INTRODUCTION TO GLOBALIZATION international trade and investment.

Governments
also have negotiated dramatic reductions in
Globalization Concepts, Meanings, Features, barriers to commerce and have established
and Dimensions international agreements to promote trade in
goods, services, and investment. Taking advantage
Globalization of new opportunities in foreign markets,
corporations have built foreign factories and
- process in which people, ideas and goods established production and marketing
spread throughout the world, spurring arrangements with foreign partners.
more interaction and integration between
the world's cultures, governments and - A defining feature of globalization,
economies(1). therefore, is an international industrial and
- process of interaction and integration financial business structure (4).
among the people, companies, and
governments of different nations, a process Technology
driven by international trade and
investment and aided by information - Principal driver of globalization.
technology. - Economic life is dramatically transformed
- has effects on the environment, on culture, by advancement in information technology.
on political systems, on economic - All sorts of individual economic actors like
development and prosperity, and on human consumers, investors, and businesses
physical well-being in societies around the which are valuable new tools for
world identifying and pursuing economic
- about growing worldwide connectivity. opportunities, including
1. faster and more informed analyses
There were similarities in features of those of economic trends around the
prevailing waves of globalization before the world,
outbreak of the First World War in 1914 to the 2. easy transfers of assets, and
current wave. There is an increase in cross border- 3. collaboration with far-flung
trade, investment, and migration due to policy and partners are provided by
technical developments in the past few decades. It information technologies.
is in the area of economic development that
observers believe the world has entered a new Globalization is the process of integration of
phase. economies across the world through cross-border
flow of factors product and information (5).
- Today’s globalization is farther, faster,
cheaper, and deeper in comparison to According to the International Monetary Fund
earlier waves of globalization. (IMF) globalization is the growing economic
interdependence of countries worldwide through
In the years since the Second World War, and increasing volume and variety of cross border
especially during the past two decades, many transactions in goods and services and of
governments have adopted free-market economic international capital flows and also through the
systems, vastly increasing their own productive more rapid and wide diffusion of technology (6).
potential and creating myriad new opportunities
for
Globalization is an expansion, and intensification world-including products whose various
of social relations and consciousness across world components were manufactured in different
time and world space. countries. This process is called social stretching.

Further, globalization is considered a Covered in the process of social stretching are:

multi-dimensional process involving economic, 1. Non-governmental organization
political, technological, cultural, religious and 2. Commercial enterprises
ecological dimensions. 3. Social clubs
4. Regional & global institutions and
- It suggests a dynamic process of change associations (UN, EU, ASEAN, Google
that results in either positive or negative and others)
development.
- It leads to the creation of something new; 3. Globalization involves the intensification and
it involves the multiplication of social acceleration of social exchanges and activities.
connections and various activities that
transgress traditional and political, 1. The worldwide web relays distant
economic, cultural and geographical lines. information in real time
2. Satellites provide consumers with instant
Attributes, Qualities or Characteristics of pictures of remote events
Globalization 3. Sophisticated social networking by means
of facebook or twitter has become routine
1. It involves both the creation of new social activity for more than a billion people
networks and the multiplication of existing around the globe.
connections that cut across traditional, political,
economic, cultural, and geographical boundaries. 4. Globalization processes do not occur merely at
an objective, material level but they also involve
- Brazilian World Cup: Today’s media the subjective plane of human consciousness.
combine conventional TV coverage with
multiple streaming feeds into digital - Without erasing local and national
devices and networking sites that transcend attachments, the compression of the world
nationally based services. into a single place has increasingly made
global the frame of reference for human
2. Globalization is reflected in the expansion and thought and action.
the stretching of social relations, activities, and - Globalization involves both the
connections. macro-structures of a global community
and the micro-structures of global
Examples: personhood.
1. Reaching of financial markets around the - It extends deep into the core of the self and
globe its dispositions, facilitating the creation of
2. Occurrence of electronic around the clock multiple individual and collective identities
3. Emergence of gigantic and virtually nurtured by the intensifying relations
identical shopping malls in all continents between the personal and the global.
to cater to consumers who can afford - They differ from each other by acceleration
commodities all over the in the speed of social exchanges and
widening of geographical scopes (7).
Historical Periods of Globalization dramatic way and it was a kind of leap in the
history of globalization.
1. The Prehistoric Period (10000 BCE-3500
BCE) Dimensions of Globalization

In this earliest phase of globalization, contacts There are six dimensions in globalization. These
among hunters and gatherers – who were spread include: economic, political, technological,
around the world – were geographically limited. In cultural, religious and ecological dimensions.
this period due to the absence of advanced forms
of technology, globalization was severely limited. 1. Economic Dimension

- This refers to the extensive development of

2. The Pre-modern Period (3500 BCE- 1500 CE) economic relations across the globe as a
result of technology and the enormous
In this period the invention of writing and the flow of capital that has stimulated trade in
wheel were great social and technological boosts both sources and goods (8)
that moved globalization to a new level. The
invention of the wheel in addition to roads made Major players in the current century’s global
the transportation of people and goods more economic order
efficient. On the other hand, writing facilitated the
spread of ideas and inventions. 1. Huge international corporations (General
Motors, Walmart,
3. The Early Modern Period (1500-1750) Mitsubishi)
2. International Economic Institutions (IMF, World
It is the period between the Enlightenment and the Bank, The World Trade Organization)
Renaissance. In this period, the European 3. Trading Systems
Enlightenment project tried to achieve a universal
form of morality and law. This with the emergence The result of these powerful forces resulted in the
of European metropolitan centers and unlimited wide gap between the rich and the poor countries.
material accumulation which led to the capitalist
world system helped to strengthen globalization. Major Sources of Economic Growth across
Countries (9)
4. The Modern Period (1750-1970)
1. Property rights
Innovations in transportation and communication 2. Regulatory institutions
technology, population explosion, and increase in 3. Institutions for macro-economics
migration led to more cultural exchanges and 4. Stabilization
transformation in traditional social patterns. 5. Institutions for social influence
Process of industrialization also accelerated. 7. Institutions for conflict management

5. The Contemporary Period (from 1970 to - Economic institutions have decisive

present) influence on investment in physical and
human capital, technology, and industrial
The creation, expansion, and acceleration of productions. It is also important for
worldwide interdependencies occurred in a resource distribution.
2. Political Dimension Cultural diversity often results from
hybridization- a constructive interaction process
This refers to an enlargement and between global and local characteristics which is
strengthening of political interrelations across the often visible in food, music, dance, film, fashion,
globe (10). and language. As a result there is a scarcely any
society in the world that expresses itself in its own
Political Issues that Surface in this Dimension self-contained and authentic culture (11c).

1. The principle of state sovereignty Advertisement plays an important role in this

2. Increasing impact of various intergovernmental cultural flow by featuring various celebrities in the
organization television aside from transforming newscast into
3. Future shapes of regional and global entertainment shows.
governance
4. Religious Dimension
Example:
Religion
1. Global cities like New York, London,
Tokyo, and Singapore are more closely - personal or institutionalized set of
connected with one another than they are attitudes, beliefs, and practices relating to
to various cities in their own countries. or manifesting faithful devotion to an
2. European Union, United nations, NATO, acknowledged ultimate reality or deity(12)
The World Trade Organization - It is the most important defining element of
any civilization as contrasted with race,
3. Cultural Dimension language, or way of life.
- As such, it is also portrayed as a defining
- This refers to the increase in the amount of element in future conflicts. Whether the
cultural flows across the globe. Cultural root cause of a particular conflict or merely
interconnections are at the foundations of a vehicle for the mobilization of nationalist
contemporary globalization (11b). or ethnic passions, religion is certainly
central to much of the strife currently
Individualism and consumerism which are taking place around the globe (13).
the dominant cultural characteristics of our age
and the drive for economic success stimulated by 1. Bin Laden understands umma as a single
the internet and other technological devices community of believers professing faith in
circulate much more easily than they did in earlier the one and only God, but at the same time
periods. committed to destroying not only alien
invaders but also corrupt Islamic elites in
- In the dissemination of popular culture, order to return power to the Muslim
transactional media corporations play a masses.
major role which brought a sharp rise in 2. Since one third of the world’s Muslim
homogenized popular culture that is population lives in non-Islamic countries,
manifested in the dominance of fast food the restoration of God’s proper reign must
restaurants in more aspects of life be a global event. Hence, Al-Qaeda
throughout the world. established jihadist cells in various parts of
the world.
Roman Catholic Teaching of Globalization According to catholic teaching, a just society is
one which these forms of justice are assured
There are eight (8) principles that summarize the because they are required by human dignity.
Roman Catholic Teachings (15).
5. Ideological Dimensions
1. Commitment to universal human rights
2. Commitment to the social nature of the human Ideology - a system of widely shared ideas,
person beliefs, norms and values among a group of
3. Commitment to the common good people.
4. Solidarity (The principle of Solidarity affirms
that membership in the human family means that - It is often used to legitimize certain
all bear responsibility for one another.) political interests or to defend dominant
5. Preferential option of the poor (In the Theology power structures.
of the Incarnation- Christ God became poor for us - Ideology connects human actions with
so as to enrich us by his poverty. some generalized claims.
6. Subsidiary (The Catholic Church teaches that
decisions should be made at the Globalization is a social process of intensifying
lowest level in order to achieve the common good. global interdependence while globalism is an
7. Justice ideology that gives the concept of neo-liberal
8. Integral Humanism- is concerned with whole values and meanings to globalization.
person
Major Ideological Claims of Advocates of
Justice is divided in three (3) categories: Globalism (14b)

1. Commutative justice 1. Globalization is about the liberalization and

global integration of markets.
- This aims at fulfilling the terms of
contracts and other promises on both The problem with this claim is that
personal and social level. liberalization and integration of markets happen
through a political project of engineering free
2. Distributive justice markets by interference of centralized state power,
and it is in contrast to the neoliberal ideal of
- This ensures a basic equity in how both the limited role of governments.
burden and the goods of society are
distributed and that ensures that every 2. Globalization is inevitable and irreversible.
person enjoys a basically equal moral and
legal standing apart from differences in Globalists believe that spread of market
wealth, privilege, talent and achievements. forces driven by technological innovations is
inevitable in globalization. Neoliberals use this
3. 3. Social justice claim to convince people to adopt the natural
discipline of the market if they want to prosper,
This refers to the creation of the conditions in which implies the elimination of government
which the first two categories of justice can be controls over the market.
realized and the common good identified and
defended.
3. Nobody is in charge of globalization. According to the International Monetary Fund
(18) economic globalization is a historical process,
This claim seeks to depoliticize the public debate the result of human innovation and technological
on globalization and neutralize anti -globalist progress.
movements.
- It refers to the increasing integration of
4. Globalization benefits everyone. economies around the world, particularly
through the movement of goods, services,
Globalists talk about the benefits of market and capital across borders. It also refers to
liberalization such as rising global living the movement of people (labor) and
standards, economic efficiency, individual knowledge (technology) across
freedom, and technological progress. But the international borders.
reality is that the opportunities of globalization are
spread unequally and power and wealth are In economic terms, globalization is nothing but a
concentrated among a specific group of people, process making the world economy an organic
regions and corporations. system by extending transnational economic
processes and economic relations to more and
5. Globalization furthers the spread of democracy more countries and by deepening the economic
in the world. interdependencies among them (19).

For the globalists democracy and free markets are Two Major Driving Forces for Economic
synonymous. Globalization

The neoliberal explanation of globalization is 1. The rapid growing of information in all types of
ideological because it is politically motivated and productive activities
contributes to the construction of particular 2. Marketization - (A restructuring process that
meanings of globalization which stabilize existing enables state enterprises to operate as
power relations. Globalism tries to create market-oriented firms by changing the legal
collective meaning and shape people’s identities. environment in which they operate (20) and can be
achieved through reduction of state subsidies,
THE STRUCTURES OF GLOBALIZATION organizational restructuring of management such
as corporatization, decentralization, and
THE GLOBAL ECONOMY privatization (21).

Economic globalization refers to the increasing Rapid development of science and technologies
interdependence of world economies as a result of served as the basis for immediate globalization of
the growing scale of cross-border trade of the world economies which in turn provided an
commodities and services, flow of international environment where there is a swift spreading of
capital and wide and rapid spread of technologies. market economic systems all over the world.

- It reflects the continuing expansion and Dimensions of Economic Globalization

mutual integration of market frontiers, and
is an irreversible trend for the economic 1. The globalization of trade of goods and services
development in the whole world at the turn 2. The globalization of financial and capital
of the millennium (17). markets
3. The globalization of technology and In the 17th and 18th century the global economy
communication existed only in trade and exchange rather than
4. The globalization of production production as the world export to World GDP did
not reach 1 to 2 percent (28).
Difference between Economic Globalization from
Internationalization In the 19th century the advent of globalization
approaching its modern form was witnessed. A
Economic globalization is a functional integration short period before World War I is referred to as
between internationally dispersed activities which the golden age of globalization characterized by
means that it is a qualitative transformation rather relative peace, free trade, financial and economic
than a quantitative change. stability (29). Growth in international exchange of
goods accelerated in the second quarter of the 19th
Internationalization is an extension of economic century.
activities between internationally dispersed
activities (22). Global economy in the 19th and 20th centuries
grew by an average of nearly 4 percent per annum,
Economic globalization produces its own major which is roughly twice as high as growth in the
players in the form of transnational corporations national incomes of the developed economies
(TNCs), the main driving forces of economic since the late 19th century (30).
globalization of the last 100 years or roughly
two-thirds of world export (23). International Monetary Systems and Gold
Standard
Transnational corporation otherwise known as
multi -national corporation is a corporation that International monetary system (IMS)
has a home base, but is registered, operates and
has assets or other facilities in at least one other - refers to a system that forms rules and
country at one time (24). Examples are the standards for facilitating international trade
US-based General Electric (GE), the Coca-Cola among the nations.
Companies of Atlanta, Georgia, US Nike and
others. - helps in reallocating the capital and
investment from one nation to another.
Origin of Economic Globalization
- the global network of the government and
Economic globalization is a process that creates an financial institutions that determine the
organic system of the world economy. exchange rate of different currencies for
international trade.
In the 16th century world system analysts
identified the origin of modernity and - a governing body that sets rules and
globalization through long distance trade in the regulations by which different nations
16th century (25). This best known example of exchange currencies with each other (31).
archaic globalization is the Silk Road, which
started in western China, reached the boundaries - IMS as rules, customs, instruments,
of the Parthian empire, and continued onwards facilities, and organizations for affecting
towards Rome (26). It also connected Asia, Africa, international payments with the main task
and Europe (27). of facilitating cross-border transactions,
 especially trade and investment (32). It ● Since the United States held most of the
also reflects economic power and interests, world’s gold, all the nations would
as money is inherently political, an integral determine the values of their currencies in
part of high politics or diplomacy (33). terms of dollars. The central banks of
nations were given the task of maintaining
Evolution of the International Monetary fixed exchange rates with respect to the
System dollar for each currency. The Bretton
Woods system ended in 1971 as the trade
● In 1870 to 1914, with the help of gold and deficit and growing inflation undermined
silver, trade was carried without any the value of the dollar in the whole world.
institutional support. Monetary system In 1973, the floating exchange rate
during that time was decentralized while system, also known as flexible exchange
market based and money played a minor rate system was developed that was market
role in international trade in contrast to based (36).
gold.
To assess whether the gold standard was
Gold was believed to guarantee a non-inflationary, successful, the following roles of a properly
stable economic environment, a means for designed IMS must be considered:
accelerating international trade (34) and the gold
standard functioned as a fixed exchange rate 1. to lend order and stability to foreign
regime, with gold as the only international reserve. exchange markets,
2. to encourage the elimination of
Gold Standard is a system of backing a country’s balance-of-payments problems,
currency with its gold reserves. Such currencies 3. to provide access to international credits in
are freely convertible into gold at a fixed price, the event of disruptive shocks
and the country settles all its international trade
transactions in gold (35). The gold standard has never worked
satisfactorily in controlling inflation or
● After World War I, the use of gold declined maintaining equilibrium in international
due to increased expenditure and inflation transactions.
which were caused by war. Major
economic powers were on gold standards
but could not maintain it and failed European Monetary Integration
because of the Great depression in 1931.
European monetary integration
● In 1944, 730 representatives of 44 nations
met at Bretton Woods, New Hampshire, - refers to a 30-year long process that began
United States to create a new international at the end of the 1960s as a form of
monetary system called the Bretton Woods monetary cooperation intended to reduce
system, the aim of which is to create a the excessive influence of the US dollar on
stabilized international currency system domestic exchange rates, and led, through
and ensure monetary stability for all the various attempts, to the creation of a
nations. Monetary Union and a common currency.
This Union brings many benefits to
Member States.
European Monetary System (EMS) - is the exchange of goods, services and
capital across national borders.
- on the other hand is a 1979 arrangement
between several European countries which - a multi-million dollar activity, central to
links their currencies in an attempt to the Gross Domestic Product (GDP) of
stabilize the exchange rate. many countries, and it is the only way for
many people in many countries to acquire
- the system was succeeded by the European resources (41).
Economic and Monetary Union (EMU), an
institution of the European Union (EU), - the exchange of goods or services along
which established a common currency international borders.
called the euro.
- allows for a greater competition and more
- an attempt to stabilize inflation and stop competitive pricing in the market (42).
large exchange rate fluctuations between
European countries. The two key concepts in the economics of
international trade are specialization and
- The future of EMU depends on the comparative advantage.
willingness of member states to agree on
more fundamental changes in the Comparative advantage
governance of the Eurozone.
- comes in; so long as the two countries have
European Financial Stability Mechanism different relative efficiencies, the two
(EFSM) countries can benefit from trade – the
country with absolute advantage will still
- is a permanent fund created by the benefit by directing its resources to those
European Union (EU) to provide goods where it is most productive and
emergency assistance to member states trading for the others
within the Union.
Specialization
- raises money through the financial
markets, and is guaranteed by the - refers to this process; countries as well as
European Commission. individual businesses can maximize their
welfare by specializing in the production
European Financial Stability Facility (EFSF) of those goods where they are most
efficient and enjoy the largest advantages
- an organization created by the European over rivals (43)
Union to provide assistance to member
states with unstable economies. Global trade allows wealthy countries to use their
resources such as labor, technology, or capital
International Trade and Trade Policies more efficiently.

International trade ● Because countries are endowed with

different assets and natural resources, some
countries may produce the same good
 more efficiently and therefore sell it more
cheaply than other countries (44). - state-imposed restrictions on trading a
● Specialization in international trade particular product or with a specific nation.
happens if a country cannot efficiently
produce an item and obtain it by trading - can be linked to the product, service like
with another country that can. technical requirement and it can also be
administrative in nature such as rules and
Trade policies procedures of transactions.
- refer to the regulations and agreement of
foreign countries Safety
- defines standards, goals, rules, and
regulations that pertain to trade relations - This ensures that imported products in the
between countries. country are of high quality. Inspection
regulations laid down by public officials
● Each country has specific policies ensure the safety and quality standards of
formulated by its officials. Boosting the imported products.
nation’s international trade is the aim of
each country. Taxes imposed on import and Types of Trade Policies
export, inspection, regulations, tariffs and
quotas are all part of a country's trade National Trade Policy
policy.
- This safeguards the best interest of its trade
Focuses of Trade Policy in International Trade and citizens.

Tariffs Bilateral Trade Policy

- taxes or duties paid for a particular class of - To regulate the trade and business relations
imports or exports. between two nations, this policy is formed.
- Under the trade agreement the national
● Imposing taxes on imported and exported trade policies of both the nations and their
goods is a right of every country. Heavy negotiations are considered while bilateral
tariffs on imported goods are levied by trade policy is being formulated.
some nations for the protection of their
local industries. The prices of imported International Trade Policy
goods in local markets are inflated due to
high import taxes to ensure demand for - This defines the international trade policy
local products. under their charter like the International
economic organizations, such as
Trade barriers Organization for Economic Co-operation
and Development (OECD), World Trade
- These are measures that governments or Organization (WTO) and International
public authorities introduce to make Monetary Fund (IMF).
imported goods or services less
competitive than locally produced goods
and services (47).
 - The best interests of both developed and and especially prevalent in areas where
developing nations are upheld by the complex projects are the norm like
policies. construction and information technology
Trade Policy and International Economy (52).

The World Trade Organization (WTO) Outsourcing is a means of finding a partner with
which a firm can establish a bilateral relationship
- deals with the global rules of trade between and having the partner undertake
nations with the main function of ensuring relationship-specific investments so that it
that trade flows smoothly, predictably and becomes able to produce goods and services that
freely. fit the firm’s particular needs.

- only global international organization One of the most rapidly growing components of
dealing with the rules of trade between international trade is the outsourcing of
nations with WTO agreements, negotiated intermediate goods and business services. There
and signed by the bulk of the world’s are three essential features of a modern
trading nations and ratified in their outsourcing strategy.
parliaments at its heart (48).
1. Firms must search for partners with the
- viewed as the means by which expertise that allows them to perform the
industrialized countries can gain access to particular activities that are required.
the markets of developing countries (49). 2. They must convince the potential suppliers to
customize products for their own specific needs.
Global Economy Outsourcing 3. They must induce the necessary
relationship-specific investments in an
Outsourcing environment with incomplete contracting.

- is an activity that requires search for a Possible Determinants of the Location of

partner and relation-specific investments Outsourcing
that are governed by incomplete contracts
and the extent of international outsourcing 1. Size of the country can affect the “thickness” of
depends on the thickness of the domestic its markets.
and foreign market for input suppliers, the 2. The technology for search affects the cost and
relative cost of searching in each market, likelihood of finding a suitable partner.
the relative cost of customizing inputs and 3. The technology for specializing components
the nature of the contracting environment determines the willingness of a partner to
in each country (50). undertake the needed investment in a prototype.
4. The contracting environments can impinge on a
Subcontracting firm’s ability to induce a partner to invest in the
relationship.
- a central element of the new economy

- is the practice of assigning part of the

obligations and tasks under a contract to
another party known as a subcontractor