NATURE OF GLOBALIZATION Learning Outcomes CHAPTER l At the end of the chapter, the students must: 1. arrive at a realization that the essence of globalization is inherently interdisciplinary; 2. : ia “) eople in the world today interact £4 with one another in a variety of ways. The technologies that /) emerged from the past 50 plus years have transformed the world like never before, In the Philippines, more and more Filipinos have increasingly related with people not just beyond their towns and provinces but even beyond the boundaries of the country. For instance, air travel cost is a way lot lower now than before while one could communicate with people hundreds of miles away with hand-held gadget at a very affordable price. ‘This is a result of globalization where people tions are given access to territories r services and and institu' where they could offer thei compete with other competitors with lesser government restrictions. In the Philippines, found its way into the heart globalization of Philippine society during the presidency of Fidel Ramos in 1992-1998. He envisioned Filipinos to be self-reliant and globally competitive by fostering ties with neighboring foreign economies, and by exploring other avenues for expanding international trade ‘and investments. In achieving this, the Ramos ‘administration dismantled monopolies in the ‘communications and transportation networks, privatized basic utilities provider like water, and liberalized trade (Bernardo & Tang, 2008). ‘This paved the way for cheaper travel and affordable local and overseas communications oe enabled people relations across and -yond boundaries to thrive view the nature of the contemporary world from a broad varie 3. allow students to examine the various globalizing processes. sy of lenses; and With these development, Internet connection has become more and more accessible for a large number of people. ‘This is just one of the things that the present generation of Filipinos, together with other citizens of the world are enjoying. With the states’ intention to boost productivity within the bounds of their territories, states often have the tendency to liberalize trade, which paves the way for multinational corporations (MNCs) and transnational corporations to (TNCs) to become major players in most states’ local economy. As aresult, Filipinos, together with people of other nations, eat and breathe globalization, that is, they eat, use, or even cannot live without the products or things that have been brought about by globalization through MNCs and TNCs. After all, these foreign corporations are primary actors in the international system and have a growing role in a number of states’ policy outcomes (Stopford & Strange, 1991) Nevertheless, the way people relate and interact with each other across boundaries and borders has led the way to the rise of an international society centering on cooperation among states with shared values as playing a key role in states’ policy outcomes (Micheals, 2001). Yet, globalization’s essence would be rainy ifone looks at it ina variety of lenses since globalization is inherently interdisciplinary in relation to the aspect o it could be learned and appreciated by oe directly and indirectly affected by pacts. With this, people in all walks oflife would be given opportunities to study and the various globalizing processes, scrutini ig eventually lead to the question oa a not the present day generation whet be construed and considered as global citizens. GLOBALIZATION AND ITS EFFECTS TO WORLD POLITICS According to Manfred Steger (2014), “Globalization refers to the expansion and intensification of social relations and consciousness across world-time and world- space.” With this definition, one can look at globalization from different lenses and different points of views. Hence, when globalization talks about the increase of social relations and consciousness across timelines and borders, the political scientist would likely see globalization’s great potential to challenge the nation state. As mentioned earlier, the emergence of TNCs and MNCs, have in a way, influenced many state’s policies in relation to the particular states’ political Policies. Hence, the power and influence of these foreign corporations have greatly influenced the aspect of how states have been governed. In fact, there are TNCs and MNCs whose reven ‘ tues are bigger than the 098 Domestic Produet (GDP) of independent States, With a number of foreign corporations’ ee Ues bigger than some of the world’s lependent states’ Gross Domesti (opp at a 's Domestic Products Thie is a of the country. independent 1 2 great challenge to st themselves oe lence, states formed 80 association of states for the past d an that they could address “* Political, economic, and S is seen as rise of the located along the West Phili Association of South East (ASEAN) was established on, August 8, 1967 in Bangkok by the five original ment. countries: Indonesia, Malaysia, Philippin. Singapore, and Thailand, Brunei Darussalg, Joined on January 8, 1984, Vietnam on Ju}, 28, 1995, Laos and Myanmar on July 23, 1997 and Cambodia on April 30, 1999. ‘The ASEAN Declaration states that the aims and purpos, of the association are: (1) to accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equ: and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian nations, and (2) to promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries in the region and adherence to the principles of the United Nations Charter. In 1995, the ASEAN Heads of State and Government re-affirmed that, “Cooperative peace and shared prosperity shall be the fundamental goals of ASEAN.” Moreover, the Treaty of Amity and Cooperation (TAC) i= Southeast Asia, signed at the First ASEAN Summit on February 24, 1976, declared th in their relations with one another, the Hig? Contracting Parties should be guided by 4 following fundamental principles: (1) Mat respect for the independence, sovereist' equality, territorial integrity, and aad identity of all nations, (2) The right of State to lead its national existence ieee external interference, subversion, o° ve af (3) Non-interference in the internal . oes one another, (4) Settlement ofa ro Aipurtes iy pose a mealand (g) Esfeti”® of the threat or use of force, and Associate’ cooperation among themse! oi). Wit® of Southeast Asian Nations interact these, naa an thei own nation each other in line les set DY intr ie member-states o pine Sea, t, Asian Nation, ele® = |‘This manifests relations among states that go beyond territories and boundaries and triggered by the events that unfold brought about by the workings of globalization. GLOBALIZATION AND ITS EFFECTS. ON ECONOMICS Globalization also has great effects in the realm of economies, For one, it greatly increased free trade. The rise of regional blocks all over the world lead to facilitate easy trade relations among member-states of regional blocks since one of the objectives of such organizations is to promote economic prosperity. In the 1990s, regional bloc! a craze in the sedate world of economies and Free Trade Agreements (FTAs) have played a role towards the trend of regional integration. FTAs essentially remove trade barrie s became: such as tariffs and import quotas among member- states of regional blocks (Urata, 2002). This makes trading among regional blocks’ member-states easy. Not only that, it is also favourable for the business sector since trade for them, not only in their home states but also in their neighboring states, has become more friendly than in the previous years or decades. Moreover, globalization has also increased the speed of trade. The development of computer and communication technologies and the emergence of the information technology era have led to the development. of high frequency trading (HFT) that often reflects the current situation of the economy of a particular state. Though HFT does not involve the most of common of citizens people that have a say on the economic, or even, political policies of a state are into it as a matter of necessity. In essence, HFT is the use of computer algorithms to rapidly trade stocks. Highly sophisticated proprietary strategies are programmed to move in and out of trades in timeframes as little as fractions of a second. It is a business dominated by a few giants as it is a sandbox that costs many millions to play in (Finger, 2013). Hence, the speed of trade as embodied by HFT is brought about by globalization since trading in this 's. This makes ‘tional bounda ich other a “0s! manne people interact with e globe without personally knowing each other, ‘oss the which manifest how relationships among people are intensified across world space and world time ~ a manifestation of the workings of globalization. ide from HFT, Global Economic zations (GEOs) have also played an nt role on the spread and influence of ion in the economic arena. The three major international economic organizations are the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO). The WTO emerged out of the General Agreement on Tariffs and Trade (GATT) in 1995, which delves more on the arrangement across countries that serve as a forum for negotiations on trading rules as well as a mechanism for dispute settlements in trade issues (Krueger, 1998). Yet, the World Bank and IMF deal with their member-countries one at a time, They have little influence with industrial countries but can affect developing countries during times of economic crisis and when those countries seek additional foreign exchange resources (Krueger, 2018). The origins and evolution of the three organizations are of considerable interest since they have a major role in the development of states that deal with them directly or indirectly. With this, it is safe to claim that world economic organizations have great hegemony on the economic and political policies of a number of independent states as a matter of necessity rather than that of convenience. With this the course of each state's development is, in one way or another, dependent upon the programs and directions of the said world economic organizations. GLOBALIZATION IN RELATION TO CULTURE AND COMMUNICATION Globalization has not only affected the realm of politics and economic, it has also affected the realm of culture andthroughout ally ch wed the way people communication in many societi the world. Globalization has 1 ged how people live, It ¢ unicate to each other since they I ve been empowered to communic ast even f they are thousands of mil away from ner. This also manifests that. people's also been affected by globalization as manifested by the way people live. People have behave differently now as compared to the past. Globalization has also affected and chang ulture people's needs, desires, and even their Some chang re obvious while others are subtle like the changes in meaning in the of freedom and justice, 8 with every form of globalization, one ought to consider ‘th the emergence of a global cultural system on societies and on individuals as well as the ‘nstitutions within them (Chirico, 2014) Moreover, improvements in the realm of ‘tion accelerate flows of ideas and ‘formation, Culture flows through the world +b, changing people's ideas, imagi communi influencing inings about each other and the T parts of the world, and even leading to © snvention of new social forms. Real time audio and visual communic, other Let tack may participate in one another's : “+s through social media, Families separated by migrati ‘88 media and frequent 'w Communications media allow People to gather * Spontaneously (Chirico, 2014), With this, it ig already apparent that many parts of the world, we is wery noticeable, From mune tye fi 18, Lo how busines, and, most every spect of human ie manifestation of cultur tiv. te Ly political» unity 0 culty, hion, to sy imper to the imposition by one usuall economically dominant commy aspeets of its own culture dominant community, It Of Varig (onto another so, is cultural in th, the customs, traditions, religion, |, anguag, social and moral norms, a and other aspeds Y are distinct fig though often closely related to, the and pol the imposing commu eon: 1 systems that shape the othe community. It is a form of imperialism int, the imposing community forcefully extens the authority of its way of life over the ater population by either transforming or repla aspects of the non-dominant communis: culture (Tobin, 2018). However, the lite Concept of “forcefully extending authority's not anymore the case in many contemporit} Society. Yet, elements of culture from mx dominants cultures in the West, more i than not, find its way to the heart of alas! every civilize society of the contemporary | VARIOUS FORMS OF CONNECTIVITY BROUGHT ABOUT BY GLOBALIZATION There are various forms of — thathave been brought about by global They are diverse and affect society it 2 of ways. This connectivity can be eT, | in the sense that when the West x00 | financial crisis in their homeland ji number of other countries woul! eo affected by such crisis, For instance) United States (U.S.) experienced vs 30 crisis in 2008, a number oe 1 the world were also affected: 0" so take note that every country nt ‘i i other Oa! is intertwined with every oh gS economy. Hence, when the nit wey almost experienced an a a ped in 2008, the rest of the worl for wis in chaos as well. The reaso™‘4 the world have financial Hoy wh the United States, For fuany foreigs 1 producers depend on © the United States for their own swe health Ifthe United States is in a ‘on, and American consumers eut back pending on things like computer or clothes, ‘he countries that manutaeture those products We. Lrouble (Rampell, 2008). {u the realm of investment, a number of Hon US citizens care a lot about what's going om in the United s ates economy because they have invested in it (Rampell, 2008). Yet, this 's not only rue in the United States alone. People also have connectivity with other parts of the world such as Europe, Africa, and the rest of Asia. In the ease of the Asian Financial started in Thailand, However, its effects were very much felt in the industrialized state of South Korea as well as other Asian countries like the Philippines and Indonesia. Crisis of 1997, it only Connectivity ean be felt not only in economies but also in the musie industry. An example of this is the popularity of Psy, triggered by his pop song, Gangnam Style, when it garnered 1 billion views on YouTube 2. For the South Koreans, Psy is not new to them, In fact, Psy, has been around for more than a decade, but in 2006, he took time off from music to get married and complete two years of mandatory military service. In 2010, he started his comeback in South Korea, kicking off the new PSY with a video for“Right Now,” which features English lyries, “2010 once again, PSY is coming back,” He picked up where he left off with K-pop fans, but it wasn’t until two years later that PSY rose to fame in the US. (Benjamin, 2012) Political connectivity is also a product of globalization. A recent manifestation of this connectivity was the Arab Spring, a series of anti-government protests, uprisings and armed rebellions that spread across the Middle East in early 2011, The movement was triggered by an appeal to the Arabs to take back their country from the traditional corruptelites that rule their country. It was, in part, fuelled by a sense of patriotism and social message that united the Arabs whether they were secularists or Islamist, left wing groups or advocates of liberal economic reforms, middle class or poors (Manfreda, 2017). The spontaneity of the phenomenon, though it was short and brief, had been attributed to the power of social and mainstream media, which manifested globalization essence as connecting people across world space and time For instance, the first mass protest in Egypt was announced on Facebook, which convinced thousands of people to protest. Social medica had proven itself to be a good mobilization tool to even a thousand people since it connected people in a variety of ways. The movement did not limit itself in Egypt. Rather it spread across other Arab nations, manifesting globalization’s role of connecting people even in the realm of politics (Manfreda, 2017) With all the connectivity’s mentioned earlier, it is also discernible that most, if not all of them are triggered by various factors, Pressures, the media, etc..Yet, one has to take note that the effects of the degrees of interconnection are uneven and unequal ‘The effects of the Arab Spring may be more impactfal on one country but not in another. One nation may be greatly affected by a financial crisis while one may not be affected at all. This manifests the uneven nature of the effects of globalization. Globalization is a process, and in a process, effects are more often than not, not uniform and mostly unequal EXPANSION AND STRETCHING OF SOCIAL RELATIONS Globalization has stretched and expanded relationships among nations and even among people in the course of the years. One of the agents for expanding such relationships is the emergence of non-government organizations (NGOs), These organizations are mostly aid groups whose main objective is to alleviate the lives of people especially those in distress One good example of this was when Leyte washit by the most powerful storm to ever make landfall in recent history - Typhoon Haiyan in 2013. The province became like a ground zero after the landfall where the Philippine sovernment was not able to respond quickly, Yet, despite said short coming from the government, NGOs converged in Tacloban City for the main purpose of helping People in distress as well as helping them also to rebuild their lives. These forms of relationships have not started from personal connections but said organizations have come from far away places miles away ‘rom their homeland to give help where “As needed most. Moreover, the essence of friendships and relationships has alse evolved in relation to thei, the realm of g friendship may ir essences in lobalization. The notion of not be personal in the realm of social media. Nevertheless, social media friends find a degree of connection them even if that connecti: on a personal relationshi among on is not grounded iD. INTENSIFICATION AND ACC! OF SOCIAL EXCHANGES, AND ACTIVITIES, In most part of the cont Social exchanges and activi ELERATION temporary world, ties have already been intens fied and accelerated thro, the advancement of communications 1) transportation technology. Years back, it would take time for the recipient of a Jey, : to receive it even ifthe sender lived not yy far. At present, everything has changed Communication can be sent in a spi 5p a second and is readily available at tip of the finger of the sender. One rece, innovation that influences a large number the present generation is the social meg;, Tt makes people connected since it serves facilitate split second transfer of information or communication from one person to anothe, People far from each other may feel that they belong to the same community since soci media have made it possible for people jg be perpetually connected with each othe, Quick travel is already accessible to number of people. Though some p it expensive, the thing is it is aln available to anyone who has the capacity tg do £0. Live television and even social media live streaming enable people far from each other to fully be aware of what is happening sround them. With all these present in the 8 greater eoplee fing eady readily7. Globalization has little effects in the realm of a nation’s economic life since it is mainly preoccupied with the aspect of eultur Zl 8. The various forms of connectivity that developed among people in recent have nothing to do with the workings of globalization JR 9. In the globalization process, there emerge the intensification and acceleration and activities. ‘uments that caused the increase of free trade of social exchangs [yuh 10. Global in many nations. ation is one of the instr B. Identification. Identify the person, concept, or event described in each number. Write your answer on the space provided before each number. Wordva\ WicLuhwag 1. Declares that media is slowly transforming the world into a “global village’. = in 2. It refers to the imposition by one usually politically or economically dominant community of various aspects of its own culture onto another, non-dominant community. Refers to a series of anti-government protests, uprisings and armed rebellions that spread across the Middle East in early 2011. A form of trading that makes use of computer algorithms to rapidly trade stocks. ~~ Refers to the expansion and intensification of social relations and consciousness across world-time and world-space. Ibis the process of globalization. Used as a means to announce the first mass protest in Egypt at the height of the Arab Spring by an anonymous group of activists. Refer to the International Monetary Fund (IMF), the World Trade Organization (WTO), and the World Bank (WB) ‘The aspect or element in the realm of globalization that is construed to be =, the main reason for the development of the idea of “Shrinking the World”, Asian Fatuial Gr¥is 10, ‘The Financial crisis that started in Thailand that hit the Philippines, Indonesia, South Korea, and other Asian countries in 1997 C. Essay. As a student and as a young citizen of the Philippines, write a two paragraph essay about your experience on globalization. ee)THE GLOBAL ECONOMY Learning Outcomes CHAPTER C At the end of the chapter, the students must: 1. define economic globalization and internationalization from different sources; foundation of economic globalization; identify historical antecedents and technological breakthroughs that laid the 3. identify the attributes of a global corporation; 4. determine the results of the waves of economic globalization: Early Wave, The Keynesian Liberal Wave, and Neo-Liberal Wave; and 5. assess the consequences imposed under the international trade and trade policies. lobalization has been the buzzword since the end of the cold war in the late 1980s. Free flowing of goods had increased dramatically in the second half of the 21st century. Opening the market worldwide through free trade, technological advancement in transportation and communication facilitated the volume of goods and services much easier. International trade has created new opportunities for firms and individuals to sell their products and expertise worldwide. This was made possible due to rapid technological transformation in the 1990s, which brought paradigm shift in all aspects of globalization. This growth was fueled by the new order of creating wealth through massive economies of scale production and knowledge-based technologies. “Sophisticated manufacturing methods, heavily dependent on computers and information...that could not be easily matched in world markets” (Toffler, 1991:9). Big global market players such as transnational corporations, powerful international economic institutions, and large regional trading networks have played a controversial role in the global economic order in the twenty-first century (Steger, 2009). The study of globalization needs a multidimensional approach for its processes involve a complex phenomenon. Its processes operate in various dimensions such as economic, political, cultural, and scientific simultaneously and in different degrees on several levels. Of all the global dimensions the major driving force of the process of globalization is economic (Benczes, 2010). ‘WHAT IS ECONOMIC GLOBALIZATION? IMF defined economic globalization as a historical process, the result of human innovation and technological progress, It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders (IMF, 2008). Economic globalization has several interwoven dimensions, such as 1) the globalization of trade of goods and services; 2) the globalization of financial and capital markets; 3) the globalization of technology and communication; and 4) the globalization of production. A closer description of economic globalization is internationalization. But the two is so distinct such that the former is on qualitative transformation of functional integration between internationally dispersed activities while the latter is more onquantitative change (Diken,2004), Meaning, it is more about the extension of economic activities of nation states across be economic terms, globalization is incorpor the world’s economy as an “or ani systeny extending transnational economic proces and econon ¢ relations to greater countries: and deepening econo (Szentes, 2003), ic interdependence CONFLUENCE VERSUS DIVERGENCE Is globalization the answer to end, if not minimize, inequality and dehumanizing, Poverty in the peripheries? Or would it only make the poor worse off and benefit more the rich? With notable exceptions of China, India, South Korea, and Taiwan, why most poor countries failed to catch up with developed ones? The answer probably is viewed by standard economic theories such as structural- change models. Chenery (1979) observed that development has identifiable pattern in all countries, A country’s size of raw materials or economic resources, government policies and objectives, available technology and external capital, and international trade environment constitute influencing factors to the process of development. Though its pace and pattern depends on the myriad of events taking place in the domestic and foreign environment. Global south economic impediments can be viewed from domestic and external factors. “Problems of poverty, inequality, low productivity, population growth, unemployment, primary-product export dependence, and international vulnerability have both domestic and global origins and Potential solutions” (Todaro & Smith, 2011:91). Binary approach to tackle poverty problems faced by the developing countries is the logical solution. Efforts from developing countries to improve human capital, technological, social, and institutional changes would not matter unless there is som: attitudinal, and instituti world economy. \e major structural, ional reform in the Indeod, every « ry baw a Hayne characteristic Poliei inherent only to that hry vlopted by other countrie lates fe ql Institutions would nol yrive a yuarantee bo take Mernat effect once itis replicated to another coun WAVES OF ECONOMIC GLOBALIZATION Early Wave Due to the problem of man since (ime imm varerLy of resoures had resorted ty, al, Boudreaux (2008) aptly described the primary re engage in trade so that “each party expeets tobe made better off by that. trade Through trade the exchange is not limited engage rade for survi HON peopl rely Lo sro0ds and services. There is also more impo nt and that is ideas and knowledge. ‘This trade did not only transpire from its close neighbors but encompasses for thousands of miles. Famous of which that lasted for 2,000 years, from ancient times into the 16th century was known as'The Silke Road. ‘The cov vast connect ise of this trade was si, ing by land and sea from Asia to the far end of Europe, Middle Bast as well as Africa. During this period traded goods were predominantly artisan goods, silk, spices, ceramics, textile, compasses, gun powder f India and China (Frank,1998) By middle ages trade incre expanded due to more treati nations for a sed and signed by ‘afe passage and secure trade However, this growing trade was hampered because the feudal economic system was self-sustaining. Manorial structure promoted economic self-sustenance by producing thei! own needs thereby negating any chances fo" trade outside the manor. When feudal s weakened and capital sed, this fa an impetus to spur economic globalization ‘The Age of Exploration, from early 15t!" to 17th century was the pivotal era th! “changed the shape of the world and the eo" of history” (Roberts, 1992), European made! unprecedented levels of exploration bec" emthe growing numbers of professional explorer and navigators. European ships travelled around the world in search for trading routes and new lands to colonize. New age of global commercial capitalism was laid during this period The Keynesian Liberal Wave Shaping the Global Economic Order In anticipation of the inevitable end of the Second World War, 44 countries headed by the United States of America and Great Britain gathered in Bretton Woods, New England to frame new international economic policies that will regulate trade and financial agreement. Economic setbacks in the inter-war years from 1918-1938 such as The Great Depression in 1929 and 1930s motivated political and financial leaders to set the institutional foundations for the establishment of three international economic organizations, The International Monetary Fund (IMF) was established to administer responsibility to coordinate and regulate international monetary transaction as well as to promote global economic prosperity and political stability. Unfair trade practices that might harm worldwide stability are discouraged. The International Bank for Reconstruction and Development (IBRD) became known as World Bank, primarily designed for the Marshall Plan to extend financial loans to reconstruct the devastated economies in Europe. By 1950s loans were expanded to the developing countries in the world to provide funds to finance various industrial projects (Steger, 2002). The General Agreement on Tariffs and Trade (GATT) was established in 1947 charged in crafting and policing multilateral trade agreements. Then it became World Trade Organization in1995. Since the 1990s WTO became the subject of great controversy over the policies imposed that have made more developing countries worse off. The Bretton Woods goals, and strategies were macroeconomic stability, import substitution, and governance reform, The main architects of this Bretton Woods agreement were John Maynard Keynes and Harry Dexter White. Macroeconomic Stability ‘To maintain macroeconomic stability, the US dollar was the only international standard currency of choice peg at $35 per ounce of gold. Each country set a value for its currency and pledged to maintain the value within a range of variations to eliminate extreme volatility. The IMF was expected to maintain an equilibrium functioning of the gold standard that if'a certain country get short of its balance of payments, financial assistance is provided. By the 1950sand 1960s, European countries and Japan regained their economies and that. undermined the economic competitiveness of the United States. The monopolization of US dollars led to the over valuation relative to other currencies to the extent that some countries doubted the supply of gold in the United States treasury. As a response, foreign countries converted their US dollars into gold thereby depleting US gold reserves. With the pressure mounting President Nixon of United States announced on August, 15 1971 to abandon the gold-exchange standard. Anew order was introduced in December 1971 under the Smithsonian Agreement headed by G-10 nations that US dollar was pegged with major currencies (currencies from highly industrialized nations) at central rates, being allowed to adjust by 2.25%. The forces of the market were too strong to resist that by 1976 exchange rate policy shifted to floating exchange rate system. Under this floating system, a country's currency is determined by the market mechanis, that is based on the demand and supply of dollars and the soundness of the central bank position. ‘The Philippine peso for example, was adjusted to fluctuate in response to the volume of dollars that enters our economy. If more dollar inflow goes to our economy due to positive net exports, more foreign directease of OFW remittances, investments, ine! aes e ‘ist arrival 1 tt appreciate, Conversely He sc exports become negative, foreign vot investments remains po0F, i ore remittances declines, the peso will also sli or depreciate its value. The Asian Financial Crisis of 1997 In order to attract foreign direct investments, countries such as the Philippines, Thailand, Indonesia, and South Korea embraced new ways by raising interest rates. In response to such profitable attraction, international investors began pouring in their dollars in Southeast Asia. In 1997, export led economic policies turn out a promising performance among economic tigers. The economic boom raised the value of real estate, enticed more corporate spending, and large government projects all funded by heavy borrowings from banks. The assets prices deviated strongly from its intrinsic values that led to investors to pull out their investments totalling 105 billion in US dollars, Such huge amount crippled the economic momentum in Southeast Asia. Economie output declined, unemployment increased, and the price of wage decreased, In a desperate response governments in SEA devaluated their currencies and used up their foreign exchange reserves (Steger, 2009), These devaluations led to high inflation and a host of problems ensued. Foreign banks and creditors refused to len Import Substitution Domestic industries were built in the 59, and 60s to replace imported products ang promote domestic industrial developmen, and eventually achieve industrialization. This will move people from primary industry int, manufacturing and better jobs. Improvement of jobs create substantial demand for goods and services. Some developing nations recovered rapid growth, such as Brazi, Mexico, Argentina, and some in Africa and the Middle East (Rodrik 2000,5; Tab) 2009, 117,270). Availability of financial) capital was a defining factor. Countries that adopted a combination of import substitution industrialization and export promotion perform better than those who did not. This was the case of our Asian Tiger neighbors when they aggressively built their local industries and unceasingly promoted exports Governance Reform Article IV of the Bretton Woods agreement stipulates “members” exchange rate policies, avoid pursuing policies that are designed to either interfere with the adjustment process or gain an unfair competitive advantage over other members. In particular, a specific obligation under Article IV, Section 1 is the requirement that members “avoid manipulating exchange rates or the international monetary system in order to prevent ineffective balance of payments adjustment or to gain an unfair competitive advantage.” Most developing countries failed to implement such policies. Loans extended to Poor countries from IMF often comes with @ conditions such as they should oriented economic models and Sconomies to the foreign co gradual opening of markets ( This would put them into disadvantage becaust eloping countries infant industries needed Protection. They have no match with the «ale of production of foreign firms, Another reform institu: ted by IMF is fe y OSE" food governance through eradieaité adopt market open up their mpetition and (Westad, 2005')corruption. Prosperity is impossible to attain if public funds coming from foreign loans intended to improve social services end up in private pockets. The practice of crony capitalism was rampant among developing countries. Development loans granted by IMF have either been pocketed by authoritarian political leaders or have enriched local businesses and the Northern corporations they usually serve (Steger, 2009). Indeed, a lot of World Bank and IMF funded projects had been compromised, in the second half of the last century. Failure to realized the promised of prosperity under the Bretton Woods regime a new global economic order had emerged (Chirico, 2014). The Neo-Liberal Wave After the dissolution of the Bretton Woods a new set of policies were introduced: Neoliberalism and the Washington Consensus. Neoliberalism economic policies were grounded under the laissez-faire principle that market is the fundamental dominant decision maker. Joseph Stiglitz aptly described neo-liberal doctrine is more on freedom from the government in terms of taxation, freedom from regulation, free flow of capital, freedom of tariffs and quotas—the more prosperity there will be, and prosperity will trickle down from elite to lower classes. The term Washington Consensus was named after the key players in Washington headed by President Ronald Reagan of US and Prime Minister Margaret Thatcher of England. This set of policies unleashed for the developing countries with large unpaid debts from the 1970s and 80s Washington Consensus as defined by John Williamson, president of World Bank in the 1970s, required governments to implement the following structural adjustments in order to qualify for loans (Steger, 2009) 1. Aguarantee of fiscal discipline, and a curb to budget deficits; 2. A reduction of public expenditures, particularly in the military and public administration: 3. Tax reform, aiming at the creation of a system with a broad base and with effective enforcement; 4, Financial liberalization, with interest rates determined by the market; 5. Competitive exchange rates, to assist export-led growth; 6. Trade liberalization, coupled with the abolition of import licensing and a reduction of tariffs; 7. Promotion of foreign direct invest- ments; 8. Privatization of state enterprises, leading to efficient management and improve performance; 9. Deregulation of the economy; and 10. Protection of property rights. Heavily debtor countries rarely made significant improvements from above mentioned requirements, because mandated cut on public spending would decrease social programs such as education, health care, infrastructures, security, environment preservation, and that constitute greater poverty (Steger, 2009, p 55) THE POWER OF TRANSNATIONAL, CORPORATION Iwan (2012) clarifies some distinction of international, multinational, global, and transnational companies. International companies are importers and exporters, typically without invest- ment outside of their home country. «@ Multinational companies have investments in other countries, but do not have coordinated product offerings in each country. They are more focused on adapting their products and services to each individual local market 2 Global companies have invested in and are present in many countries. They typically market their products and services to each individual local market ca Transnational companies are more complex organizations which have a central corporate facility butfave decision making, researel and nal marketing, powers Co each individual foreign markets development (RED) Vransnational corporation (INC) is ofined as an enterprise that on whieh add value extraction, services, markotin, than one countey (UNC, 1991) There are three fandam that have substantially chang of global corporation, Birs and impact of digit global communica ages in xelivitios 1 eturinngs, ote) in more rental innoy ions: od the charactor was the advent alization in instantaneous ation. Production of goods AN now be forecasted with xteater accuracy beeause countries ¢: nd serviews ey orders from other n be digital multimedia. Second, the structural tr anstormation of global commerce from producer driven commodity chains to buyerdiven, A commodity chain refers to the whole range of activi involved in the design, production booked through the use of ata product, While producer-dt Wen conn chains are those in whieh f ze, Usual transnational, manufacturers PAY the gogg roles in coordinating production Networ,, tnd rdand forward link, ng their barckave pital-and technol, such a automobijg, semiconductors, and hea characteristic of intensive indus aireraft, computer wichinery, Manu vould mi namie of scale not only confined in the, in economies of sca ferent parts home countries but to different parts of y ivendvantage warran, ‘uring plants would opens world (Gere, 1999), ; ‘Third, the increasing role performe, through the global system by finan, elements and emergence of the globg, financial firm (Neubauer, SAGE Handbook, ‘Transactions done within and abroad are facilitated with ease and assured securely, due to the coordination of international banking system, Transfer of funds is smooth sailing regardless of the volume of amount. Table 2.1 Transnational Corporations Versus Countries: A Comparison SSS Waimart 466 Norway 431 State Grit 31s South Atrica 308 768 Portugal § 3 Sinopec Group 268 ‘9 2. ° ° Slovenia Cat China Nationa! - . Petroleum land) 248 5 Toyota Motors ess treland 247 6 Volkswagen 240 Antigua 229 Royal Dutch Shell 240 Peru & Serbia 227 . Berkshire i Hathaway Vietnam § Yemen 222 2 Apple 216 Bangladesh 216 Exxon Mobi 208 O0 ist of year 2017 PortugaEXERCISES A. True or False. Write True if the given statement is correct, and False if itis not answer on the space provided before each number. 1. For transnational corporations regardless of the » influence decision making of a country’s sovereign state 2. The collapse of the Bretton Woods System was attributed by of US dollar relative to the gold reserves of the World Bank 3. Economic interdependence is the new form of world order. 4, Free trade has eliminated social control mechanisms and 1) improvement of global labor standards and better ecological pr 5. Economic crisis is hard to predict in a growing complex global environs 6. The absence of a global government aggravates the slow process of add unexpected economic crisis. 7. Under a floating exchange rate policy the value of the local currency rela to the dollar is dictated by the market forces, 8. Asian tiger economies performed better than the rest of their neighbors their defiance of import substitution policy imposed by the World Bank 9. The most controversial debate about the imposition of policies initiated b World Bank and the General Agreement on Tariffs and Trade is the equal treatment in all nations. 10. The basic common characteristic of multinational, international, trai and global corporation is that their operation is beyond the domestic sphere ational B, Essay. Answer the following questions. 1. Is liberalization of market beneficial to one’s country or not? Cite concrete exampli that would prove your claim. 5 points 2. Asastudent what will you doto help yourself and your country face the present global economic order? 5 points