International economic integration is a fundamental aspect of globalization, although it's essential to remember that globalization encompasses more than just economics. While economics is a significant part of globalization, it's not the entire picture. Economic globalization plays a crucial role in facilitating global culture and politics. Trade allows for the exchange of cultural products, like movies and music, and is intertwined with political diplomacy, often serving as a basis for international relations. Given the importance of economic globalization, it's vital to consider how to make the system more equitable. While some aspects of global free trade can be adjusted, it cannot be completely eliminated. International policymakers should focus on making trade deals fairer and ensuring that governments find ways to mitigate the negative impacts of economic globalization while making sure its benefits are accessible to all.

1. The Globalization
of World
Economics

2. Learning Outcomes
At the end of this lesson, you should able to:
1. Define economic globalization;
2. Identify the factors that facilitate economic
globalization;
3. Narrate a short story of global market integration in
the twentieth century; and
4. Articulate your stance on global economic
integration

3. Contents
● Introductions of Globalization of World Economics
● International Trading System
● The Bretton Woods System
● Neoliberalism and Its Discontents
● The Global Financial Crisis and the Challenge to
Neoliberalism
● Economic Globalization Today
● Conclusion

4. The Globalization of Worlds Economics
The International Monetary Fund (IMF) defines economic
globalization as a historical process driven by innovation and
technology, involving increased integration of global economies
through the movement of goods, services, and capital across
borders. However, there is subjectivity in defining the degree of
integration. Despite this ambiguity, both the IMF and ordinary
people agree that significant global economic changes are
underway.

5. According to the IMF, the percentage of world GDP represented
by trade (goods and services) rose from 42.1% in 1980 to 62.1%
in 2002, indicating a substantial increase. Foreign direct
investment, as reported by the United Nations Conference on
Trade and Development (UNCTAD), soared from $57 billion in
1982 to $1.76 trillion by 2015, marking a dramatic change in a
relatively short time.
Moreover, the speed and frequency of trading have increased
significantly, with high-frequency trading enabled by
supercomputers executing millions of stock transactions globally
in seconds. The nature of traded items has also evolved, shifting
from physical goods to digital downloads of books and music.

6. International
Trading System
01

7. The history of international trade systems has evolved over time. The
Silk Road, dating back to ancient times, was an early international
trade route, known for its exchange of goods like silk. However, it
wasn't truly global as it didn't connect to the American continent.
Economic globalization, where all populated continents traded
products directly or indirectly with crucial impacts, is traced back to
1571 with the galleon trade linking the Philippines and Mexico.
During the age of mercantilism in the 16th-18th centuries, European
countries focused on selling more goods to boost their income,
leading to high tariffs, trade restrictions, and export subsidies.
The gold standard, adopted internationally in 1887, aimed to create
an efficient trade system with fixed exchange rates based on gold
values. However, it was still restrictive, and World War I led to its
abandonment as countries depleted their gold reserves. This shift
allowed governments to spend more to stimulate their economies.

8. The 1970s saw the end of the Bretton Woods system, leading to stagflation – a
combination of economic stagnation and inflation. Economists like Friedrich Hayek
and Milton Friedman challenged Keynesian economics and advocated for minimal
government intervention, forming the basis of neoliberalism.
Neoliberalism, also known as the Washington Consensus, dominated global
economic policies from the 1980s to the early 2000s. It emphasized reduced
government spending, privatization of services, and trade liberalization, particularly
in developing countries. However, the Washington Consensus faced criticisms and
challenges, such as in post-communist Russia, where privatization efforts led to the
concentration of economic power in the hands of a few, perpetuating an oligarchy.
Overall, the evolution of international trade systems reflects shifts from
mercantilism to the gold standard, abandonment of gold in favor of flexible
currencies, and the rise of neoliberalism, each with its own impacts and
consequences.

9. The Bretton
Woods System
02

10. The Bretton Woods system was a post-World War II international monetary
system that was established during the United Nations Monetary and
Financial Conference held in Bretton Woods, New Hampshire, in July 1944.
This conference brought together representatives from 44 Allied nations to
design a new global financial order to promote economic stability and prevent
the competitive devaluations and protectionist policies that had contributed to
the Great Depression and global economic instability in the 1930s.

11. Key features of the Bretton Woods system included:
1. Fixed Exchange Rates: Under the Bretton Woods system, participating countries agreed to
fix the value of their currencies to the United States dollar (USD), which was backed by gold.
The USD became the primary reserve currency, and other currencies were pegged to it at
specific exchange rates.
2. The Gold Standard: While the U.S. dollar was the primary reserve currency, it was
convertible into gold at a fixed rate of $35 per ounce. This made the U.S. dollar effectively as
good as gold in international trade and finance.
3. International Monetary Fund (IMF): The conference established the International Monetary
Fund (IMF) as a specialized agency of the United Nations. The IMF's primary purpose was to
provide financial assistance to member countries facing balance of payments problems,
helping them maintain stable exchange rates and address short-term economic challenges.
4. World Bank: The conference also created the International Bank for Reconstruction and
Development, commonly known as the World Bank. Its primary mission was to provide long-
term loans and financial support for the reconstruction and development of war-torn and
developing countries.
5. Fixed Parity System: Countries were required to maintain exchange rate parities within a
narrow range, with the option to adjust these parities with IMF approval in case of
fundamental disequilibrium.

12. The Bretton Woods system played a significant role in promoting global
economic stability and facilitating the post-war recovery. It helped reduce
currency fluctuations and trade imbalances, which in turn promoted
international trade and investment.
However, the system faced challenges and strains over the years, including
the growing U.S. trade deficit, which led to an accumulation of U.S. dollars in
foreign reserves. By the early 1970s, the U.S. gold reserves were
insufficient to back the increasing amount of dollars in circulation. In 1971,
President Richard Nixon announced the suspension of the U.S. dollar's
convertibility into gold, effectively ending the Bretton Woods system.
This event, known as the "Nixon Shock," marked the end of the Bretton
Woods system and ushered in an era of floating exchange rates, where
currencies fluctuate based on market forces. Since then, the global
monetary system has evolved, with the USD still playing a central role but
without a fixed gold backing.

13. Neoliberalism and Its
Discontents
"Neoliberalism and Its Discontents" encapsulates the criticisms and
challenges directed at neoliberal economic policies that have dominated
since the 1980s. Neoliberalism emphasizes minimal government
intervention, deregulation, privatization, and free-market capitalism. Critics
argue that it exacerbates income inequality, promotes austerity, contributes
to financial crises, prioritizes profit over public welfare through privatization,
and neglects environmental concerns. It is also accused of eroding workers'
rights, undermining democracy, and creating global economic imbalances.
The phrase captures the ongoing debate and concerns about the impact of
neoliberalism on societies, economies, and individuals.

14. The Global Financial
Crisis and the
Challenge to
Neoliberalism

15. The "shock therapy" of neoliberalism, characterized by a belief in free markets,
didn't always yield the ideal results. A major setback for neoliberalism occurred
during the global financial crisis of 2007-2008, the worst economic downturn
since the Great Depression. This crisis was rooted in the U.S. deregulation of
banking and investments starting in the 1980s.
Deregulation continued into the 2000s, leading to risky lending in the U.S.
housing market. Banks bundled mortgage payments into "mortgage-backed
securities" (MBS) and sold them to investors. They extended loans to high-risk
borrowers, assuming that most would not default, and that rising housing
prices would offset any losses.

16. However, when home prices stopped increasing, defaults rose, and
the MBS market collapsed in 2008, causing major investment banks
like Lehman Brothers to fail. The crisis had global repercussions as
foreign investors were heavily involved in these securities.
This interconnectedness triggered a global financial ripple effect. For
example, Iceland's banks failed due to a credit crunch, leading to a
seven-fold increase in debt. Other countries, like Spain and Greece,
faced high debt levels, leading to austerity measures, affecting social
services and employment.
The U.S. recovered relatively quickly due to a Keynesian-style stimulus
package, while Europe faced ongoing economic challenges, leading to
political upheaval and the rise of far-right parties blaming immigrants
for economic problems.

17. Economic Globalization Today
The global financial crisis will take a long time to resolve, and
while some advocate closing national economies to world
trade, it's increasingly difficult due to global integration.
International trade remains essential for contemporary
development.
Exports are a key driver of economic growth today. Initially,
advanced nations like the United States, Japan, and the EU
dominated global exports, but as more countries embraced free
trade, developing nations like the Philippines, India, China,
Argentina, and Brazil have gained a larger share, accounting
for 53% of global exports by 2011.

18. Economic globalization has led to substantial global growth, with per capita GDP
rising significantly in the second half of the 20th century, particularly in Asian
economies like Japan, China, South Korea, Hong Kong, and Singapore.
However, economic globalization is uneven, benefiting some countries,
corporations, and individuals more than others. Trade talks under the WTO have
reduced trade barriers but have often been unfair. Developed countries protect
their industries through policies like Japan's safeguarding of its rice sector and
the U.S. protecting its sugar industry.
This protectionism creates trade imbalances between developed and developing
countries. Transnational corporations (TNCs) have been major beneficiaries of
global commerce, prioritizing profits over social programs. Host countries often
loosen tax laws and labor standards to attract TNCs, leading to a "race to the
bottom" in labor and environmental standards, with detrimental consequences
for workers and the environment.

19. Localizing the Material
Many Philippine industries were devastated by unfair trade deals under the GATT
and eventually the WTO. One sector that was particularly affected was Philippine
agriculture. According to Walden Bello and a team of researchers at Focus on the
Global South, the US used its power under the GATT system to prevent Philippine
importers from purchasing Philippine poultry and pork-even as it sold meat to the
Philippines.
Although the Philippines expected to make up losses in sectors like meat with gains
in areas such as coconut products, no significant change was realized. In 1993,
coconut exports amounted to $1.9 billion, and after a slight increase to $2.3 billion
in 1997, it returned to $1.9 billion in 2000.
Most strikingly, Bello and company noted that the Philippines became a net food
importer under the GATT. In 1993, the country had an agricultural trade surplus of
$292 million. It had a deficit of $764 million in 1997 and $794 million in 2002.
-Bello, Walden, Herbert Docena, Marissa de Guzman, and Mary Lou Malig. The
Anti-Development State: The Political Economy of Permanent Crisis in the
Philippines. London and New York: Zed Books, 2006, 140-142.

20. Conclusion
International economic integration is a fundamental aspect of globalization,
although it's essential to remember that globalization encompasses more than
just economics. While economics is a significant part of globalization, it's not the
entire picture. Economic globalization plays a crucial role in facilitating global
culture and politics. Trade allows for the exchange of cultural products, like
movies and music, and is intertwined with political diplomacy, often serving as a
basis for international relations.
Given the importance of economic globalization, it's vital to consider how to make
the system more equitable. While some aspects of global free trade can be
adjusted, it cannot be completely eliminated. International policymakers should
focus on making trade deals fairer and ensuring that governments find ways to
mitigate the negative impacts of economic globalization while making sure its
benefits are accessible to all.

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