THE

GLOBAL
ECONOMY
CHAPTER 2
 INTRODUCTION
 The United Nations (UN) tried to address the different
problems in the world. Their efforts were guided by the eight
Millennium Development Goals, which they created in the
1990s. Among these eight goals, the eradication of extreme
poverty and hunger ranked as first. The seven goals include:
achieving universal primary education, promoting
gender equality and women empowerment, reducing
child mortality, improving maternal health, combating
diseases like HIV/AIDS and malaria, ensuring
environmental sustainability, and having a globa
partnership for development (United States, 2015)
 The UN tried to achieve them by the year 2015
 In the Philippines, a person is officially living in poverty if he
makes less than 100,534 pesos a year, around 275 pesos a
 Extreme Poverty (United Nations, 2015) – a condition
characterized by severe deprivation of basic human needs
 UN defines extreme or absolute poverty as living on less than $1.25
a day. The organization aim to eliminate extreme poverty for all
people by 2030.
 Three years ago, UN (2015) reported that 836 million people still
live in extreme poverty but that is down from 1.9 billion, so there is
a success or at least a progress.
 World Bank predicted that by 2030 the number of people living in
extreme poverty could drop to less than 400 million. However,
climate change has to be considered since it is a threat to these
improvements in global poverty.
 Income inequality is rampant and one in seven people still live
without electricity.
 However, the greatest contributor is economic globalization.
 Economic
Globalization
and Global
Trade
Economic Globalization and Global Trade
 According to the United Nations (as cited in Shangquan,
2000), “Economic globalization refers to the increasing
interdependence of world economies as a result of the
growing scale of cross-border trade of commodities
and services, flow of international capital, and wide
and rapid spread of technologies. It reflects the
continuing expansion and mutual integration of
market frontiers, and is an irreversible trend for the
economic development in the whole world at the turn
of the millennium.”
 There are two different types of economies associated with
economic globalization: Protectionism and Trade
Liberalization.
Economic Globalization and Global Trade
Protectionism – means “a policy of systematic government intervention in
foreign trade with the objective of encouraging domestic production. This
encouragement involves giving preferential treatment to domestic
producers and discriminating against foreign competitors” (McAleese, 2007
as cited in Ritzer, 2015, p. 1169).

 Trade protectionism usually comes in the form of quotas and tariffs.

Tariffs are required fees on imports and exports. For instance, a pen that
costs $1.00 in Country A and in Country B, it would be given five-dollar
tariff. The pen would become $6 in Country B.
 This policy was practiced during the mercantilist era, from sixteenth to
seventeenth centuries until the early years of the Industrial Revolution
(Chorev, 2007).
 The Great Depression of 1929 marked the peak of protectionism. Until
today, protectionism exists in the world economy despite the growth of
trade liberalization. Countries such as China, Japan, and the United
States are being accused of practicing protectionism (Ritzer, 2015).
Economic Globalization and Global Trade
World War II heavily influenced the shifting of the dominant economic
policy from protectionism to trade liberalization or free trade.
Free trade agreements and technological advances in transportation
and communication mean goods and services move around the world
more easily than ever. We are talking about everything from shoes and
bananas to innovations and ideas. Example: Mobile Phones
 According to economist Jeffery Sachs, mobile phones are the “single
most transformative technology” when it comes to the developing
world.
 Economists call this leapfrogging, the idea that countries can skip
straight to more efficient and cost-effective technologies that were
not available in the past.
 International trade has also created new opportunities for people to
sell their products and labor in a global marketplace.
Economic Globalization and Global Trade
 Globalization made some countries, especially the developing ones,
to gain more in the global economy at the expense of other nations.
There are various ways, however, the country can make trade easier
with other countries while lessening the inequities in the global
world. One of them if “fair trade” (Nicholas and Opal, 2005).
 Fair trade, as defined by the International Fair Trade Association, is
the “concern for the social, economic, and environmental well-being
of marginalized small producers” (Downie, 2007, pp. C1-C5).
 It aims for a more moral and equitable global economic system.
Specifically, it is concerned with protection of workers and producers,
establishments of more just prices, engagement in environmentally
sound practices and sustainable production, creation of relationships
between producers in the South and consumers in the North, and
promotion of safe working environment. Products like coffee,
bananas, cotton, wine, tea, and chocolate have been exchanged in
light of fair trade.
Economic Globalization and Global Trade
 A concrete example of the growth of fair trade is the case of
American coffee chains such as Starbucks and Dunkin’ Donuts. In
2006, there are $2.2 billion dollars spent on certified products, which
is 42% greater than the preceding year (Ritzer, 2015). In turn, coffee
growers such as those in Brazil “get at least $1.29 per pound of
coffee beans compared to the current market price of $1.25”
 Economic
Globalization
and Sustainable
Development
Economic Globalization and Sustainable
Development
 There are some significant downside to globalize trade
and perhaps the strongest argument against economic
globalization is it lack of sustainability or the degree to
which the earth's resources can be used for our needs,
even in the future.
Environmen
tal
Degradation
 Environmental Degradation
 This is the period in human history that made possible
the cycle of efficiency. This process made buying of
good easier for the people. Then, there is an increased
demand. Ultimately there was an increased efficiency.
 Food
Security
 Food Security
 The demand for food will be 60% greater that it is
today and the challenge of food security requires the
world to feed 9 billion people by 2050 (Breene, 2006).
Global food security means delivering sufficient food
to the entire world population it is, therefore a priority
of all the entire countries, whether developed or less
developed. The security of food also means the
sustainability of society such as the population growth,
climate change (Breene, 2016) cited the case of India
to show how complex the issue of food security is in
relation to other factors.
Dependency
Theory and
the Latin
American
Experience
 WHAT is Dependency Theory?
 Started around the 1950s
 Dependency is an historical condition which shapes a
certain structure of the world economy such that it
favors some countries to the detriment of others and
limits the development possibilities of the subordinate
economics… a situation in which the economy of a
certain group of countries is conditioned by the
development and expansion of another economy, to
which their own is subjected.
 WHEN? When it happened?
 Dependency Theory developed in the late 1950s under the
guidance of the Director of the United Nations Economic
Commission for Latin America, Raul Prebisch

Some Background
Developed by a U.N. director, Raul Prebisch
- In response to concern over disparities in development
worldwide
1. Core countries
- nations that have major influence, and are the most
developed
Ex.: France, United States
2. Peripheral countries
- nations that are "weaker", or less developed
 Prebisch’s Industrialization Strategy
(Economic Commission for Latin America
Amnifesto)
 One-sided international division of labor to be
stopped, Latin America to undergo
industrialization
 Industrialization to be sped up by substitution
of a large part of current imports by domestic
production
 Income from raw materials would pay for
imported capital goods
 Governments should be active participants
(as coordinators) of the industrialization
 Neo-Marxism
 Neo-Marxists see imperialism from the “peripheral”
point of view, focusing on the indictments of
imperialism on Third World development. This deviates
from the conventional study of imperialism from the
“center’s” perspective
 Andre Gunder Frank
 Born 1929 in Germany, died 2005
 Economic historian and sociologist
 Ph.D. Economics from Chicago
 “patched-up” some of the holes of early neo-Marxist
analysis of capitalist trade and exchange

Dependency theory focuses on understanding the

―periphery‖ by looking at core-periphery relations.
 The Modern
World-System
 Immanuel Wallerstein
 American sociologist, historical social scientist, and
World system analyst
 Immanuel Wallerstein was born in New York in 1930.
Where he grew up and did his all studies.
 He entered Columbia university . Where he obtained
his BS , MA , and PhD degrees. He remained a faculty
member in Columbia’s Department of Sociology from
1958 to 1971
 Dependency and world system theory propose
that the poverty and backwardness of poor countries
are caused by their peripheral position in the
international division of labor.
The world-economy manifests a tripartite
division of labor with:
1. Core nations
 Refers as made up of “free countries” dominating others without
being dominated.
 Main reason for the position of the developed countries is
economic power.
 The most economically diversified.
 Wealthy and powerful.
 Eg.USA, Holland, Japan, France, Brazil, and China
2. Semi-periphery nations
 Semi periphery nations are those that are midway between the
core and periphery.
 Dominated by dominated countries (usually by core countries ),
at the same time dominating others (usually peripheries)
 They tend to be countries moving towards industrialization and
a more diversified economy. Those regions often have relatively
developed and diversified economy, but are not dominant in
international trade.
 Eg. India, Pakistan, Sweden, Poland, and South Africa

3. Periphery nations
 Least economically diversified.
 Have relatively weak governments.
 Tend to be least industrialized.
 Have small bourgeois and large peasant classes.
 Tend to be extensively influenced and by core nations.
 Eg. Latin America, Sub-Saharan Africa, Cuba,Israel
The Third World
and the Global
South
 The Third World and the Global
 "Third World" is an outdatedSouth
and derogatory phrase that has been used
historically to describe a class of economically developing nations. It is
part of a four-part segmentation that was used to describe the world's
economies by economic status.
 The First World consisted of the U.S., Western Europe and their allies. The
Second World was the so-called Communist Bloc: the Soviet Union,
China, Cuba and friends. The remaining nations, which aligned with
neither group, were assigned to the Third World. The Third World has
always had blurred lines.
 Brazil is considered a Third World country, based on the historical
definition, and a developing country. Brazil is part of BRICS and has the
largest economy of any country in South America and Central America;
however, Brazil has a low BDP per capita, low living standards, and high
birth and death rates.
 The phrase “Global South” refers broadly to the regions of Latin America,
Asia, Africa, and Oceania. It is one of a family of terms, including “Third
World” and “Periphery,” that denote regions outside Europe and North
The Global City
 The Global City
 Global city, an urban centre that enjoys significant competitive
advantages and that serves as a hub within a globalized economic
system. The term has its origins in research on cities carried out during
the 1980s, which examined the common characteristics of the world's
most important cities.
 A global city is a city that has the power to effect global issues and
change the global outlook. They can do this through a varied set of
systems from politics to military and economics, controlling and adapting
the route the global economy takes.
 New York
 London
 Paris
 Tokyo
 Brussels
 Los Angeles
 Singapore
 Beijing
Walt Rostow’s
Four Stages of
Modernization
 Walt Rostow’s Four Stages of Modernization
1. Traditional Stage – this refers to societies that are structured
around small, local communities with production typically being
done in family settings. because these societies have limited
resources and technology, most of their time is spent on laboring to
produce food, which creates a strict social hierarchy
Examples
• Feudal Europe
• Early Chinese Dynasties.

2. Take-Off Stage – Rostow describes this stage as a short period of

intensive growth, in which industrialization begins to occur, and
workers and institutions became concentrated around a new
industry.
- People begin to use their individual talents to produce things
beyond the necessities. This innovation creates new markets for
trade. In turn, greater individualism takes hold and social status is
more closely linked with material wealth.
 Walt Rostow’s Four Stages of Modernization

3. Technological Maturity – in which technological growth of the

earlier periods begins to bear fruit in the form of population growth,
reductions in absolute poverty levels, and more diverse job
opportunities.
- This stage takes place over a long period of time, as standards of
living rise, the use of technology increases, and the national
economy grows and diversifies.

4. High Mass Consumption – it is when your country is big enough

that production becomes more about wants than needs. Many of
these countries put social support systems in place to ensure that all
of their citizens have access to basic necessities.
“Where the globalization means, as
it so often does, that the rich and
powerful now have new means to
further enrich and empower
themselves at the cost of the
poorer and weaker, we have a
responsibility to protest in the
name of universal freedom.”
—Nelson Mandela