CHAPTER 1: THE RISE OF

GLOBALIZATION Decoupling
Globalization • A world economy in which the engines
• is the socioeconomic reform process of of growth could comprise several major
eliminating trade, investment, cultural, industrialized and emerging economies,
information technology, and political such as the United States, the European
barriers across countries. Union, China, India, Brazil, Russia, and
• It can lead to increased economic South Africa rather than the United
growth and geopolitical integration and States alone.
interdependence among nations of the
world. Multipolar world
• It represents more free international • A global shift in which industrialized
trade and investment or the free flow of country-dependent developing
goods and services (including cultural economies grow based on their own
and belief systems) between countries. underlying economic strengths rather
• It includes a process of integrating the than those of highly-developed
nations of the world so that they countries. (China and the world vs US)
become more economically efficient,
interdependent, and perhaps relatively Main Goal: non-dependence of countries from
more inclusive and homogeneous. the US

Emerging economies South of the Global South are linked in various

• are implementing more open trade and configurations through multinational alliances
free-market policies to propel growth. and trade agreements.

• Prior to 2000, globalization generally

implied that business expanded from One such grouping is BRICS+. Others include

developed countries to developing or the ten member states of the Association for

emerging economies. Southeast Asian Nations (ASEAN), the African

• Now the flow of business had moved in Continental Free Trade Area, and South

both directions, and increasingly from America's Mercosur.

one developing country to another.

• The world's center of economic gravity Key International Institutions That Facilitate

is shifting toward emerging economies, Globalization

especially China.
Globalization gained momentum after World • Information and knowledge transfer to
War II, when governments of the free world developing countries to support
recognized the importance of international sustainable development.
cooperation and coordination which led to the • Eradicating communicable diseases.
emergence of three major international
organizations: World
• Bank:
• The international Monetary Fund (IMF)
• The World Bank • Focus: Long-term economic
• The World Trade Organization (WTO) development and poverty
International Monetary Fund's role in global reduction in developing countries.
financial stability: • Mission: Aims to reduce poverty
• Provides a forum for cooperation on and improve living standards in
international monetary problems. developing counties by providing
• Facilitates international trade that financial and technical
promotes job creation, economic growth, assistance.
and poverty reduction. • Activities: Provides loans, grants,
• Promotes exchange rate stability and an and technical assistance to
open system of international payments. developing countries to support
• Lends countries foreign exchange to investments in areas like
help address balance of payment education, health, infrastructure,
problems. al private sector development.
• Membership: 189 member
World Bank's initial role was to aid the countries.
reconstruction of Europe after World War II. • Key Function: Aids in the
implementation of specific
Current focus areas include: development projects and
• Global integration through trade programs.
liberalization and expansion.
• Analysis and national trading policy International Monetary Fund (IMF):
advice to strengthen free-market • Focus: Oversees the international
institutions and infrastructure. monetary system, promoting global
• Agreements supporting international monetary cooperation and financial
standards in financial systems. stability.
• Mission: Aims to prevent crises in the
international monetary system, facilitate
 trade, and promote sustainable Institutional Structure and Its Impact on
economic growth and high employment. Globalization
• Activities: Monitors economic and Institutions
financial developments, provides policy • the rules, enforcement mechanisms,
advice, offers financial assistance and the organizations that support
(loans) to member countries with market transactions.
balance-of-payments problems, and To work appropriately, political systems must
promotes capacity development. also be in place.
• Membership: 191 member countries.
• Key Function: Acts as a "lender of last Adaptive institutions
resort" to countries facing economic • government organizations that create
crises. strong incentives for private investment
and operate under a system of checks
The WTO began trading in 1948 under the and balances that function best in a
General Agreement on Tariffs and Trade democratic system of government.
(GATT).
• Liberalized trade by lowering and/or Effective Policy Measures that Promote
removing trade barriers such as tariffs, Globalization
quotas, and subsidies. o Good governance
• Developed through a series of trade o Competitive markets
negotiations o Property rights
o Anticorruption policies
WTO promotes global trade by:
• Administering trade agreements
• Acting as a forum for trade negotiations
• Settling trade disputes
• Reviewing national trade policies
• Providing developing countries with
technical assistance and trainin
programs Impact of Information Technology on

• Cooperating with the IMF and the World Globalization

Bank • Lower broadband prices have allowed

emerging economies to reach rural
towns and villages
 • IT revolution has been relatively • Globalization does create winners and
instantaneous losers.
Globalization Winners and Losers
Digital divide
• the perceived economic gap between Globalization's Winners
countries with easy access to digital • China
• India
technology and those with limited
• Brazil
access Globalization's Losers
• Central Asia
• Much of Africa
The Globalization Controversy
• North Korea
• The impact of an increasingly free flow
of ideas, people, goods, services, and CHAPTER 2: THE EVOLUTUION OF
INTERNATIONAL BUSINESS
capital that leads to closer integration
and interdependence of economies and International business
societies—can be a force for exploitation • All commercial transactions, both private

and injustice. and public, between nations of the

world.
Arguments against globalization:
• The rise of international business
• Job losses and income stagnation impacts both blue-collar and white-collar
• Loss of local control over economic jobs across wealthy nations (USA,
Europe, Japan).
policies and developments
• Historical roots: Sumerians (3000 B.C.)
• Disappearance of old industries traded grain surplus for copper, fostering
• Related erosion of communities cultural exchange and security.
Outsourcing
• The corporate practice of acquiring or
Making Globalization Work for All producing quality goods or services
• Most economists would agree that abroad at a lower cost, thereby
greater integration of the world economy eliminating domestic production
Factors of production
and more openness to efficiency and • endowments used to produce goods
modernization offer all citizens of the and services: land (quantity, quality, and
global village a more rewarding and mineral resources beneath it), labor
(quantity and skills), capital. (cost), and
hopeful future.
technology (quality)
• Globalization has the potential to Trade surplus
increase the quality of life for people;
• When the value of exports exceeds the
however, there cannot be a guarantee
value of imports; the opposite of a trade
that the quality of life for all people will
deficit.
increase or that all changes caused by
globalization will be positive.
 2-1. Benefits of Trade and Foreign Direct • Developed countries enjoy cheaper
Investment goods

Downsides of Trade
Trade
• Disruption in Jobs: Some industries lose
competitiveness.
• The two-way flow of exports and imports
of goods (merchandise trade) and • Need for retraining and education
services (service trade).
• Outsourcing to lower-wage countries like
Foreign Direct Investment (FDI) India and Philippines. Outsourcing- the
corporate practice of acquiring or
• The inflows of capital from abroad for producing quality goods or services
investing in domestic plant and abroad at a lower cost, thereby
equipment for theproduc- tion of goods eliminating domestic production.
and/or services as well as for buying
domestic companies. FDI Trends

Key Benefits of Trade • High-Income Countries (Europe, U.S.)

still receive most FDI.
• A greater amount of choice in the
availability of goods and services. • China & India: Attract FDI due to
manufacturing & services.
• Lower prices for goods and services
consumed. • BRIIC Nations (Brazil, Russia, India,
Indonesia, China): Strong draw for
• Higher living standards. investors due to population and growth.
• Promotes peace and cultural exchange FDI and the Technology Surge
• Trade Creates Jobs; For every $1 billion
• 2015–2016 FDI spike due to tech sector
in U.S. exports, 20,000 jobs are
(5G, cloud, EVs)
created.Imports also create jobs in retail,
car dealerships, and service industries. • Companies like Apple, Tesla, Google
attracted investors
FDI Benefits
• China’s infrastructure: Key factor in FDI
• Brings capital and technology to
inflows.
countries.
2-2. Major Theories of International Trade
• Creates well-paying jobs
• Attracts investment in key sectors (tech, Why Nations Must Trade?
energy).
• No country is self-sufficient. Every
Global Prosperity of Trade nation lacks some resources (e.g.,
minerals, skilled labor, land, tech)
• Post-2008 Rebound: World trade grew needed to produce everything its
17% by 2018. population wants or needs.Therefore,
trade becomes necessary for survival
• China and India: Millions moved to the
and prosperity.
middle class due to trade.
Value of Trade Theories wealth and wages in exporting countries
and leading to competitive price cuts
• First, these theories provide an among exporters
appreciation for the progress made in
understanding how trade (and gains Labor and Population Policies
from trade) really works in an open
• To maintain low labor costs and
economy.
competitiveness, mercantilists
• Second, these theories present a encouraged large families through
rationale why restriction to trade should incentives and penalties, prioritizing
be minimized even when domestic national wealth over individual
economic and business conditions seem prosperity.
awful.
• Mercantilists championed this short-
2-2a. Mercantilism – Wealth Accumulation sighted view of wealth.
as a Basis for Trade Theory 2-2b. Specialization as a Basis for Trade

Mercantilism Theory: Absolute and Comparative

Advantage
• Practice during the 1500-1750, a theory
of international trade that supports the During the mid 18th century, Adam Smith, is
premise that a nation could only gain the father of free market and open trade
from trade if it had a trade surplus. systems, recognized the irrationality of
Theory Beliefs and Goal mercantilism. In the year 1817, the Great
British Economist David Ricardo, asserted
• Exports as a way to bring precious that specialization and free trade benefits all
metals into the country. Exports = trading partners, even those that may be
national gain considered inefficient.

• Imports as a drain on national wealth Adam Smith’s international trade theory

(since gold/silver had to be paid out).
Imports = national loss • This theory proposed that unrestricted
trades favors countries to specialize in
• The theory believed that land and labor
were considered less important, the production of their goods and
because they were primary factors of services that they most efficiently
production that were needed to generate
produce. Which will be backed by the
wealth, gold and silver.
next theories :
• The goal is to Achieve a trade surplus -
increase gold/silver inflows - enhance Theory of absolute Advantage
national wealth and power
• Absolute advantage is to utilize
Flawed Global Perspective processes in what is more efficient to
produce in a country. According to Dean
• If all nations pursued trade surpluses, a et al. (2020), absolute advantage may
global surplus of exported goods would occur as a result of a country's natural
depress prices and earnings, reducing endowment.
Theory of comparative advantage

• Refinement of the previous theory and

can be attributed to the Great British
Economist, David Ricardo. Comparative
advantage happens when a country has
an absolute advantage to produce two
or more goods or services in terms of
producing one of them relatively more
efficiently than the other. Producing a
good at a lower cost in terms of other
goods is called comparative advantage
(Dean et al., 2020)
Under the assumption that a country already
has an absolute advantage over the other,
should they still manage to trade between one
another? The answer would be a yes. It is
crucial to recall that resources in all countries
are scarce already, therefore countries must
choose the most efficient tactic to make use of
their own resources which are land, labor, and
capital.
Hypothetically, when countries manage to
follow the aforementioned statement of efficient
use of resources globally, the total output and
standard of living of the world can be
increased. With the essence of free trade,
countries will ensure a higher standard of
living.