Lesson 3

The Global Economy

Definition of Terms

● Economic globalization - is the expansion of national economies, the global market

driven by modern technologies and institutional set ups that promote faster and easier
flow of goods and capital (Sugden and Wilson, 2005)
● Global economy - denotes that the economies of various countries are more
interconnected from extraction, production, distribution, consumption, to disposal of
goods and services (Carfi and Schiliro, 2018)
● International financial institutions - global financial institutions that support a country’s
economic growth through support (i.e., loans, technical assistance) to governments and
now other private sectors (Wood, 2019)
● International Monetary Fund - is an international organization with 183 member
countries that promotes international monetary cooperation and exchange stability to
foster economic growth and high employment and to provide short-term financial
assistance to countries to help ease balance of payments adjustments (IMF, 2019)
● Global civil society - is a system of non-government institutions that operate across
geographical borders and organize and mobilize for a common issue or cause (Keane,
2003: 8)
● Global corporation - is an “enterprise that engages in activities which add value
(manufacturing, extraction, services, marketing, etc) in more than one country” (UCTC,
1991)
● World system - is based on the theory of Wallerstein (1974) that recognizes that social
and economic change is not only endogenous to a country, but is affected by its
interaction to exogenous institutions, thus the focus on world-systems (Chase-Dunn,
2018)
● Economic integration - is a process of combining or increasing the interconnectivity of
national economies to the regional or global economies (Clark et al., 2018)

Introduction

● Globalization in economic terms extends economic projects and relations transnationally

and promotes economic interdependencies among different countries. Szentes
(2003:69)
● Economic globalization involves the integration of functions and processes of economic
activities (Dicken, 2004).

"Who are the actors that drive economic globalization?"

"What is the modern world system?"

Definition of Economic Globalization - San Antonio

Definition of Economic Globalization
● Economic globalization is driven by the "growing scale of cross-border trade of
commodities and services" (Shangquan, 2000:1).

● The various definitions of economic globalization focus on increasing economic trade

interrelations among countries (Steger, 2010; Al-Rodhan, et al., 2006; Shangquan,
2000). This is governed by neoliberal principles with the role of the market as a central
driver of economic activities, with less government interventions (Martin, Schumann &
Camiller, 1997)

● Economic globalization entails global industrial restructuring and readjustments where

developed countries play a dominant role (Shangquan, 2000:3).

● Gills and Thompson (2006: 1) argues that the globalization processes "have been
ongoing ever since Homo sapiens began migrating from the African continent ultimately
to populate the rest of the world."

● Explorations in earlier times tend to focus on a relatively smaller target of commodities of

high value like spices, tea, gold, or other precious metals. The difference now is the
extent and reach of economic globalization, restructuring of economic systems, and the
dominant influence of the private sector in the global economy (Shangquan, 2000).

Who are the Actors that Facilitates the Economic Globalization

● Globalization has contributed to the development of new forms of public authority
exercised by new global actors
● Actors could be state and non-state. It is the person or group of people representing a
particular institution to other country or state.
● Nation-states
- refer to a certain form of state that derives its political legitimacy from serving as
a sovereign entity for a nation within its sovereign territorial space.
● Non-State Actors
- These global actor refers to any social structure which is able to act and
influence and engage in the global or international system

International Monetary Funds (IMF), World Bank and Organization for Economic
Cooperation and Development (OECD)
● These organizations are critical in developing and pushing neoliberal for policies among
different countries.
● They help facilitate trade and development discussion among various states

Association of Southeast Asian Nation (ASEAN) and North American Free Trade
Agreement (NAFTA)
 ● These organization promote regional agreements and standards that facilitate better
trade and exchange of knowledge, human resources and regional cooperation

Multinational Companies (MNCs)

● Which are considered to be the main carriers of economic globalization.
● any corporation that is registered and operates in more than one country at a time.

Central Banks
● They are considered one of the most powerful institutions in the world economy since
they can lead economic development.
● They carry out the nation's monetary policy and control the money supply.

Global Civil Society

● Major driver of economic globalization. Global civil society is seen as either composed of
individuals or groups of individuals disadvantaged by the effects of globalization.
● foster changes in power structure and instill knowledge within communities to bring
about social change.

Transnational Advocacy Networks (TAN)

● Networks which is are organized to promote causes, principled ideas, and norms and
they often involve individual advocating policy changes that cannot be easily linked to a
rationalist understanding of their “interest”

G8 and G20:

These organizations represent some of the world's greatest economies and serve as
forums for discussing critical global issues such as economic stability, security, and
sustainable development. The G20, which comprises emerging nations, is playing an
increasingly important role in global governance, reflecting evolving power relations.
They hope to influence national laws through the conversations held in these venues
(Weiss, 2018).

Global Civil Society:

This notion highlights the importance of grassroots organizations, non-governmental

organizations (NGOs), and social movements in opposing the effects of globalization.
These organizations advocate for social justice, environmental sustainability, and human
rights, hoping to influence legislation and practices at both the national and international
levels. They advocate for alternatives and represent social movements seeking a new
global order (Gherghel, n.d.; Keane, 2003).

Modern World System:

Immanuel Wallerstein's world-system theory (1974) outlines how dominant countries
(cores) control weaker regions (peripheries). He describes a social system that has
diverse structures and laws. The global economy is classified into three sectors: core,
semi-periphery, and peripheral. The latter provides raw resources, while semi-peripherals
manage processing and distribution (Wallerstein, 2011). Modern transportation and
communication make it easier for resources, products, and people to move around.

International Monetary Funds

The IMF is an international organization of 183 member countries to promote International

monetary cooperation and exchange stability; to foster economic growth and high employment;
and to provide short-term financial assistance to countries to help ease balance of payments
adjustments (IMF, 2019).

International Financial Institute

The generic name given to all financial institutions operating on an international level, ranging
from development banks, such as the World Bank and the European Bank for Reconstruction
and Development (EDB), and monetary authorities, such as the International Monetary Fund.
These organizations give loans to governments for large-scale projects, restructuring and
balance of payments on condition that they make specific changes that IFIs believe will boost
economic growth (Shangquan, 2000).

Transnational Corporation

"Enterprise that engages in activities which add value (manufacturing, extraction, services,
marketing, etc.) in more than one country (UCTC, 1991).”Transnational corporations (TNCs) are
businesses that have a global reach. They are companies that operate in more than one
country. Transnational companies do not have a centralized management system
and are able to gain more interest in the local markets since they maintain their own systems.

Summary

This lesson sets out to answer the following questions: "what is economic globalization?", "who
are the actors that drive economic globalization?", and What is the modern world system?"

• Economic globalization is the expansion of national economies, the global market driven by
modern technologies and institutional set ups that promote faster and easier flow of goods and
capital (Sugden & Wilson, 2005).
• The Global economy is a product of this economic globalization where each countries'
economies are more interconnected and affected by each other.

Different actors and institutions that drive economic globalization

TYPES OF ACTORS AND INSTITUTION THAT DRIVE ECONOMIC GLOBALIZATION

• State Actors - managing by particular government
• Non-State Actors - only international events but without government control

• most of which are non-state actors. These include international economic organizations like
International Monetary Fund, World Bank, Asian Development Bank ; central banks; private
sectors led by Multi-National Companies; and Global civil society. These organizations affect
trade and economic policies and serve as source of support (funds, services, technical) for
economic globalization.

THE THEORY OF WALLERSTEIN

The modern world system is based on the theory of Wallerstein (1974), which posited that the
global economy is divided into the following:

Core - sustain the raw material and the dominant, capitalist countries characterized by high
levels of industrialization and urbanization.
Semi-periphery - under the processing and distribution of the product that fall in the middle of
the economic spectrum.
Periphery. - The countries are poor, have exploitable resources, and do not possess great
social stability or government and who control less of the products