THE CONTEMPORARY WORLD (GNED 07)
Lecture 1
INTRODUCTION
Much
has
changed
since
immemorial.Human
beings
have
encountered many changes over the last
century
especially
in
their
social
relationships and social structures. Of these
changes, one can say that globalization is a
very important change, if not, the “most
important” (Bauman, 2003).
What is Globalization?
● Onset of the borderless world
(Ohmae, 1992). – Board and
Inclusive.
● The
characteristics
of
the
globalization trend include the
internationalization of production,
the new international division of
labor, new migratory movements
from South to North, the new
competitive
environment
that
accelerates these processes, and the
internationalization of the state,
making states into agencies of the
globalizing
world
(Rawoo
Netherlands Development Assistance
Research council, 2000). – Narrow
and Exclusive.
Metaphors of Globalization
Metaphors make use of one term to
help us better understand another term.
Solid – Is a barrier that prevents or makes it
difficult to move things. Solids can either be
natural or man – made.
Natural solids – Ex. Landforms and
THE CONTEMPORARY WORLD (GNED 07)
bodies of water.
Man – made solid – Ex. Great wall
of China and Berlin wall.
However this may have a tendency
to melt. This process involves how we can
describe what is happening in today’s global
world and it is becoming increasingly liquid.
Liquid – It refers to the increasing ease of
movement of people, things, information,
and places in the contemporary world.
Ex. Videos uploaded on YouTube or
Facebook are unstoppable once they become
viral.
Ex. The internet sensation becomes
famous not only in their homeland
but also to the entire world.
Metaphors of Globalization
● Liquidity and Solidity are in constant
interaction. However, liquidity is the
one increasing and proliferating
today.
● Globalization can be best described
as liquidity.
Flows
These are the movements of people , things,
places, and information brought by the
growing “porosity” of global limitations
(Ritzer, 2015).
Ex. Different foreign cuisines are being
patronized and consumed by the Filipinos,
aside from local dishes, many of us are fond
of eating sushi, ramen, hamburger, and
French fries – This are foods that are
introduced to us by foreign cultures.
Topic 01: The Global Economy
WHAT IS ECONOMIC GLOBALIZATION?
➡ international exchange of goods and services
➡ widespread international movement of goods, capital, services, technologies, and information
➡ increasing interdependence of world economies as a result of the growing scale of crossborder trade of commodities and services, flow of international capital and wide and rapid
spread of technologies
ACTORS THAT FACILITATE ECONOMIC GLOBALIZATION
1. International governmental organizations (IGOs)
➡ involving two or more nations, working on issues of common interest, such as peace and
security, human rights, and official languages, e.g., The United Nations, The World Bank, etc.
2. International non-governmental organizations (INGOs)
➡ also known as voluntary organizations
➡ include charities, non-profit advocacy groups, business associations, and cultural associations,
e.g., Human Rights Watch, Greenpeace, World Vision International, etc.
3. Businesses
➡ relying on outsourcing and subcontracting across vast geographical spaces, as supply chains
are global and intermediate products are produced.
➡ firms that engage in inter-firm alliances and rely on foreign research and
development
➡ innovations in communications and transportation technology
➡ learning the tools to effectively interact in a culturally agile way with people of many diverse
cultural backgrounds.
4. Migrants
➡ Communities of migrants in the destination country often provide new arrivals with
information and ideas about how to earn money. In some cases, this has resulted in
disproportionately high representation of some ethnic groups in certain industries, especially if
economic success encourages more people to move from the source country.
➡ Movement of people also spreads technology and aspects of business culture, and moves
accumulated financial assets.
THE MODERN WORLD SYSTEM
➡ The modern world-system is a capitalist world-economy which is the geo historical system in
which we live. The basic geo history is that it was constructed in Europe in the "long" 16th
century and expanded to cover the whole world.
➡ World-systems theory is a multidisciplinary approach to world history and social change
which emphasizes the world-system as the primary unit of social analysis.
REPORTERS OPINION ON GLOBAL ECONOMIC INTEGRATION
1. Factors Driving Global Economic Integration
- by Michael Mussa, Economic Counselor and Director of Research
➡ Global economic integration is not a new phenomenon. Trade took place between distant
civilizations even in ancient times. Through trade, factor movements and communication of
economically useful knowledge and technology-has been on a generally rising trend. This
process of globalization in the economic domain has not always proceeded smoothly.
2. Global Economic Integration: What's New and What's Not?
- by Chairman Ben S. Bernanke
➡ The remarkable economic integration changes that we observe today are being driven by the
same basic forces and arehaving similar effects as in the past. Most importantly, technological
advances continue to play an important role in facilitating global integration.
3. Further progress in global economic integration should not be taken for granted, however.
Geopolitical concerns, including international tensions and the risk of terrorism, already
constrain the pace of worldwide economic integration.
Definition of Some Terms:
Outsourcing - process of producing goods and services from outside suppliers or
companies
Subcontracting - act of hiring another person to take part in one's job
THE CONTEMPORARY WORLD (GNED 07)
Topic 02: Market Integration
INTRODUCTION
Economy is the social institution that has the biggest impact on society. We usually think
of the economy in terms of numbers-number of unemployed, GDP, or how the stock market is
doing today. While we often talk about it in numerical terms, the economy is composed of
people. The people is the social institution that organizes everything happening in the society;
production, consumption, and trade of goods.
WHAT IS MARKET INTEGRATION?
Market integration is the fusing of many markets into one. Global Market Integration
means that price differences between countries are eliminated as all markets become one.
WHAT IS INTERNATIONAL FINANCIAL INSTITUTIONS?
The International Financial Institutions (IFIs) are major providers of financial and
technical assistance to developing nations and are essential for fostering both global stability and
economic growth.
ROLES OF INTERNATIONAL FINANCIAL INSTITUTIONS
●
Provides financial support and assistance to developing countries
●
Promotes international economic cooperation and stability
●
Gives professional advice for economic and social development activities to developing
countries
BEST KNOWN INTERNATIONAL FINANCIAL INSTITUTIONS
●
●
●
World Bank
International Monetary Fund
International Finance Corporation
WORLD BANK
A global financial institution founded in 1944 at the end of World War II to assist in
providing long-term funding for the development and reconstruction of member nations.
For initiatives involving billions of dollars in economic growth, it handles a large portion
of the planning and financing.
The world bank is the largest provider of development aid in the world, lending
approximately $30 billion to it’s client it’s client nation each year
The World Bank Group has two ambitious goals: End extreme poverty within a
generation and boost shared prosperity.
MULTILATERAL DEVELOPMENT BANKS
●
●
●
●
●
●
European Investment Bank (EIB)
Asian Development Bank (ADB)
European Bank for Reconstruction and Development (EBRD)
Inter-American Development Bank Group (IDB, IADB)
African Development Bank (AfDB)
Islamic Development Bank (IsDB)
THE 2030 AGENDA FOR SUSTAINABLE DEVELOPMENT
“A world of universal respect for human rights and human dignity, the rule of law,
justice, equality and non-discrimination”
The 2030 Agenda for Sustainable Development was launched by a UN Summit in New
York on September 25-27, 2015 and is aimed at ending poverty in all its forms. The Global
Goals and the 2030 Agenda for Sustainable Development seek to end poverty and hunger, realize
the human rights of all, achieve gender equality and the empowerment of all women and girls,
and ensure the lasting protection of the planet and its natural resources.
SHORT HISTORY OF GLOBAL MARKET INTEGRATION IN THE 21ST CENTURY
Global market integration began when large American companies began to emerge after
the second world war. International telegraph buys Avis car rental, hotel Sheraton, continental
banking, and more. Then, Japan and Europe followed suit. Japan's global automotive company
took off after the giant American company developed. These companies prospered as major and
global truck makers for the Japanese military (Dower, 1992).
The French multinational automaker, Renault Car, was used to assist post-war military
operations. The emergence of Japanese, American and European global companies paved the
way for a more continuous development of international trade.
The integration of the global market started when big American corporations began to
emerge after the Second World War with the rise of new conglomerates. International Telephone
and Telegraph bought Avis Rent-a Car, Continental Banking, Sheraton Hotels, and Hartford Fire
Insurance (American History,2018). Later, Japan and Europe followed suit. Japanese global
automobile corporations like Toyota, Nissan, and Isuzu took off after the giant American
economies flourished. These companies prospered as the primary and global makers of trucks for
the Japanese military (Dower 1992). Renault automobiles, a French multinational automobile
manufacturer, was also used to help in the military post-war operations. The rise of American,
Japanese, and European global corporations paved the way for the further development of
international trade. Harvey (1990) sees that cities and countries were able to extend their reach
beyond borders and patterns of trade and technology because of the developments in shipping
and navigation which was observable in the development of maritime transport throughout
history.
GLOBAL CORPORATION
A corporation is an artificial being created by operation of law, having the right of
succession and the powers, attributes and properties expressly authorized by law or incident to its
existence (Batas Pambansa Blg. 68 The Corporation Code of The Philippines, Section 2 –
Corporation defined).
According to Investopedia, a corporation is a legal entity that is separate and distinct
from its owners. Corporations enjoy most of the rights and responsibilities that an individual
possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue
and be sued, hire employees, own assets and pay taxes.
Based on Entrepreneur Asia Pacific Small Business Encyclopedia, corporation is a form
of business operation that declares the business as a separate, legal entity guided by a group of
officers known as the board of directors
THE BIRTH OF GLOBAL CORPORATIONS
Earliest forms of Global Corporations (Religious and Mercantile Sectors
●
Roman Catholic Church as the religion of the Roman Empire during the 4th Century AD.
It sought monopoly of spiritual power against both paganism and other religious faiths in
those territories that came under its influence.
●
Muscovy Company, also called Russia Company, body of English merchants trading
with Russia. The company was formed in 1555 by the navigator and explorer Sebastian
Cabot and various London merchants and was granted a monopoly of Anglo-Russian
trade. It was the first English joint-stock company in which the capital remained regularly
in use instead of being repaid after every voyage.
●
The British East India Company, founded in 1600, and The Dutch East India Company,
founded in 1602, are often called the first multinational corporations. Headquartered in
England and the Netherlands, respectively, these firms were set up to trade goods such as
cotton and spices over a large portion of South and Southeast Asia, then called the East
Indies. The Dutch East India Company very quickly became the wealthiest and largest
mercantile organization the world had ever seen; by 1669 it had 150 merchant ships, 40
warships, 50,000 employees and a private army of 10,000 soldiers, and paid dividends of
40 per cent per annum.
●
Dutch West-Indische Compagnie byname of West India Company, a Dutch trading
company, founded in 1621 mainly to carry on economic warfare against Spain and
Portugal by striking at their colonies in the West Indies and South America and on the
west coast of Africa. The Dutch West India Company was much less successful than the
Dutch East India Company, its counterpart in Southeast Asia
THE CONTEMPORARY GLOBAL CORPORATIONS
A global corporation is generally referred to as a multinational corporation (MNC),
transnational corporation (TNC), international company.
An enterprise that engages in activities which add value (manufacturing, extraction,
services, marketing, etc) in more than one country (United Nations Centre On Transnational
Corporations, 1991).
MNCs place multiple production facilities in multiple countries under the control of a
single corporate structure (Oatley, International Political Economy 5th Edition).
A multinational corporation (MNC) is a company that operates in more than one country.
Generally, multinational corporations consist of separate companies (called subsidiaries) in
different countries, all of which answer to a central office located in the firm’s home country
(Riggs, Everyday Finance: Economics, Personal Money Management, and Entrepreneurship)
A HISTORICAL EVENTS FOR GLOBAL CORPORATION
World Trade Organization (WTO) is an international organization established on January
1, 1995 under the Marrakesh Agreement after the Uruguay Round (1986–94) of multilateral
trade negotiations. WTO’s role is to supervise and liberalize world trade. The WTO is the
successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947 in
the expectation that it would soon be replaced by a specialized agency of the United Nations
(UN) to be called the International Trade Organization (ITO). Although the ITO never
materialized, the GATT proved remarkably successful in liberalizing world trade over the next
five decades. By the late 1980s there were calls for a stronger multilateral organization to
monitor trade and resolve trade disputes.
ACTIVITIES OF GLOBAL CORPORATIONS
●
International companies are importers and exporters, typically without investment outside
of their home country;
Multinational companies have investment in other countries, but do not have coordinated
product offerings in each country. They are more focused on adapting their products and
services to each individual local market.
● Transnational companies are more complex organizations which have invested in foreign
operations, have a central corporate facility but give decision-making, research and
development (R&D) and marketing powers to each individual foreign market.
●
TACTICS OF GLOBAL CORPORATIONS
Foreign Direct Investment occurs when a firm based in once country builds a new plant
or a factory or purchases existing one in a second country a national corporation thus becomes an
MNC by making a foreign direct investment. As a consequence, the world's stock of FDI, the
total amount of foreign investment in operation has grown from 692.5 billion dollars in 1980 to
16.2 trillion dollars in 2008 (United Nations Conference on Trade and Development 2009,251)
2,300 percent increase in less than 30 years.
●
Types of FDI
1. Horizontal Integration occurs when firms create multiple production facilities each of
which produces the same goods. Firms integrate horizontally when a cost advantage
is gained by placing a number of plants under common administrative control.
Intangible assets can be based on a patented process or design. These assets are
difficult to sell to other firms at a price that accurately reflect their true value that's
why firms horizontally integrate.
2. Vertical integration refers to instances in which firms internalize their transaction for
intermediate goods. An intermediate good is an output of one production process that
serves as an input into another production process. Specific asset is an investment that
is dedicated to a particular long-term economic relationship. By internalizing
transactions involving specific assets, therefore, vertical integration enables welfareimproving investments.
CONTRIBUTION OF GLOBAL CORPORATIONS
The possible benefits of a multinational investing in a country may include:
●
Improving the balance of payments - inward investment will usually help a country's
balance of payments situation. The investment itself will be a direct flow of capital into
the country and the investment is also likely to result in import substitution and export
promotion. Export promotion comes due to the multinationals using their production
facility as a basis for exporting, while import substitution means that products previously
imported may now be bought domestically.
●
Providing employment - FDI will usually result in employment benefits for the host
country as most employees will be locally recruited. These benefits may be relatively
greater given that governments will usually try to attract firms to areas where there is
relatively high unemployment or a good labor supply.
●
Source of tax revenue - profits of multinationals will be subject to local taxes in most
cases, which will provide a valuable source of revenue for the domestic government.
●
Technology transfer - multinationals will bring with them technology and production
methods that are probably new to the host country and a lot can therefore be learnt from
these techniques. Workers will be trained to use the new technology and production
techniques and domestic firms will see the benefits of the new technology. This process
is known as technology transfer.
●
Increasing choice - if the multinationals manufacture for domestic markets as well as for
export, then the local population will gain from a wider choice of goods and services and
at a price possibly lower than imported substitutes.
●
National reputation - the presence of one multinational may improve the reputation of the
host country and other large corporations may follow suite and locate as well
ISSUES OF GLOBAL CORPORATION
●
Environmental impact - multinationals will want to produce in ways that are as efficient
and as cheap as possible and this may not always be the best environmental practice.
They often lobby governments hard to try to ensure that they can benefit from regulations
being as lax as possible and given their economic importance to the host country, this
lobbying will often be quite effective.
●
Uncertainty - multinational firms are increasingly 'footloose'. This means that they can
move and change at very short notice and often will. This creates uncertainty for the host
country.
●
Increased competition - the impact on the local industries can be severe, because the
presence of newly arrived multinationals increases the competition in the economy and
because multinationals should be able to produce at a lower cost.
●
Influence and political pressure - multinational investment can be very important to a
country and this will often give them a disproportionate influence over the government
and other organizations in the host country. Given their economic importance,
governments will often agree to changes that may not be beneficial for the long-term
welfare of their people.
Transfer pricing - multinationals will always aim to reduce their tax liability to a
minimum. One way of doing this is through transfer pricing. The aim of this is to reduce
their tax liability in countries with high tax rates and increase them in the countries with
low tax rates. They can do this by transferring components and part-finished goods
between their operations in different countries at differing prices. Where the tax liability
is high, they transfer the goods at a relatively high price to make the costs appear higher.
This is then recouped in the lower tax country by transferring the goods at a relatively
lower price. This will reduce their overall tax bill.
● Low-skilled employment - the jobs created in the local environment may be low-skilled
with the multinational employing expatriate workers for the more senior and skilled roles.
●
●
Health and safety - multinationals have been accused of cutting corners on health and
safety in countries where regulation and laws are not as rigorous.
●
Export of Profits - large multinationals are likely to repatriate profits back to their 'home
country', leaving little financial benefits for the host country.
●
Cultural and social impact - large numbers of foreign businesses can dilute local customs
and traditional cultures. For example, the sociologist George Ritzer coined the term
McDonaldization to describe the process by which more and more sectors of American
society as well as of the rest of the world take on the characteristics of a fast-food
restaurant, such as increasing standardization and the movement away from traditional
business approaches.
CORPORATIONS IN THE PHILIPPINES
Jollibee Food Corps
-
Largest fast-food chain in the Philippines, operating a nationwide network of over 750
stores.
A dominant market leader in the Philippines, Jollibee enjoys the lion’s share of the local
market that is more than all the other multinational brands combined. The company has also
embarked on an aggressive international expansion plan in the USA, Vietnam, Hong Kong,
Saudi Arabia, Qatar and Brunei, firmly establishing itself as a growing international QSR player
-
Jollibee Foods Corporation’s (“JFC” or the “Company”) core business is the
development, operation and franchising of its quick-service restaurant brands.
The tried and tested formula of delivering great-tasting food, adherence to world class
operating standards and the universal appeal of the family values the brand represents are driving
the expansion of Jollibee both locally and in the overseas market.
THE CONTEMPORARY WORLD (GNED 07)
Topic 03: Global Interstate System
Globalization describes the growing interdependence of the world's economies, cultures,
and populations. It is a consequence of cross-border trade in goods, technology, investments,
information, and services along with the labor market.
The Globalization of Government focuses on how the leaders of nations have integrated
their laws and built alliances for their mutual benefit.
EFFECTS OF GLOBALIZATION ON GOVERNMENTS
POSITIVE EFFECTS
NEGATIVE EFFECTS
Establishment of International
Norms
● Ease of Movement
● Ease of Trade
● Establishment of Blocs of Influence
●
Loss of Power at the Nation-State
Level
● Levels of Bureaucracy
● Decreased Political Accountability
● Terrorism
●
INSTITUTIONS THAT GOVERN INTERNATIONAL RELATIONS
●
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UNITED NATIONS (UN)
BELT AND ROAD INITIATIVE
NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)
NORTH ATLANTIC TREATY ORGANIZATION (NATO)
ASSOCIATION OF SOUTHEAST NATION (ASEAN)
EUROPEAN UNION (EU)
WORLD TRADE ORGANIZATION (WTO)
INTERNATIONALISM vs. GLOBALISM
INTERNATIONALISM
-refers to the idea that cooperation between different countries is beneficial for everyone.
GLOBALISM
-The concept of globalism is based on the idea that there should be no restrictions on the free
flow of people, products, and information across boundaries.
-the difference between globalism and internationalism. is that globalism is an ideology based on
the notion that people, products, and information should be allowed to traverse international
borders freely whereas internationalism is political, economic, and cultural cooperation between
states.
THE CONTEMPORARY WORLD (GNED 07)
Topic 04: Contemporary Global Governance
Global Governance
⮚ Sum of laws, norms, policies, and institutions that define constitute, and mediate transborder relations between states, culture, citizens, intergovernmental and nongovernmental organizations, and the market
⮚ Global governance is needed to facilitate relations within countries and amongst
countries, organizations, and markets through a set of norms, policies, laws, codes of
conduct or regulations. In cases where states do not have capacity to solve problems on
their own, global governance is needed.
The Roles and Functions of the United Nations
There is no ‘’Central Authority’’ in Global Governance. But the United Nations, with its
193 state-membership and capability to involve many non-state actors, come close as to being a
‘’Central Authority” to raise global issues and to help resolve them.
The UN is an intergovernmental organization and their task is to promote international
order and create and maintain international order. It is the largest, most familiar, most
internationally represented and most powerful intergovernmental organization in the world.
Four Main Purposes of the UN:
1.
2.
3.
4.
Maintaining worldwide peace and Security
Developing friendly relations among nations
Fostering cooperation between nations
Providing a forum for bringing countries together
There were five stages or main gaps met by the UN in the 21 st century: Knowledge,
Norms, Policy, Institutions, and Compliance. A critical hole in any of the five stages can cause
efforts at problem solving to collapse.
Challenges of Global Governance in the 21st Century
Issues that involve interwoven domestic and foreign challenges include threats at the
beginning of the century which include ethnic conflicts, infectious diseases, and terrorism as well
as a new generation of global challenges including climate change, energy security, food and
water scarcity, international migration flows and new technologies. Diverse perspectives on and
suspicions about global governance, which is seen as a Western concept, add to the difficulties of
effectively mastering the challenges.
The new governance challenges in the 21st century being related to globalization entail
multiple trajectories of change within states, among actors inside and outside nation states, as
well as new forms of resource mobilization and risk allocation.
● Within states the first trajectory or path is the depoliticization which can be observed
in the form of delegating decisions to independent regulators and experts, central banks,
or judiciaries.
● A second trajectory is the rescaling of economic and social relations well beyond the
territorial boundaries of nation states, facilitated by transnational legal arrangements that
have their roots in national law.
● Law is also a critical ingredient for transforming real assets into commodities and
ultimately financial assets, that is, the third path which is the capitalization of assets.
Different effects are expected on different constituencies within and across domestic
politics (an organized society; a state as a political entity). Considered important for effective
governance include recognition of these paths or trajectories and their potentially destabilizing
effects for polities.
The Relevance of the State amid Globalization
These two terms have been used interchangeably, but it is important to distinguish the two:
State - refers to a distinctive political community with its own government which asserts
sovereignty over its land and people
Nation - refers to a socially-constructed communities that hold together people bound by
common history and culture, cutting across some identifies such as ethnicity, language
and religion
Nation-State
● sovereign institution which governs individuals sharing a collective history, culture
identity, and culture within a bounded territory
● the state is considered the representative of 'the people'.
● 'the people' is the source of the state's sovereignty; it is the people who give the state its
legitimacy
Is the State still relevant?
There are cases of States that are incompetent, and where other actors are more effective
in addressing some specific issues.
However, until or unless some actors can perform better the services that states do now in
a macro scale, then the state will continue to be a major force of globalization.
Others argue that the state is more relevant now because it can influence the direction of
globalization.
Faced with globalization, states have to deal with global concerns in addition to their
internal affairs. Some examples of global concerns are: terrorism, economic globalization,
environmental protection.
''As Globalization shapes the State, the State shapes Globalization''
THE CONTEMPORARY WORLD (GNED 07)
Topic 05: Global Divides: The North and The South
North - South Divide - it is a global socio-economic and political categorization of countries,
and it is divided into two distinct groups: the north and the south.
North - comprises all the first world countries and most of the second world countries, which are
the wealthy developing countries.
South - compromises third world countries or poorer developing countries.
Willy Brandt - a West German former Chancellor proposed the brandt line in the 1980s.
Global North countries:
Canada, US, European countries, developed part of East Asia, Australia, and New Zealand.
Global South countries:
Latin America, African countries, and developing Asian countries.
Global North:
●
●
●
●
●
Less in population
Wealthy countries
High standard of living
High technological advancement
Industrial
Global South:
● Large Population
● Countries that suffer from high
poverty
● Low standard of living
● Less technological advancement
● Agricultural
Reasons of Global Divides:
● Colonialism
● Trade
● Debt
● North America:
● North America is the third largest continent in size and the fourth largest when we
consider population.
● Wealth varies greatly in North America.
● The continent is richly endowed with natural resources, including great mineral wealth,
vast forests, immense quantities of fresh water, and some of the world’s most fertile soils.
● North America is home to vast deposits of oil and natural gas, which are drilled for
energy and fuel.
● North America has the highest average income per person of any continent and an
average food intake per person that is significantly greater than that of other continents.
South/Latin America:
● Poverty is still rampant in the major parts of the continent.
● Most of the countries are vulnerable to natural dangers and the overall climate change.
● South America has a long history of colonialism under North America and European
dependencies and even neo-imperialism.
● There are still less resources in spite of occasional or frequent rise of national incomes
because of increasing population.
● Geopolitics and marginalization of rights are the main reasons why the vast part of the
landmass is still considered members of the Global South nations.