MODULE 2 Flashcards
(21 cards)
- refers to the growing interdependence of the world economies manifested by the ever-increasing flows of capital, technologies, and communication through a common economic system.
Economic Globalization
- attributed the integration of the global economy to a
historical process as the result of the following;
● Human Innovation
● Technological progress
International Monetary Fund
Industrial Revolution (Stages)
1st: Steam
2nd: Electricity
3rd: Computing
4th: Intelligence
- is a political philosophy and ideology belonging to liberalism in which primary emphasis is placed on securing the freedom of the individual by limiting the power of the government.
Classical Liberalism
- is a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports).
Free Trade
- the father of economics, emphasizes that countries must free up their citizens to produce and buy goods as they pleased, both in domestic and foreign markets, at a cheaper rate than what they can provide at home country.
- Smith in his 1776 book The Wealth of Nations, explained that “It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor”.
Adam Smith
- is both political and economic ideology, modified laissez-faire economics that imposes less government regulation towards businesses (both domestic and foreign) under a “strong state” that could promote economic cooperation.
Neoliberalism
Four (4) Primary Principles of Neoliberalism;
- Free Market
- Rule of Law or legal state (“Strong state” principle)
- Public Interest through a ‘constitutionally’ limited state power
- Protection of private property or ownership
- it is based on the notion that voluntary exchanges will protect individual freedom while efficiently allocating economic resources
Free Market
- It is related to the maxim that “we are a government of laws and not of men”, that in terms of conflict, among free individuals in a free-market economy, we will be governed, equally, in accordance with the promulgated laws.
Rule of Law or legal state (“Strong state” principle)
- It is in consonance to the previous number but focuses on the fundamental obligation of the state to ensure ‘law and order,’ socio-economic needs of the people, and safeguarding the market order.
Public Interest through a ‘constitutionally’ limited state power
- It gives a certain sense of autonomy for every person (natural person or juridical entity (e.g., corporation) to own and secure a property without any invasion from the state.
Protection of private property or ownership
- The growth of world trade has been attributed to the regional and international market liberalization agreements.
- as a trilateral trade agreement in North America (Canada, USA, & Mexico), was created to reduce and eliminate barriers in trade and investment
North American Free Trade Agreement (NAFTA)
- is a multilateral agreement aimed to prevent trade wars and was able to liberalize international trade. However, failed to address global investment and intellectual property issues, among others. Thus, the World Trade Organization was formally established to replace and address its inefficiency and to provide better transparency and accountability.
General Agreement on Tariffs and Trade (GATT)
- According to him, the government has a significant and direct role in managing the economy, as opposed to classical liberalism or laissez-faire economics, particularly if there is an economic downturn or crisis through a massive spending by the government.
John Maynard Keynes
- In 1944, United Nations Monetary and Financial
Conference was held in Bretton Woods, New
Hampshire, U.S.A. - This post-world war II new economic order is later
called the Bretton Woods system, spearheaded by the
economist John Maynard Keynes. According to
Keynes, the government has a significant and direct
role in managing the economy, as opposed to classical liberalism or laissez-faire economics, particularly if there is an economic downturn or crisis through a massive spending by the government (Steger & Roy, 2019). - Yet the Bretton Woods system collapsed in the early
1970s, due to the economic recession and Oil crisis. The imposed prohibition and discontinued oil shipments to the USA, UK and other allied countries by the Arab-member countries or the OPEC (Organization of Petroleum Exporting Countries). It quadrupled the prices of oil and caused stagflation (Stagnant economy and inflation) to the affected countries (Steger & Roy, 2019).
Bretton Woods
Fundamental Institutions that Facilitate Economic Globalization
A. International Monetary Fund (IMF)
B. World Bank (WB)
C. World Trade Organization (WTO)
The primary function is to lend money through what it called Emergency Financing to its member countries like the Philippines (member since 1945).
International Monetary Fund (IMF)
is initially known as the International Bank of Reconstruction and Development (IBRD) and helped postwar reconstruction after World War II in Europe.
World Bank (WB)
aimed to reduce trade barriers. Like other economic institutions such as the IMF and World Bank, it promotes free and fair trade among countries
World Trade Organization (WTO)
offers financial products and policy advice to countries aiming to reduce poverty and promote sustainable development. Is now known as the World Bank.
IBRD (International Bank for Reconstruction and Development)
