1 | P a g e f o r B S U u s e o n l y STUDY GUIDE MODULE III ECONOMIC GLOBALIZATION Time Table Module Number & Title Learning Objectives Topics Week 4 January 30- February 3, 2023 Module III Economic Globalization After working on this module, you should be able to: 1. Understand the nature of economic globalization; 2. Discuss the early beginnings of international trade; and 3. Examine and analyze theories on the stratification of states. The Nature of Economic Globalization History of Economic Globalization Theories on Economic Stratification THE CONTEMPORARY WORLD (SS 23) 2 ND SEMESTER, SY 2022-2023

2 | P a g e f o r B S U u s e o n l y Introduction Module III discusses the components of economic globalization and its early forms. The history of international trade is basically tied with the waves of globalization that was explained in Module I. In addition, this module enumerates and briefly discourses several theories that elucidate the existence of economically developed states and poorly developed ones. Learning Objectives After working on Module III, you should be able to: 1. Understand the nature of economic globalization; 2. Discuss the early beginnings of international trade; and 3. Examine and analyze theories on the stratification of states. Key Concepts A. The Nature of Economic Globalization Economic globalization is the exchange of goods, resources, technology, capital, and services among states of the globe. Note that for economic globalization to exist, the exchange of these identified components have to be transplanetary. The article on the next page illustrates how economic globalization works. It takes the involvement of several countries to manufacture iPhone 6s, which is one of the known models of mobile phones in the globe.

3 | P a g e f o r B S U u s e o n l y writepass.com Learning Activity Look closely and analyze the illustration below.

4 | P a g e f o r B S U u s e o n l y B. The History of Economic Globalization The interdependence of state economies at present begun from the Silk Trade which commenced in 130 BC. China’s Han Dynasty opened the Silk Road for the transport of several Chinese goods to a number of states in the Western part of the globe. The conflicts between China and the Ottoman Empire closed Silk Trade, but the Europeans were able to use the sea for the travel of goods and people from and to the Eastern part of the globe. The advancement in technology brought developments to the conduct of global trade, and now the world has witnessed the unfolding of online trade. C. Theories on Economic Stratification These theories offer explanations on why there are states that are economically developed compared to the others. A Product’s Journey This activity will be done by group. Each group needs to have 4 members; Choose who will be your groupmates from the class. As a group, decide what product you will choose. The product should be something that students use frequently. It can be a specific brand of mobile phone, a brand of a laptop, a ballpen, and so on. After identifying the product and its brand, tract its jourrney (refer to the iphone illustration as an example). Show the countries where the raw materials come from; discuss the countries where the assembly of the product is done; present the country where the quality check happens; show the countries where the product is exported. You need to do your research using the internet for this purpose. Do not forget to cite your references. Once the information are present, create a visual presentation that shows and expalins the creation of the product your group chose. Be creative in your illustration. Rubrics: a. Substance of Information Presented in the Illustration: 10 points b. Vibrancy and Neatness of the Illustration: 5 points

5 | P a g e f o r B S U u s e o n l y MODULE III ECONOMIC GLOBALIZATION The Nature of Economic Globalization Deocampo et. al. (2019) noted that “the interconnectedness of world economy is the forefront marker of globalization”. This means that no single country at present can claim that it is capable of producing everything that its people need or even desire; hence, there is an impending need for countries to establish economic relationships and strengthen these by continuous exchange of goods, services, resources, capital, and technology. Economics, is perhaps, the primary reason for the birth of globalization. Shangquan (2000) defined economic globalization as the “increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies”. Notice that this definition has been emphasized in the discussions of module 1 and 2. The interlocking of the state markets did not happen overnight. The International Monetary Fund (2008) remarked that economic globalization is a “historical process” simply because “it is the result of human innovation and technological progress”. IMF further stressed that economic globalization “is an irreversible trend for the economic development in the whole world at the turn of the millennium”; hence, states at present continue to engage in international trade since this is believed to be the key to economic growth. Technological progress paved way for the growth of and expansion of economic globalization. Shangquan explained that technological advancements reduced the cost of production of a particular commodity since it provided the Source: blog.intertrade.com

6 | P a g e f o r B S U u s e o n l y opportunities for companies to scout for different states that can aid in its production process. Take the iphone as an example of this. The iphone is a popular brand of mobile phone that is being sold by the American multinational technology company Apple, the headquarters of which is in Cupertino, California. It is stimulating to note that although the head office is in the USA, the state relies on various other states to manufacture the iphone. Apart from Apple, Deocampo et.al. (2019) shared that Toyota, a Japanese multinational automotive manufacturer that is stationed in Aichi, Japan, assembles auto parts in countries (notably Philippines and Indonesia) were labor is cheap. Then it markets these automotive products in states like Singapore and Malaysia where there is an increasing demand for cars. These cited examples of transnational companies that depend on a number of countries for the manufacture of their specific products showcase the obvious scenario that no state is self-sufficient; no state can verbally claim that it is able to produce everything that its citizens or companies need; hence, the need for economic collaboration in order to address economic challenges. In addition to goods, states also collaborate to solve labor deficiencies. The Philippines, for instance, relies on Middle East countries not only for oil supply, but also as a market for the former’s labor force. Benczes (2014) stressed that the main driving force of economic globalization of the last 100 years are transnational corporations (TNCs). Deocampo et. al. (2019) defined transnational corporations (TNCs) as “business organizations and firms that

7 | P a g e f o r B S U u s e o n l y compete in regional or global markets”. In addition, these operate in “countries and make investments in research, technology, facilities, distribution, and production”. Just like what Benczes thought, Deocampo et.al. also stressed that TNCs can control and monopolize the global market especially if these companies have a huge pool of resources making them one of the most powerful economic actors in the world. Transnational Corporations (TNCs) were formerly referred to as Multinational Corporations (MNCs). The term MNCs was changed into TNCs according to Deocampo et. al. because the latter is the more appropriate term considering the extent of its production and networks around the globe. To strengthen global trade, international economic organizations (or some term these as institutions) exist. These organizations manage the global economy by upholding trade policies, agreements, and programs among countries. These organizations make possible the inclusion of all countries, especially the economically undeveloped ones, in global trade and amass benefits from it. Some of these international economic organizations are presented in the table below. International Economic Organization Description International Monetary Fund economicshelp.org Lends money to countries that are in financial trouble (not having enough funds to pay for international bills and debts). World Bank ceowatermandate.org It is not actually a bank, but it provides loans to developing countries to alleviate poverty and inequality World Trade Organization brandsoftheowlrd.com It manages global trade negotiations and settle trade disputes between countries. Its purpose is to help trade flow as freely as possible. Group of 20 (G20) dreamstime.com This is made up of countries with the biggest economies in the world. It is regarded as the world’s premiere economic-crisis management organization since it is capable of quickly establishing agreements to settle trade disputes compared to IMF and WB. Source: International Organizations https://www.ecnmy.org/learn/your-world/international-organizations/

8 | P a g e f o r B S U u s e o n l y You should have understood by now that economic globalization is made possible by global trade (exportation and importation of goods and services), presence of foreign direct investment (existence of TNCs), capital market flows (presence of international economic organizations where countries can borrow funds for economic endeavors), migration of human resources (case of Filipino overseas workers), and diffusion of technology. History of Economic Globalization The economic interdependence of states is not a new phenomenon. Economic globalization, as asserted by Vanham (2019), begun during the first century B.C. when Chinese luxury goods were able to reach the Eurasian continent through the Silk Road. The Silk Road, according to Encyclopedia Britannica, is otherwise known as the Silk Route. This 4,000 mile (6,400 km) road that originated from Xi’an (Sian) has linked China with the Western part of the globe. This route enabled the transport and exchange of “goods as well as ideas between Rome and China”. Vanham (2019) narrated that the next chapter in the evolution of global trading took place when Islam spread in all directions from the Arabian heartland in the 7th century. Since the prophet Mohammad and his wife Khadija were famous merchants, trade flourished along with the spread of Islam through the work of Islamic merchants, who dominated the Mediterranean and Indian Ocean trade by the early 9th century. The main focus of Islamic trade were spices (which were traded by sea) like nutmeg, cloves, and mace from the Spice islands (Maluku Islands in Indonesia). Just like their craving for silk, the Europeans also had an increased

9 | P a g e f o r B S U u s e o n l y demand for spices; thus, making it expensive, and the chief focus of international trade. Global trade kicked off during the Age of Discovery (15th -18th centuries) when the European explorers accidentally discovered the Americas. Vanham (2019) remarked that the circumnavigation of Magellan cut out the role of the Arab and Italian middlemen when his voyage opened the door to the Spice Islands. Trade became global during this age, and resulted to altering the lives of people. When products like potatoes, tomatoes, coffee and chocolate were introduced in Europe, the price of spices fell unreasonably. The Philippines, according to some authors, played a crucial role in the history of economic globalization since the phenomenon begun in the country’s shores specifically during the Galleon Trade (1565-1815). The Galleon trade connected Manila (Philippines) and Acapulco (Mexico). The European empires set up global supply chains, but mostly with those colonies they owned. Their colonial model was chiefly exploitation. In order to protect their own merchandise from other competitors, the early European monarchs imposed high tariffs, forbade colonies to trade with other nations and restricted trade routes. The first wave of economic globalization (19th century-1914) took place during the Industrial Revolution. The British Empire dominated the globe due to technological inventions that practically expanded international market. Great Britain was able to manufacture products (iron, textiles, goods) that were in demand globally, and transported these across the globe using trains and steamships. Great Britain was able to benefit much from this expanding international trade, but it also has to be noted that other states were also able to have tasted benefits Source: infantalamabanog.com

10 | P a g e f o r B S U u s e o n l y because these states were also able to export their products to Europe. The flourishing international ‘trade was halted by the two world wars that resulted to the breakdown of global economy. Global trade commenced booming after the 2nd world war under the leadership of the United States of America aided by the technologies brought by the second industrial revolution (car and planes). The collapse of the Berlin Wall and the Soviet Union paved way for the eventual spread of economic globalization; the creation of the World Trade Organization (WTO) further influenced most states to engage in free trade. China joined WTO in 2001, and commenced to manufacture for the world (notice everything now a days is made in China). The invention of the internet further escalated global trade since it connected people all over the globe in an even more direct way. Vanham (2019) claims that the world at present is now experiencing globalization 4.0. The USA and China are the hegemons of today’s world, both trying to concur the cyber world. The trend now a days is digital economy that is very much visible through e-commerce. Theories of Economic Stratification These theories offer explanations on why states differ in terms of their level of economic development. Aldama (2018) presented 4 theories, namely: 1. Modernization Theory. The theory espouses that economic dissimilarities between and among countries is due to technological and cultural differences. This theory assumes that European states progressed first compared to the rest of the world due to the Columbian Exchange and the Industrial Revolution. Source: microform.digital

11 | P a g e f o r B S U u s e o n l y The Columbian Exchange refers to “the spread of goods, technology, education, as well as diseases across the Americas and Europe resulting from the discovery of Columbus of the Americas”. The discovery paved way for the establishment of trade that resulted to the flourishing of life in Europe. Likewise, the Industrial Revolution also benefitted the Europeans particularly the merchants/traders who were able to maximize the use of technology for the production and distribution of their goods. Those “countries that industrialized saw massive improvements in their standards of living, and countries that did not lagged behind”. 2. Walt Rostow’s Stages of Modernization Theory. Walt Rostow, an American economist, underlined that modernization took place in the West because these developed western countries were the first to undergo the stages of modernization. a. Traditional society. The society basically thrives through subsistence agricultural economy. Families only produce what they need; products created were of low quality, and no surplus that can be traded within the community or nearby communities. b. Pre-conditions for take-off. During this stage, the people begun to produce beyond their necessities; thus, manufacturing extra surplus products that can be merchandized. This set up created markets for trade. c. Take-off stage. Technological growth during this stage resulted in the creation of manufacturing industries which became more important compared to the agricultural sector although this sector still exists under this stage. The co-existence of these two sectors resulted to a dual economy according to tutor2u.net. The website explained that “there is a rising Source: treeofed.com

12 | P a g e f o r B S U u s e o n l y productivity and wealth from the manufacturing and other industries as contrasted with stubbornly low productivity and real incomes in rural agriculture”. d. Drive to maturity. Industry becomes more diverse and technology further improves resulting to growth spreading to various parts of the state. e. Age of mass consumption. This stage sees that the country produces not only for subsistence, but also what they desire. There is an increased consumer expenditure since there also is an increase in the number of middle class consumers. 3. Dependency Theory. This theory espouses that the progress of the economically developed countries was achieved by exploitation of the economically undeveloped ones. Aldama (2018) cited that the terms “core nations” and “peripheral nations” are always utilized in discussing this theory. The peripheral nations refer to states that are less developed and receive unequal distribution of the world’s wealth; they were also the former colonies of the core states. Core nations, on the other hand, pertain to countries that are more industrialized and receive the majority of the world’s wealth. Aldama also mentioned Anton’s (2006) thought that “even after decolonization, there are still important ties between the developed and less developed countries, which mainly consist in the exploitation of the peripheral natural resources and workforce by the center”. Ferraro’s (2008) point was also cited by Aldama. The development of peripheral nations is stagnant

13 | P a g e f o r B S U u s e o n l y because of the exploitative nature of the core nations. the less developed periphery nations are said to primarily serve the interests of the wealthier countries and end up having little to no resources to put forward their own development. The economy of the periphery countries rely on manual labor and to export raw materials to core nations. The core nations then process these raw materials and sell them at a much higher price. Periphery nations end up spending more money on the processed goods. 4. Wallerstein’s Modern World System/ Capitalist World System Theory. This theory is associated with the premise of the dependency theory that periphery remains economically dependent on the core. This remains to be the system since the periphery only have raw materials and no capital to develop or manufacture these raw materials. Hence, the periphery exports these resources to the semi periphery (global south countries that do not possess the economic dominance of the core) and core countries that have corporations that can buy these materials at a cheaper price and process and sell the manufactured goods at a higher price. Based on the presented theories, which do you think best explains the economic disparity of states at present? Which of these theories do you think best explains the current economic situation of the Philippines?

14 | P a g e f o r B S U u s e o n l y References Aldama, P.K.R. (2018). The contemporary world. REX Book Store. Allen, R. (15 May, 2009). Why was the Industrial Revolution British? https://voxeu.org/article/why-was-industrialrevolution-british Anton, N. (2006). Cardoso and Faletto’s “Dependency and development in Latin Americ”a- A Bolivian perspective. University of Munster. Benczes, I. (January 2014). The globalization of economic relations. https://www.researchgate.net/publication/293358032_The_globalization_of_economic_relations Deocampo, F.R., Ramos, B.F. and Llonora, R.L. (2019). Globalization in contemporary world. St. Andrew Publishing House. IMF Staff. (May, 2008). Globalization: A brief overview. https://www.imf.org/external/np/exr/ib/2008/053008.htm Shangquan, G. (2000). Economic globalization: Trends, risks, and risk prevention. https://www.un.org/en/development/desa/policy/cdp/cdp_background_papers/bp2000_1.pdf Schmidt, S. (2019). Latin American dependency theory. https://globalsouthstudies.as.virginia.edu/key-thinkers/latinamerican-dependency-theory Vanham, P. (17 January, 2019). A brief history of economic globalization. https://www.weforum.org/agenda/2019/01/how-globalization-4-0-fits-into-the-history-of-globalization/