GE 3

CONTEMPORARY
WORLD
WHAT IS
GLOBALIZATION?
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).
The reality and omnipresence of
globalization make us see
ourselves as part of what we refer
to as the "global age" (Albrow
1996).
Globalization encompasses a
multitude of processes that involve
economy, political systems, and
culture. Social structures, therefore,
are directly affected by globalization.
(Al-Rhodan 2006)
Swedish Journalist Thomas Larsson (2001)
saw globalization as "the process of world
shrinkage, of distances getting shorter, things
moving closer. It pertains to the increasing
ease with which somebody on one side of the
world can interact, to mutual benefit with
somebody on the other side of the world."
some see it as occurring
through and with regression,
colonialism, and
destabilization.
 
THE
DIMENSIONS OF
GLOBALIZATION
ECONOMIC
GLOBALIZATION
refersto the widespread international
movement of goods, capital, services,
technology and information. It is the increasing
economic integration and interdependence of
national, regional, and local economies across
the world through an intensification of cross-
border movement of goods, services,
technologies and capital.
ECONOMIC
GLOBALIZATION
Economic globalization primarily
comprises the globalization of
production, finance, markets,
technology, organizational regimes,
institutions, corporations, and
labour.
POLITICAL
GLOBALIZATION
refers to the transmission of ideas,
meanings, and values around the world in
such a way as to extend and intensify social
relations. This process is marked by the
common consumption of cultures that have
been diffused by the Internet, popular
culture media, and international travel.
This has added to processes of commodity
exchange and colonization which have a
longer history of carrying cultural meaning
around the globe.
The circulation of cultures enables
individuals to partake in extended social
relations that cross national and regional
borders.
The creation and expansion of such social
relations is not merely observed on a
Cultural globalization involves the
formation of shared norms and
knowledge with which people
associate their individual and
collective cultural identities. It
brings increasing interconnectedness
among different populations and
cultures.
GLOBALIZATION AND
TECHNOLOGY
Technological developments are conceived as the
main facilitator and driving force of most of the
globalization processes. Before elaborating on the
consequences of several technological
developments, we must go through the definition
of technology as a sociological term, so that we
can further explore the social and political role of
technology in the globalization process.

Technology can be defined as the
socialized knowledge of producing
goods and services. We can describe
the term technology with five
important elements: production,
knowledge, instruments, possession and
change. Our definition of technology as
a socialized knowledge can be better
conceived with these elements.
Technology can be defined as the
socialized knowledge of producing
goods and services. We can describe
the term technology with five
important elements: production,
knowledge, instruments, possession and
change. Our definition of technology as
a socialized knowledge can be better
conceived with these elements.
THE STRUCTURES OF
GLOBALIZATION
When the American
economy sneezes,
the rest of the
world catches a
cold?
This means that
world economies
have been brought
together by
globalization
What does the
Global Economy
mean?
A global economy is an economic
interdependence established between the
most influential countries that drive the
worldwide economic environment.
It is also the aggregate economic output,
movement, and influence of all countries.
The global economy can also be defined as
each country’s economy added together but
that is not the only way to portrait how the
world economy works.
Production Networks in The
Global Economy
 In the 1990s, a new framework, called GLOBAL
COMMODITY CHAINS (GCC), tied the concept of the
value-added chain directly to the global organization of
industries (see Gereffi and Korzeniewicz 1994; Gereffi
1999, 2001). This work was based on an insight into the
growing importance of global buyers (mainly retailers
and brand companies, or ―manufacturers without
factories‖) as key drivers in the formation of globally
dispersed production and distribution networks.
Production Networks in The
Global Economy
Gereffi (1994a) contrasted these buyer-driven
chains to what he termed producer-driven
chains. The trade data alone mask important
organizational shifts because they differentiate
neither between intrafirm and interfirm trade
nor between the various ways in which global
outsourcing relationships were being constructed.
Production Networks in The
Global Economy
A variety of overlapping terms has been
used to describe the complex network
relationships that make up the global
economy. Each of the contending concepts,
however, has a particular emphasis that is
important to recognize for a chain analysis
of the global economy:
Production Networks in The
Global Economy
Supply chains. A generic label for an input-
output structure of value-adding activities,
beginning with raw materials and ending
with a finished product International
production networks. A focus on the
international production networks in which
TNCs act as ―global network flagships ‖
(Borrus, Ernst, and Haggard 2000)
Production Networks in The
Global Economy
 Global commodity chains. An emphasis on the internal
governance structure of supply chains (especially the
producer-driven vs. buyer-driven distinction) and on the role
of diverse lead firms in setting up global production and
sourcing networks (Gereffi and Korzeniewicz 1994) French
―filière‖ approach. A loosely-knit set of studies that used the
filière (i.e., channel or network) of activities as a method to
study primarily agricultural export commodities such as
rubber, cotton, coffee, and cocoa (Raikes, Jensen, and Ponte
2000)
Production Networks in The
Global Economy
Global value chains. Emphasis on the relative
value of those economic activities that are
required to bring a good or service from
conception, through the different phases of
production (involving a combination of physical
transformation and the input of various producer
services), delivery to final consumers, and final
disposal after use (Kaplinsky 2000; Gereffi and
Kaplinsky 2001)
Containerization
The costs of ocean shipping have
come down, due to containerization,
bulk shipping, and other efficiencies.
The lower unit cost of shipping
products around the global economy
helps to bring prices in the country
of manufacture closer to those in
export markets, and it makes
markets more contestable globally
Technological change
Rapid and sustained technological
change has reduced the cost of
transmitting and communicating
information – sometimes known as
“the death of distance” – a key
factor behind trade in knowledge
products using web technology.
Economies of scale
Many economists believe that there has
been an increase in the minimum
efficient scale (MES) associated with
some industries. If the MES is rising, a
domestic market may be regarded as too
small to satisfy the selling needs of these
industries. Many emerging countries
have their transnational corporations
Differences in tax systems
The desire of businesses to benefit from
lower unit labor costs and other favorable
production factors abroad has encouraged
countries to adjust their tax systems to
attract foreign direct investment (FDI). Many
countries have become engaged in tax
competition between each other in a bid to
win lucrative foreign investment projects.
Less protectionism
Old forms of non-tariff protection such as import
licensing and foreign exchange controls have
gradually been dismantled. Borders have opened
and average import tariff levels have fallen.
That said, it is worth knowing that, in the last
few years, there has been a rise in non-tariff
barriers such as import quotas as countries have
struggled to achieve real economic growth and
as a response to persistent trade and current
account deficits.
Growth Strategies of Transnational and
Multinational Companies
In their pursuit of revenue and profit growth,
increasingly global businesses and brands have
invested significantly in expanding
internationally. This is particularly the case for
businesses owning brands that have proved they
have the potential to be successful globally,
particularly in faster-growing economies fueled
by growing numbers of middle-class consumers.
The International
Financial
Institutions
“World economies have been brought closer together
by globalization. It is reflected in the phrase “when
the American economy sneezes, the rest of the world
catches a cold”. But it is not only the economy of
America that has impact to the world economy.
Other countries have also significant contribution to
global market and finance.”

--(Adapted
from: Aldama (2018) The
Contemporary World)--
“World economies have been brought closer together
by globalization. It is reflected in the phrase “when
the American economy sneezes, the rest of the world
catches a cold”. But it is not only the economy of
America that has impact to the world economy.
Other countries have also significant contribution to
global market and finance.”

--(Adapted
from: Aldama (2018) The
Contemporary World)--
The Bretton Wood System
The major economies in the world had suffered
because of World War I, the Great Depression in
the 1930’s and the World War II. Because of the
fear of the recurrence of lack of cooperation
among nation state, political instability, and
economic turmoil, reduction of barriers to trade
and free flow of money among nations became the
focus to restructure the world economy and ensure
global financial stability (Ritzer, 2015). Thus the
creation of the Bretton Woods System.
The Bretton Wood System
Bretton Woods System generated
the expression of currency in terms
of gold value to establish a par value
(Boughton). For instance a 35 U.S
dollar pegged by the United States
per ounce of gold is the same as 175
Nicaraguan cordobas per ounce of
gold.
The Bretton Wood System
Secondly, two official monetary authority in
each country ( A central bank or its equivalent)
would agree to exchange its own currency for
those of other countries at the established
exchange rates, plus or minus one-percent
margin‖ ( Boughton 2007:106-7). This made
international trade possible at or near the
exchange rate for the currencies of the
countries involved without the need for any
outside intervention.
The Bretton Wood System
Thirdly the international Monetary Fund (IMF) was
created (Babb 2007:128-64) to establish, stabilize,
and oversee exchange rates. Forty states became
IMF members in 1946 and were required to deposit
some of their gold reserves with the IMF. The IMF
was empowered to approve the par values of
currencies and member states could not change that
value by more than 10 percent. If a currency was
destabilized, the IMF was prepared to lend member
states the money needed to stabilize their currency.
The Bretton Wood System
Thirdly the international Monetary Fund (IMF) was
created (Babb 2007:128-64) to establish, stabilize,
and oversee exchange rates. Forty states became
IMF members in 1946 and were required to deposit
some of their gold reserves with the IMF. The IMF
was empowered to approve the par values of
currencies and member states could not change that
value by more than 10 percent. If a currency was
destabilized, the IMF was prepared to lend member
states the money needed to stabilize their currency.
The Bretton Wood System
Fourthly, the member states agreed
to eliminate, at least eventually all
restrictions.-- Adapted from:Aldama
(2018) The Contemporary World)—
The General Agreement on Tariffs and Trade
(GATT) and the World Trade Organization (WTO)
 One of the system born out of Bretton Woods
was the General Agreement on Tariffs and
Trade (GATT) that was established in 1947
Goldstein et.al, 2007). GATT was a forum for
the meeting of 23 member countries. It focused
on trade goods through Multinational trade
agreement.
 ---Adapted from: Aldama (2018) The
Contemporary World) ---
 It operated until 1995 when it was superseded by the World
Trade Organization (WTO). While GATT focused on Trade and
Goods, the WTO also took for the responsibility for the
increasingly important trade in service. While GATT was simply
a forum for the meetings of representatives of countries, the
WTO is an independent organization. GATT was deemed more
acceptable than the International Trade Organization (ITO) by
the US and other countries; and in 1947, a number of initial
trade agreements were negotiated by 23 nations. Since then
multinational trade agreement have been negotiated under
GATT‘s (and later the WTO‘s) institutional umbrella. Over the
years a number of ―rounds‖ of negotiation were completed. It
was out of the Uruguay Round (1986-1983) that an agreement
that reached to create the WTO.
 
World Trade Organization (WTO)
The headquarter of WTO is located
in Geneva, Switzerland with 152 members states
as of 2008 (Trachtman, 2007) It is an
independent multilateral organization that
became responsible for trade in services, non-
tariff-related barriers and other broader areas of
trade liberalization.
--Adapted from: Aldama (2018) The
Contemporary World)—
World Trade Organization (WTO)
While GATT focused on tariff reduction, the
WTO has come to focus more of non-tariff related
barriers to trade. One example is the differences
between nation in relation to regulations on such items
as manufactured foods or food. A given nation can be
taken to task for such regulations if they are deemed to
be an unfair restraint to the trade in such items.
However, the WTO has been criticized for not going far
enough in countering the trade barriers retain by
developed countries in such domains as agricultural
products and some services.
The International Monetary Fund (IMF)
and the World Bank
IMF and World Bank were founded
after the World War II. Their
establishment was mainly because of
peace advocacy after the war. IMF
and World Bank were designed to
complement each other.
The International Monetary Fund (IMF)
and the World Bank
The IMF’s main goal was to help countries in trouble at the
time and who could not obtain money by any means. Both
institutions are basically banks. The IMF is lightning rod for
critics who see it as supporting developed countries and
their efforts to impose their policies on less developed
countries. It supporters see it as key to emergence and
further development of the global economy. As a result of
changes of the global economy, the nature and functions
of the IMF have changed since its creation in 1944. In the
beginning, it managed the exchange rate system created in
Bretton Woods.
WORLD BANK
The World Bank, officially the International Bank for the
Reconstruction and Development (IBRD) is the most
important element of the World Bank Group (WBG)
(Gilbert and Vines 2000; Bradlow 2007:1262-7). The IBRD
or the bank was established in 1944 at Bretton Woods and
began operations in 1946. Membership is open to all
member states of the IMF, and as of this writing, it
includes 184 nations. It provides funds to government-
sponsored or guaranteed programs in so-called Part II
countries (member states that are middle income or
creditworthy poorer nations).