In the name of the Father and of the Son and of the Holy Spirit.
Amen
Creator of all things,
true Source of light and wisdom,
lofty origin of all being,
graciously let a ray of Your brilliance
penetrate into the darkness of our understanding
and take from us the double darkness
in which we have been born,
the obscurity of both sin and ignorance.
Give us a sharp sense of understanding,
a retentive memory,
and the ability to grasp things correctly and fundamentally.
Grant us the talent of being exact in our explanations,
and the ability to express ourselves with thoroughness and charm.
Point out the beginning, direct the progress, and help in the completion;
through Christ our Lord.
Amen.
Dimensions of globalization
Chapter 3- Economic dimension
Chapter 4- Political dimension
Chapter 5- Cultural dimension
Economic
dimension
Economic dimension
• Economic globalization refers to the
intensification and stretching of
economic connections across the globe.
• Markets have migrated to cyberspace
and integrated local, national, and
regional economies.
Economic dimension
• MAJOR BUILDING BLOCKS OF THE 21ST CENTURY’S
GLOBAL ECONOMIC:
•transnational corporations (TNCs)
•powerful international economic institutions
•gigantic regional business and trade networks like Asian
Pacific Economic Cooperation (APEC) or the European
Union (EU)
Economic dimension
• THE EMERGENCE OF THE GLOBAL ECONOMIC ORDER
• Contemporary economic globalization can be traced back to
the gradual emergence of a new international economic
order assembled at an economic conference held towards the
end of the Second World War in the sleepy New England
town of Bretton Woods.
• Under the leadership of the United States and Great Britain,
the major economic powers of the global North reversed
their protectionist policies of the interwar period (1918–39).
Economic dimension
•AGREEMENTS:
• commitment to expand international trade
•establish binding rules on international economic
activities
•create a more stable monetary exchange system in
which the value of each country’s currency was
pegged to a fixed gold value of the US dollar
Economic dimension
•BEAR IN MIND:
• individual nations were free to
control the permeability of their
borders
•national governments set their own
political and economic agendas
Economic dimension
• 3 INTERNATIONAL ECONOMIC ORGANIZATIONS
ESTABLISHED AFTER BW:
• International Monetary Fund (IMF)
• created to administer the international monetary system
• International Bank for Reconstruction and Development (World Bank)
• initially designed to provide loans for Europe’s postwar
reconstruction
• 1950s:purpose was expanded to fund various industrial projects in
developing countries around the world
Economic dimension
• 3 international economic organizations established
after BW:
• General Agreement on Tariffs and Trade (GATT)-1947
• global trade organization charged with fashioning and enforcing
multilateral trade agreements
• 1995: World Trade Organization (WTO) was founded as the
successor organization to GATT.
• WTO had become the focal point of intense public controversy over
the design and the effects of economic globalization
Economic dimension
• The Bretton Woods regime contributed greatly to the
establishment of what some observers have called the
‘golden age of controlled capitalism’.
• In the early 1970s, however, the Bretton Woods system
collapsed when President Richard Nixon abandoned the
gold-based fixed rate system in response to profound
political changes in the world that were undermining the
economic competitiveness of US-based industries.
Economic dimension
•RESULT:
• global economic instability in the form:
• high inflation
• low economic growth
• high unemployment
• public sector deficits
• energy crises
• the Organization of Petroleum Exporting Countries (OPEC)’s has
the ability to control a large part of the world’s oil supply
Economic dimension
•In the 1980s, British Prime Minister Margaret
Thatcher and US President Ronald Reagan emerged
as the co-leaders of the ‘neoliberal’ revolution
against Keynesianism
•RECALL:
•British economist John Maynard Keynes was one of
the chief architects of the Bretton Woods system.
Economic dimension
Economic dimension
Economic dimension
• THREE MOST SIGNIFICANT DEVELOPMENTS RELATED
TO ECONOMIC GLOBALIZATION:
•internationalization of trade and finance
•increasing power of transnational corporations and
large investment banks
•enhanced role of international economic institutions
•IMF
•World Bank
•WTO.
Economic dimension
• major global economic setbacks: THE ERA OF GLOBAL
ECONOMIC VOLATILITY
• THREE CRUCIAL MILESTONES:
• 2008/9 and the ensuing Great Recession
• European debt crises that came to a climax in the 2015
Greek government debt crisis
• China’s economic slowdown reflected in the 2016 plunge of
its stock markets
Economic dimension
1. INTERNATIONALIZATION OF TRADE AND FINANCE
Many people associate economic globalization with
the controversial issue of free trade.
The total value of world trade exploded from $57
billion in 1947 to an astonishing $18.5 trillion in
2015
Economic dimension
1. INTERNATIONALIZATION OF TRADE AND FINANCE
The alleged benefits and drawbacks of free trade
rages at a feverish pitch as wealthy Northern
countries and regional trading blocs have increased
their efforts to establish a single global market
through far-reaching trade-liberalization
agreements.
Economic dimension
1. INTERNATIONALIZATION OF TRADE AND FINANCE
The proponents have nonetheless assured the public that the
elimination or reduction of existing trade barriers among nations will
increase global wealth and enhance consumer choice
The ultimate benefit of integrated marketswould be secure peaceful
international relations and technological innovation for the benefit of
all
Economic dimension
1. INTERNATIONALIZATION OF TRADE AND FINANCE
internationalization of trade has gone hand in hand with
the liberalization of financial transactions
KEY COMPONENTS:
1. deregulation of interest rates
2. removal of credit controls
3. privatization of government-owned banks and
financial institutions
4. explosive growth of investment banking.
Economic dimension
1. INTERNATIONALIZATION OF TRADE AND FINANCE
•Globalization of financial trading allows
for increased mobility among different
segments of the financial industry, with
fewer restrictions and greater investment
opportunities.
Economic dimension
2. POWER OF TRANSNATIONAL CORPORATIONS AND INVESTMENT BANKS
TNCs are powerful enterprises comprising the parent company
and subsidiary units in more than one country, which all operate
under a coherent system of decision making and a common
strategy.
Their numbers skyrocketed from 7,000 in 1970 to over 100,000
in 2015. Enterprises like General Motors, Wal-Mart, Exxon-
Mobil, Mitsubishi, and Siemens belong to the 200 largest TNCs,
which account for over half of the world’s industrial output.
Economic dimension
2. POWER OF TRANSNATIONAL CORPORATIONS AND INVESTMENT BANKS
None of these corporations maintains headquarters
outside North America, Mexico, Europe, China,
Japan, and South Korea.
This geographical concentration reflects existing
asymmetrical power relations between the North
and the South.
Economic dimension
2. POWER OF TRANSNATIONAL CORPORATIONS AND INVESTMENT BANKS
Rivalling nation-states in their economic power, these
corporations control much of the world’s investment
capital, technology, and access to international markets.
In order to maintain their prominent positions in the
global marketplace, TNCs frequently merge with other
corporations.
Economic dimension
2. POWER OF TRANSNATIONAL CORPORATIONS AND INVESTMENT BANKS
TNCs have consolidated their global operations in an
increasingly deregulated global labor market.
The availability of cheap labor, resources, and
favorable production conditions in the global South
has enhanced corporate mobility and profitability.
Economic dimension
2. POWER OF TRANSNATIONAL CORPORATIONS AND INVESTMENT BANKS
TNCs disperse manufacturing processes into many
discrete phases carried out in many different
locations around the world reflects the changing
nature of global production.
Such transnational production networks allow them
to produce, distribute, and market their products on
a global scale.
Economic dimension
2. POWER OF TRANSNATIONAL CORPORATIONS AND INVESTMENT BANKS
At the end of the day, the growing power of TNCs
has profoundly altered the structure and
functioning of the international economy.
These giant firms and their global strategies have
become major determinants of trade flows, the
location of industries, and other economic activities
Economic dimension
3. ENHANCED ROLE OF INTERNATIONAL ECONOMIC INSTITUTIONS
The three international economic institutions most frequently
mentioned in the context of economic globalization are the
IMF, the World Bank, and the WTO.
These three institutions enjoy the privileged position of
making and enforcing the rules of a global economy that is
sustained by significant power differentials between the global
North and South.
Economic dimension
3. ENHANCED ROLE OF INTERNATIONAL ECONOMIC INSTITUTIONS
In return for supplying much-needed loans to developing countries, the
IMF and the World Bank demand from their creditor nations the
implementation of so-called ‘structural adjustment programmes’.
Unleashed on developing countries in the 1990s, this set of neoliberal
policies is often referred to as the ‘Washington Consensus’.
It was devised and codified by John Williamson, who was an IMF adviser
in the 1970s.
Economic dimension
3. ENHANCED ROLE OF INTERNATIONAL ECONOMIC INSTITUTIONS
The official purpose of the document was to reform the internal
economic mechanisms of debtor countries in the developing world so
that they would be in a better position to repay the debts they had
incurred.
In practice, however, the terms of the programme spelled out a new
form of colonialism.
Economic dimension
3. ENHANCED ROLE OF INTERNATIONAL ECONOMIC INSTITUTIONS
The ten points of the Washington Consensus, as defined by Williamson, required
governments to implement the following structural adjustments in order to qualify for
loans:
1. A guarantee of fiscal discipline, and a curb to budget deficits.
2. A reduction of public expenditure, particularly in the military and public
administration.
3. Tax reform, aiming at the creation of a system with a broad base and with effective
enforcement.
4. Financial liberalization, with interest rates determined by the market.
5. Competitive exchange rates, to assist export-led growth.
Economic dimension
3. ENHANCED ROLE OF INTERNATIONAL ECONOMIC INSTITUTIONS
The ten points of the Washington Consensus, as defined by Williamson, required
governments to implement the following structural adjustments in order to qualify for
loans:
6. Trade liberalization, coupled with the abolition of import licensing and a reduction
of tariffs.
7. Promotion of foreign direct investment.
8. Privatization of state enterprises, leading to efficient management and improved
performance.
9. Deregulation of the economy.
10. Protection of property rights.
Economic dimension
3. ENHANCED ROLE OF INTERNATIONAL ECONOMIC INSTITUTIONS
Unfortunately, large portions of the ‘development loans’ granted by these
institutions have either been pocketed by authoritarian political leaders in
the global South or have enriched local businesses and the Northern
corporations they usually serve.
Sometimes, exorbitant sums are spent on ill-considered construction
projects.
Most importantly, structural adjustment programmes rarely produce the
desired result of ‘developing’ debtor societies, because mandated cuts in
public spending translate into fewer social programmes, reduced educational
opportunities, more environmental pollution, and greater poverty for the
vast majority of people.
Economic dimension
In a nutshell, this chapter has shown, economic
perspectives on globalization can hardly be
discussed apart from an analysis of political process
and institutions.
The intensification of global economic
interconnections does not simply fall from the sky;
rather, it is set in motion by a series of political
decisions.
Economic dimension
Hence, while acknowledging the importance of economics in
our story of globalization, this chapter nonetheless ends with
the suggestion that we ought to be skeptical of one-sided
accounts that identify expanding economic activity as the
primary aspect of globalization.
Rather, the impact of politics on the forging of global
interconnectivity demands that we flesh out in more detail the
political dimension of globalization.
•