pathways in the ancient world that spanned from China to what is now the Middle East and to Europe. According to Dennis O. Flynn and Arturo Giraldez , the age of globalization began when “all important populated continents began to exchange products continuously both with each other directly and indirectly via other continents and in values sufficient to generate crucial impacts on all trading partners”.
Trace this back to 1571 with the establishment of
the galleon trade that connected Manila in the Philippines and Acapulco in Mexico. During world war I, when countries depleted their gold reserves to fund their armies, many were forced to abandon the gold standard. Global economic crisis called the great depression started during the 1920s and extended up to the 1930s. This depression was the worst and longest recession ever experienced by the western world. Today,the world economy operates based on what are called fiat currencies –currencies that are not backed by precious metals and whose value is determined by their cost relative to other currencies. The Bretton Woods System was inaugurated in 1944 during the United Nations Monetary and Financial Conference to prevent the catastrophes of the early decades of the century from reoccurring and affecting international ties.
Global Keynesianism- increased
government expenditures and lower tax to stimulate demand and pull the global economy in depression. Two Financial Institutions
1.International Bank for Reconstruction and Development
(IBRD or World Bank).
2.International Monetary Fund (IMF).
In 1947, various countries also committed themselves to
further global integration through the General Agreement on Tariff and trade (GATT). Neoliberalism & Its Discontents
Neoliberalism- minimal government
spending to reduce government debt. Privatization of government- controlled services. Stagflation- persistent higher inflation combined of high unemployment and stagnant demand in a country’s economy. Neoliberalism came under significant strain during the global financial crisis of 2007-08 when the world experienced the greatest economic downturn since the great depression. The scaling back of regulations continued until the 2000s paving the way for brewing crisis. In their attempt to promote the free market , gov’t authorities failed to regulate bad investments occurring in the USA housing market. Since there was so much surplus money circulating, the demand for MBS increased as investors clamored for more investment opportunities. Financial experts wrongly assumed that, even if many of the borrowers were individual and families who would struggle to pay, a majority would not default. Banks also assumed that housing prices would continue to increase. Therefore, even if homeowners defaulted on their loans, these banks could simply reacquire the homes and sell them at a higher price, turning a profit. The crisis spread beyond the US since many investors were foreign gov’t, corporation, and individuals. The loss of their money spread like wildfire back to their countries. The US recovered relatively quickly thanks to a large keynesian-style stimulus package that President Barack Obama pushed for in his first months in office. Economics Globalization refers to the increasing interdependence of world economies as a result of growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies. The united states, japan, and the member- countries of the european union were responsible for 65 percent of global exports while the developing countries only accounted for 29 percent. the beneficiaries of global commerce have been mainly transnational corporations (TNCs) and not governments.