The document discusses the history and evolution of the global economy. It describes the major players in the global economy like the IMF and World Bank, and how they help countries facing financial crises. It then outlines different periods and systems that shaped international trade, from early trading routes like the Silk Road, to the Gold Standard system and Bretton Woods system after World Wars. The document also discusses how globalization has increased trade integration worldwide in modern times, though some developed countries still maintain protectionist policies.

1. II. The Global Economy
Therearetwo majorplayersofglobaleconomy: 1)the internationalMonetaryFund
(IMF), and 2) theWorld Bank (WB) or the InternationalBank of Reconstruction and
Development (IBRD). Although each country has its own independent or
dependent economic policy, in case of financial crisis the country affected seeks
the help of the IMF or the WB to avoid liquidity trap or bankruptcy.
TheIMFis thegloballender oflastresortto preventindividualcountriesfrom
escalating into the credit crises. If the economic growth of the country is slowing
down due to the reduction of money supply, the IMF could come to rescue by
releasing an amount of money loaned to stimulate the economy.
The WB or the IBRD is responsiblefor thefunding of postwar reconstruction
projects. However, to some extent they may also grant financial aid to developing
countries of the world through their subsidiaries, the World Health Organization
(WHO), and the World Trade Organization (WTO).
A. Market integration
The integration of marketin not new.Itstarted when people began to exchange
and trade the products continuously and spontaneously, directly or indirectly with
other countries and established among themselves a partnership in trading.
According to historians Dennis O. Flynn and Arturo Giraldez, the establishment
of the Galleon Trade in 1571 has connected Manila in the Philippines and Acapulco
in Mexico. That waswhen the time the Americans weredirectly connected to Asian
Trading routes. It was then when the Philippines became the markets for the
surplus products in American during the galleon trade or the age of mercantilism
(16th
century to 18th
century)

2. B. Global Interstate Trading
The oldest international trade is the Silk Road (130 BCE-1453 BCE). It is known
as the network of pathways in the ancient world that spanned or bridged over
from China to the Middle East and to Europe. The most profitable product
traded through this network was silk. The Silk Road was then considered
international but notyet global becauseit had no ocean routes that could reach
all countries of the world.
Aside from mercantilism as a system of global trade with multiple restrictions,
there are other global trade systems such as:
1. The Gold Standard System
When the open trade system was led by the United States and other European
nations, they called an international monetary conference in Paris in 1867
purposely to adopt the Gold Standard as a common basis for currency prices and
fixed the exchange rate system. All trading must be based on the value of gold. Its
goal was primarily to create a common system that would allow for more efficient
tradeand to preventthe isolationismof the mercantilistera. However,itcompelled
the countries to back their currencies with corresponding fixed gold reverses.
Government were restricted to print their own money or currencies without the
corresponding amount of gold reserves.
During World War 1, mostof the countries depleted their gold reserves to fund
their armies. The government could only spend money that was equivalent to
available gold reserves. Although they adopted the floating currencies rate, the
supply of gold became scarce. The gold standard has limited the amountof money
circulating in the economy that reduced the aggregate demand and consumption
of good s and services. Theglobaleconomic crisis in the 1920s and 1930scalled the
Great depression worsen the condition. As a result many countries were forced to
abandon the gold standard.
In order to mitigate or revivethe global economy, the world economy operated
based on fiat currencies, or the currencies thatwereno longer backed up with gold

3. reserves. Its value was determined by the relative cost to other countries’
currencies depending on the productcost of goods and services produced. Thefiat
currencies system allowed the government to freely and actively manage their
economies by increasing or decreasing the supply of money-circulating in the
economy as long that it is guaranteed by the monetary agency of the government.
2. Bretton Woods System
After World War II, the United Nations called for a Monetary and Financial
Conference in 1944. The world leaders created a global economic system that
would ensure long lasting global peace. They set up a network of Global financial
institutions to promote economic interdependence and prosperity, globally known
as the Bretton Wood System.
The Bretton Wood System was influences by the ideas of a British economist
John Maynard Keynes who deeply believed that economic crises occur when a
country does not have enough money to stimulate the economy, or the country
has enough money but it was not being spent or circulated in the economy. As a
result the economy will be sluggish or there will be a slowdown of the level of
economic activity. The economy will be in recession and later followed by
depression. According to Keynes, the Government using its intervening power has
to perform its active role to bring the economy to expansion by using its
expansionary fiscal policy thereby releasing a substantial amount of money from
its autonomous investment to finance governmentprojects to solve the economic
crisis.
The delegates of the Bretton Wood Conference created the two financial
institution to achieve its goals: 1) IMF and 2) WB or IBRD. They also agreed to
advance global economic integration through the General Agreement on Tariffs
and Trade (GATT) in 1947 purposely to reduce tariffs and other custom duties that
hinder free trade.

4. 3. Neo-liberalism
The world economy experienced the worstworld economic depression in 1973-
1974. The world economy was suffering from a very low economic growth and
high rate of unemployment (Stagnation) coupled with a high rate of inflation
known as “Stagflation”. The high price of oil in Arab countries reliant on oil
supply from OPEC (Organization of Petroleum Exporting Countries). In order to
arrestthe economic depression, theUnited States and other countries supplied
the Israelimilitary with the needed weapons to havean oil embargo to stabilize
the economies of the world especially the westerneconomies which resulted to
the Yom Kippur War in the Middle East.
Due to the stagflation, the Keynesian economics which influenced the
Bretton Wood Systemwas challenged by Neo-ClassicalEconomistsuch as Friedrich
Hayek and Milton Friedman. They argued that the increase of money supply in the
market to stimulate the economy had caused inflation due to high aggregate
demand while the supply of goods was relatively low. There was a shortageon the
market. They also argued that governmentintervention in the economy distorted
the proper functioning of the market. The market has its way of correcting itself.
Such a new form of economic thinking is called neo-liberalism.
Beginning in the 1980s until 2000s, the neo-liberalism became the codified
strategy of the United States Treasury Department, IMF, WB, WTO, GATT and
policies that they forwarded came to be called the Washington Consensus.
The Washington, Consensus dominated the global economic policies and it
follows these contentions:
1. Privatization of government-controlled utilities and corporation,
2. Favorable to free markets system or free enterprises or laisse Faire or let
alone policy,
3. Minimal government spending to reduce government debt.

5. 4. Reduction of tariffs and open economies for developing countries.
C. The economic Globalization Today
Today the world has become too integrated and the international trade or
export and import remain essential to countries to develop in the present
globalization world.Inthe pastdecadesfree tradebenefited only the developed
countries but when the WTO led the reduction of trade barriers known as trade
liberalization, the developing countries like China, India, Argentina, Brazil and
the Philippines opened up their economies, and took advantage of increasing
freetrade. Asa result,their sharesof the percentage in the global marketbegan
to notably increase from 29% to 51% of global exports in 2011. The global
growth rates also increase over period of time especially among Asian
economics. Yet economic globalization remains an uneven process. There are
still countries benefited from it more it more than others.
Most developed and protectionist countries like Japan, US and Arab
Countries repeatedly refuse to have some compromise of their protectionist
measures to safeguard their primary products like rice for Japan, sugar for US,
and petroleum for Arab countries. As a result there is no balance of trade.
D. Brief Summary
Globalization is a process of change, and is evolving over time. The various
changes of the economies had something to do with the economic
integration among countries of the world. The integration of countries is not
only economic but also political and cultural. The Philippines is an import
dependent country.Itsreliance on imported productsexposes the Filipino to
global culture. The products exported from other countries reflect the
culture of the producingcountries.To the Philippine Mc Donald’s,Starbucks,
Hello Kitty, Hip Hop and the like introduced a global countries.