed, and floating exchange rates became prevalent.
Instead of supporting countries with fixed exchange rates, the IMF focused more
on providing liquidity assistance to countries tied to major currencies.
The International Monetary Fund Role
The IMF's role involved offering short-term loans to prevent devaluation and
maintain fixed exchange rates during temporary balance-of-payment deficits,
promoting international financial cooperation and trade. However, its role shifted
in 1971 when the fixed-exchange-rate system collapsed, and floating exchange
rates became prevalent. Instead of supporting countries with fixed exchange rates,
the IMF focused more on providing liquidity assistance to countries tied to major
currencies.
International Bank for Reconstruction and the Development or
World Bank
International Bank for Reconstruction and
Development (the World Bank) was created to grant
long-term loans for the economic development of
less developed countries and the reconstruction of
war-torn countries in Europe. The World Bank today
is made up of two institutions. One is the
International Bank for Reconstruction and
Development (IBRD) which provides lending to
middle-income and creditworthy low-income
countries. The other is the International
Development Association (IDA) which grants
credits and loans to lowest- income countries.
World Bank 2 Institutions

 International Bank for Reconstruction and Development (IBRD) which

provides lending to middle-income and creditworthy low-income countries.

 International Development Association (IDA) which grants credits and loans

to lowest- income countries.
World Bank Role
The renewed role of the World Bank in the
modern economy is to reduce extreme poverty
while addressing the imperfections of global
capital markets continues to be secondary
importance (Clemens & Kremer, 2016). Donor
countries work with the Bank due to the
economies of scale brought by negotiating
agreements with recipient countries that involve
policy changes. Its policy influence is grounded
on the legitimacy and credibility enhanced by its
commitment to reducing poverty, along with its
technocratic staff and its status as a multilateral
organization (Clemens & Kremer, 2016).
Globalization Impact the different regions and economies around the
world. It has significantly reshaped the landscape of international trade and
finance. For instance, the rise of multinational corporations and the ease of cross-
border transactions have led to increased global trade. A prime example is China's
economic transformation, as it became the "world's factory" by embracing
globalization and exporting goods to the global market.

Globalization Challenges one major concern is income inequality.

While globalization has brought economic growth to many regions, it has also
exacerbated income disparities within and between countries. This is evident in
the growing wealth gap in many developed nations.
Conclusion
In conclusion, the global economy is a dynamic and evolving system that
faces both opportunities and challenges. Adapting to changing circumstances,
addressing economic inequalities, and pursuing sustainable growth are
essential for a prosperous and stable global economic future. International
cooperation and innovative solutions are key to navigating the complexities of
our interconnected world.
Takeaways
Understanding the global economy and globalization is paramount in today's
interconnected world.

The IMF and World Bank is essential for policymakers, businesses, and
individuals to recognize both the benefits and challenges that globalization
presents.

While it can stimulate economic growth and innovation, it can also exacerbate
inequalities and erode cultural diversity.

To navigate the global economy effectively, we must find ways to harness its
advantages while addressing its shortcomings, with an eye toward sustainable and
equitable development.
Thank You for Listening!!!