The Contemporary World REVIEWER (3&4).docx

The Contemporary World REVIEWER (3&4).docx

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  TCW REVIEWER Handout 3 MARKETINTEGRATION Market integration is the condition which separate markets for the same product virtually become one single market, like when an import tax in one type of market is abolished. It refers to an occurrence in which markets of goods and services that are in some way related to one another experience similar patterns of increase or decrease in price. This process is marked by the common consumption of mono-cultures that have been diffused by the Internet, popular culture media, and international travel, entertainment transnational marketing of particular brands and international tourism – that transcends local cultural traditions and lifestyles, and that shapes the perceptions, aspirations, tastes and everyday activities of people wherever they may live in the world’. Roles of International Financial Institutions An International Financial Institution (IFI) is a financial institution which has been founded or chartered by more than one nation and thus subjects of international law. Owners or shareholders of IFIs are normally national governments, though other international institutions and organizations sometimes serve as shareholders. The term international financial institution characteristically refers to the International Monetary Fund (IMF) and the five multilateral development banks (MDBs): (1) the World Bank Group; (2) the African Development Bank; (3) Asian Development Bank; (4) the Inter-American Development Bank; and (5) European Bank for Reconstruction and Development. Generally speaking, IMF delivers provisional financial assistance to member nations to help ease balance of payment adjustments. On the other hand, MDBs grant financing for development through the following:  Long-term loans, with maturities of up to 20 years, based on market interest rates.  Very long-term loans, with maturities of 30 to 40 years at interest rates well below market rates.  Grant financing, typically for technical assistance, advisory services or project preparation Functions of IMF Founded by international treaty as the central institution of the international monetary system which implements a system of exchange rates and currency trading that allows businesses to take place among countries with different currencies. The IMF engages in three types of activities:  Monitoring of economic and financial developments and policies, both in member countries and at the global level and offer policy advice to its members;  Lending to member countries experiencing balance of payments problems, not only to grant temporary financing but also support economic adjustment and reform intended for correcting the underlying problems;  Providing governments and central banks of its member countries with technical training and assistance in its areas of expertise Functions of World Bank Group Founded at the same international conference as the IMF and was primarily involved in the reconstruction of countries distraught by World War II. After the countries recuperated, the bank turned its chief focus to the second mission intended for it – economic development of the world’s non-industrialized countries, with the aim of lifting it out of poverty. The World Bank Group has five institutions:  International Bank for Reconstruction and Development (IBRD) – focuses on creditworthy low-income countries and middle-income countries and lends only to these governments by financing these loans chiefly through selling triple-A-rated bonds in the globe’s financial markets.  International Development Association (IDA) – focuses on world’s poorest countries which offers interest-free loans to the governments of the lowliest countries. It accounts to 40 percent of the total World Bank Group lending  International Finance Corporation (IFC) – centers on financing private sector projects. In so doing, may take an equity stake along with the lending.  Multilateral Investment Guarantee Agency (MIGA) – endorses foreign direct investment in developing countries. It does so by insuring investors against noncommercial or political risks in those states.  International Centre for Settlement of Investment Disputes (ICSID) – serves as forum for mediating disputes between investors and governments and offers advices for
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  governments as regardsto their efforts to draw investment. Functions of Inter-American Development Bank (IDB) Founded as a development institution and is the oldest regional development bank owned by 48 member countries which include Latin America, United States, Canada, several European Countries, Israel, Republic of Korea and Japan. IDB is the chief source of multilateral financing for economic, social, and institutional development projects in both public and private sectors. To achieve these goals, IDB focuses on four priority areas:  Promoting competitiveness through support for programs and policies that increase a country’s potential for development in an open global economy;  Reforming the state by strengthening the efficiency and transparency of public institutions;  Investing in social programs that magnify opportunities for the poor;  Endorsing regional economic integration by forging links among nations to develop larger markets for their goods and services. Functions of Asian Development Bank (ADB) ADB is owned by its member countries. From 31 members in 1966, ADB has grown to include 67 members – of which 48 are from within Asia and the pacific and 19 outside. Headquartered in Manila, ADBs vision is a region free of poverty. ADBs operations are funded by contributions from members, bonds and recycled repayments on its loans. More than half of its cumulative lending comes from its ordinary capital resources. Functions of African Development Bank (AfDB) Owned by 80 member countries, that is, by more than 550 African countries and more than 20 countries in the Americas, Europe and Asia. AfDB is engaged in endorsing social progress and economic development of its shareholder countries, especially in Africa. AfDB’s chief function include the following:  Creating loans and equity investments for the social and economic advancement of the regional member countries;  Offering technical assistance for the preparation and execution of development projects and programs;  Endorsing the investment of public and private capital for development purposes;  Answering the requests for assistance in coordinating the development policies and plans of the regional member countries. Functions of European Bank for Reconstruction and Development (EBRD) Owned by 67 member countries from five continents, and two intergovernmental institutions; the European Union and the European Investment Bank. Established in 1991 when communism was decomposing in Europe and is intended to aid in the democratic transition. To promote policies that will bolster the business environment, EBRD employs its close relationship with governments in the region. It operates with publicly owned companies to support restructuring of state- owned firms, privatization, and improvements in municipal services. It also provides project financing for individual businesses, banks and industries in the form of investment in existing companies and new ventures. Short History of Global Market Integrations in the 20th Century The 20th century started on January 1, 1901 and ended on December 31, 2000. This 10th and final century of the second millennium saw the fast rate of global market integration The international economic integration achieved during the nineteenth century was largely unraveled in the twentieth by two world wars and the Great Depression. The international economy entered the 20th century with the freest flow of goods and services, and capital in human history. The World War 1 brought the liberal economic order of the late 19th century to an abrupt end, 1914 clearly marked a dramatic and discontinuous break in the past. From 1929 to 1939, the industrialized world experienced its worst economic downturn, the Great Depression. In 1947, twenty-three nations, including the United States, signed the General Agreement on Tariffs and Trades (GATT) until it became a treaty among 123 nations whose government agreed to promote trade among its members. A common market is another factor for market integration in addition to removal of trade barriers, the following are treatises and associations formed to establish a common market among members which include:
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   The Associationof Southeast Asian Nations (ASEAN) – the top preferential trade agreement in the Asia Pacific area, an organization for economic, political, social and cultural cooperation among its original members which include Malaysia, Brunei, Singapore, Thailand and Philippines  The European Union (EU) – In 1951, Belgium, France, Germany, Italy, Luxemburg and the Netherlands were the only countries which started to cooperate economically. Over time 22 more countries decided to join. The Euro is the official currency of EU countries and they are collectively known as Eurozone. The EU is more than a common market because the citizens of the member countries are able to freely cross boarders within the union. This is because the union encourages the development of a community-wide labor pool.  North American Free Trade Agreement (NAFTA) – On August 12, 1992, representatives from Canada, Mexico and United States concluded negotiations for NAFTA. The government of the three member countries pledged to promote economic growth through tariff reductions and expanded trade and investment. The benefits of continental free trade benefited these countries through gradual elimination of barriers to the flow of goods, services and investments.  Common Market of the South (Mercado Comun del Sur or MERCOSUR) – Treaty was signed between governments of Brazil, Paraguay, Uruguay, and Argentina which agreed to begin phasing tariffs in August 5, 1994. A few months after, goods, services and factors of production moved freely throughout the member countries.  Andean Community Fund – Formed in 1969 the then known Andean Pact aimed to accelerate development of member states which include Peru, Bolivia, Ecuador, Venezuela and Cambodia through economic and social integration. Member countries agreed to lower tariffs among members and decide which products each country should produce. Foreign goods and companies were kept out as much as possible.  Gulf Cooperation Council (GCC) – In May 1981, the GCC was established by Qatar, Oman, Saudi Arabia, Bahrain, Kuwait and the United Arab Emirates. This is to foster unity among its members based on their common objectives and similar political and cultural identities which are rooted from Islamic beliefs. Gulf finance ministers outlined an economic cooperation agreement in terms of financial and monetary coordination, investment, petroleum and abolition of custom duties.  South African Development Community (SADC) – Established in 1992, this is referred to as a mechanism by which the region’s black ruled states could promote trade, cooperation and economic integration. Members are South African states such as Angola, Botswana, Congo, etc.  Economic Cooperation of West African States (ECOWAS) – To promote trade, cooperation and self-reliance in West Africa, 15 states signed ECOWAS in May, 1975. Member countries include Benin, Burkina Faso, Gambia, Ghana, Guinea etc. These countries agreed to establish a free trade area for unprocessed agricultural products and handicrafts and abolished tariffs on industrial goods. Attributes of Global Corporations A global corporation is a business that operates in two or more nations. The contemporary global corporation is simultaneously and usually referred to as either (a) multinational corporation (MNC); (b) transnational corporation (TNC); international company; or (d) global company. The following attributes are typical characteristics of global corporations: (1) formalization deals with defined structures, communication patterns and controlling business operations; (2) specialization is an organizational characteristic of apportioning job roles to individuals to accomplish specific tasks such as marketing, customer service, sales, recruitment, etc.; (3) centralization is a where top management possesses control over decisions and entire activities of the business. These three are said to be the typical corporate cultures of global companies. Four Dimensions of Corporate Globality Some globalization scholars define corporate globality in terms of the following dimensions:  The globalization of market presence. This refers to the degree the corporation has globalized its market presence and customer base. Car and oil companies score high on this dimension.  The globalization of the supply base. It deals with the extent to which a company sources from various locations and has located chief
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  parts of thesupply chain in optimal locations. Example, Caterpillar serves customers in 200 countries worldwide, manufactures in 24 of them, and maintain research and development facilities in nine.  The globalization of capital base. This dimension measures the degree to which a corporation has globalized its financial structure. This deals with issues such as on what exchange the company’s shares are listed, where it attracts operating capital, where it pays taxes, how it finances growth and acquisition and how it repatriates profits.  The globalization of the corporate mind-set Refers to a company’s capacity to cope with diverse cultures. Companies with an increasingly global mind-set include GE, Nestle and Procter and Gamble. Handout 4 GLOBAL INTERSTATE SYSTEM AND CONTEMPORARY GOVERNANCE The Global Interstate System The modern world-system is now a global economy with a global political system (the modern interstate system). This refers to the relationship between different state union. It also includes all the cultural aspects and interaction networks of the human population. Relations among members of the world society are said to comprise multiple and overlapping local, regional, and international expectations dependent on interests, capabilities and wills of the parties involved. Global Interstate System is the whole system of human interactions. The modern world- system is structured politically as an interstate system – a system of competing and allying states. Differences of State and Nation Global – interaction networks around the world/globe Inter – among or between State – political term which has 4 elements: people, territory, government and sovereignty System – balance among set of things working together Interstate system Interstate system may refer to a system for international relations, specifically that which deals with governments or states and their authorities. International relations can be divided into: (1) interstate; (2) intersocietal, and (3) interpersonal. Interstate relations are those authoritative actions understandings or commitments of the governmental authorities, that is, the leaders of one state with another. Intersocietal relation refer to those authoritative actions, understandings, or commitments of the authorities of groups within one state to another state. Examples: companies selling goods and services to other states, company contracting with a foreign firm, multinational corporations with foreign subsidiaries, international professional organizations/associations. Interpersonal relations (denote those relations of or between citizens of different states acting in their personal interests). Example: migrants, tourists, foreign students, international mails, phone calls, cross-border air and surface traffic. Effects of Globalization on Governments Joyce Osland of San Jose State University described the Pros and Cons of globalization related to governments. Positives include the following: • Increased economic development benefits some governments; • Increased jobs and expanded infrastructure benefit some countries; • Transfer of modern management techniques into business sector; • Greater interdependence among trading and investing partners may deter war; and • Proliferation of nongovernmental organizations to counter-balance decreased governmental power Negative effects of globalization include the following: • Power of MNEs increased at the expense of governmental power, sovereignty and ability to regulate businesses; • MNEs externalize some of the costs to countries; • Competition for factories and foreign direct investment result in too many concessions to MNEs by some governments; • Some MNEs influence local government policy and threatens to leave if their demands are not met; • MNEs pay fewer taxes to governments and incorporate where the tax rate is lowest, depriving their own country of revenue; and • Governments are pressured to reduce tax rates and decrease social benefits that may affect stability With the rise of globalization come increased international human rights norms which have brought serious challenges on traditional meanings of state sovereignty. Some challenges include: • Traditional challenges – external intervention by other countries; internal political
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  changes; regional organizationschallenging state autonomy • Challenges from national or identity movements – nation has cultural identity that people are attached to; different people with different identities and beliefs challenges the government to recognize their uniqueness • Global economy – demands the state to conform with rules of neoliberalism • Global social movements – movements that emerge from people of grassroots/marginalized origin Institutions That Govern International Relations International relations (also referred to as international affairs) have a broad purpose in contemporary society which seeks to understand the following: 1. The origins of war and maintenance of peace; 2. The nature and exercise of power within the global system; and 3. The changing character of state and non-state actors who participate in international decision making. International institutions are integral and essential part of the contemporary international relations. Institutions that govern international relations such as international organizations are established and expected to provide solutions whenever governments encounter transnational challenges. An international organization is an institution with an international membership, scope or presence. Such organizations are categorized into two: international non-governmental organizations (INGOs) and international governmental organizations (IGOs). Samples of International Governmental Organizations • United Nations – established in the wake of World War 2 to reduce international tensions, promote human rights, and decrease the possibility of other large-scale conflicts. • North Atlantic Treaty Organization (NATO) – intergovernmental defense treaty among member nations • NAFTA (North American Free Trade Agreement) – economic treaty between US, Canada and Mexico • World Bank – international development organization which provides funding for development efforts specially of poor countries • World Trade Organization – aimed at developing trade capacity, negotiate trade agreements and resolve trade problems • International Monetary Fund – serves to stabilize international monetary system and is responsible for monitoring world’s currencies Samples of International Non-Governmental Organizations • Red Cross (Red Crescent in Muslim countries) – independent and neutral organization which aids to provide humanitarian efforts especially during wars, conflicts and disasters. • OXFAM – global movement of people to end the injustice of poverty, famine, injustice and inequality • Amnesty International – global movement that campaigns toward the protection of human rights of individuals across the globe Internationalism vs Globalism Internationalism is the political, economic, social and cultural cooperation and relation between and among countries but supports individualism of nations. It advocates on greater cooperation among nations for the theoretical benefit of all. Has 3 main concepts, hegemonic internationalism, revolutionary internationalism, and liberal internationalism. Globalism is an ideology anchored on the belief that people, goods and information ought to be able to cross national boarders unrestrained and treats nations as a singular unit. Main concepts include: economic globalism, military globalism, environmental globalism and social/cultural globalism