Global Economy Chapter 2

• Chapter 2 discusses the global economy

Introduction

• The United Nations (UN) addressed global issues through the eight Millennium Development Goals in the 1990s.
• Eradicating extreme poverty and hunger was the top priority among these goals.
• The seven goals include achieving universal primary education, promoting gender equality and empowering women, reducing child mortality, improving maternal health, combating diseases like HIV/AIDS and malaria, ensuring environmental sustainability, and fostering a global partnership for development
• The UN aimed to achieve these goals by 2015.
• In the Philippines, individuals earning less than 100,534 pesos annually (approximately 275 pesos per day) are considered to be living in poverty.
• Extreme poverty is a condition marked by severe deprivation of basic human necessities.
• The UN defines extreme or absolute poverty as living on less than $1.25 per day with the goal of eradicating extreme poverty by 2030.
• In 2015, 836 million people were reported to be living in extreme poverty, a decrease from 1.9 billion, indicating progress.
• The World Bank forecasts a potential drop to less than 400 million people living in extreme poverty by 2030.
• Climate change poses a threat to advancements in global poverty reduction.
• Income inequality exists, with 1 in 7 people lacking electricity.
• Economic globalization is the greatest contributor.

Economic Globalization and Global Trade

• Economic globalization involves the interdependence of world economies, driven by cross-border trade, international capital flows, and rapid technology diffusion, marking an irreversible trend in global economic advancement.
• Protectionism and trade liberalization are two distinct types of economies in economic globalization.
• Protectionism involves systematic government intervention, encouraging domestic production by favoring local producers and discriminating against foreign competitors.
• Quotas and tariffs are standard measures in trade protectionism with tariffs consisting of fees on imports and exports.
• If a pen costs $1.00 in Country A, in Country B it would become $6 due to a five-dollar tariff.
• Protectionism was prevalent from the 16th to 17th centuries until the Industrial Revolution's early years.
• Despite the rise of trade liberalization, protectionism remains a factor in the global economy with nations like China, Japan, and the United States are accused of practicing it.
• World War II caused an economic policy shift from protectionism to trade liberalization.
• Free trade agreements alongside transportation and communication advancements facilitate the global movement of goods and services.
• Mobile phones are considered the most transformative technology for the developing world, according to economist Jeffery Sachs.
• Leapfrogging allows countries to adopt efficient technologies that were previously unavailable.
• International trade expands opportunities for individuals to sell their products and labor in a global marketplace.
• Globalization has enabled some countries, especially developed ones, to gain more in the global economy, sometimes at the expense of other nations, with the possibility of lessening inequities through "fair trade".
• Fair trade, focuses on the social, economic, and environmental welfare of marginalized small producers.
• Fair trade aims to establish a more ethical and fair global economic system.
• It emphasizes worker and producer protection, fair prices, environmentally friendly practices, sustainable production, producer relationships between the South and consumers in the North, and safe working conditions.
• Products exchanged under fair trade include coffee, bananas, cotton, wine, tea, and chocolate.
• $2.2 billion was spent on certified products in 2006, a 42% increase from the previous year, with coffee growers in Brazil earning at least $1.29 per pound of coffee beans compared to the market price of $1.25

Economic Globalization and Sustainable Development

• Globalized trade can reduce sustainability because of how the earth's recourses can and will be used for our needs.

Environmental Degradation

• Environmental degradation made the cycle of efficiency possible by making it easier for consumers to buy goods.

Food Security

• Food demand is expected to increase by 60% with the world needing to feed 9 billion people by 2050, making global food security a top priority for all countries.
• Food security includes societal sustainability such as population growth and climate change, as seen in the complex case of India.

Dependency Theory and the Latin American Experience

• Dependency Theory emerged around the 1950s claiming a structure that favors certain countries to the detriment of others.
• This limits development for subordinate economies that are conditioned by the development and expansion of another.
• Dependency Theory was developed in the late 1950s by Raul Prebisch, director of the United Nations Economic Commission for Latin America (UNECLA).
• The theory addresses disparities in development worldwide; the core countries have major influence and are the most developed, and the periphery countries are "weaker" countries that are less developed.

Prebisch's Industrialization Strategy (Economic Commission for Latin America Amnifesto)

• Latin America must industrialize to stop the one-sided international division of labor.
• Industrialization through domestic production will substitute a significant portion of current imports.
• Income from raw materials would pay for imported capital goods.
• Governments should actively coordinate industrialization.

Neo-Marxism

• Neo-Marxists analyze imperialism from the point of view of the "peripheral" and focus on its negative impacts on Third World development.
• Andre Gunder Frank 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 was an American sociologist, historical social scientist, and world system analyst born in New York in 1930.
• The dependency and world system theory link poverty and underdevelopment in poor countries to their peripheral position within the international employment division.

The world-economy manifests a tripartite division of labor with:

• Core nations are "free countries" that dominate others without being dominated and have economic power, and have diversified economies making them wealthy and powerful (USA, Holland, Japan, France, Brazil, and China.)
• Semi-periphery nations are midway between the core and periphery and are dominated by core countries, and these countries industrialize and aim for economic diversification with developed economies that are not dominant in international trade like India, Pakistan, Sweden, Poland, and South Africa.
• Periphery nations are least economically diversified, and their governments are relatively weak; these countries are usually not industrialized, have small bourgeoisie and large peasant classes and are influenced by core nations (Latin America, Sub-Saharan Africa, Cuba, Isreal.)

The Third World and the Global South

• "Third World" is a derogatory word used to describe a collection of countries that are developing economically forming a four-part segmentation that was used to describe the world's economies by economic status.
• The first world includes the US, western Europe, and their allies, and the second world was the USSR, China, Cuba, and friends, and those who didn't align with either group were assigned to the third world.
• Despite being part of BRICS and having South and Central America's largest economy, Brazil has a low GDP per capita, low living standards, and high birth and death rates, so Brazil is considered a third-world country.
• The phrase "Global South" refers to Latin America, Asia, Africa, and Oceania.

The Global City

• A global city is an urban center with competitive advantages and functions as a hub within a globalized economy (emerged from 1980s research on qualities of the world's important cities.)
• Global cities have the resources to deal with international problems with economic, military, and political systems, taking control of the global economy (Examples are New York, London, Paris, Tokyo, Brussels, Los Angeles, Singapore, Beijing).

Walt Rostow's Four Stages of Modernization

• Traditional Stage involves societies structured around local communities with family production, limited resources, strict social hierarchies (Examples include Feudal Europe and Early Chinese Dynasties.)
• Take-Off Stage involves the start of industrialization where the industry, workers, and organizations are focused on a new industry where people start using their skills to produce excess while innovation makes markets for trade, individualism, and material wealth.
• Technological Maturity involves technological growth leading to increasing population, decreasing poverty, and diverse opportunities where this stage takes a long time as living changes with the use of technology, causing a diverse national economy.
• High Mass Consumption involves a big country where production becomes more of a "want" other than "need", so many countries establish social programs to ensure citizens have access to basic needs.
• Nelson Mandela said, "Where 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.”