GLOBALIZATION & DEVELOPING NATIONS
Economic globalization – the formation of a single worldwide
economy – could further disadvantage the developing nations.
• Do exogenous growth models explain
the poor growth rates of LDCs?
• Does international community’s (World
Bank, IMF) development paradigm focus
too much on GDP growth, not enough on
well-being & sustainable development?
• How best to assess genuine progress?
• How do domestic and international
politics impeded economic reforms?
• What socio-cultural & legal institutions
hinder / help sustainable development?
Can anti-globalization protests (WTO, McDonald’s) compel creation
of a New World Order? Or, will MNC-dominated hegemony prevail?
The Globalization Trifecta
Globalization refers to processes that increase connectivity
among societies & their people, institutions, organizations.
Globalization intertwines cultural, political, and economic
interdependencies that challenge traditional arrangements.
“The growing extensity, intensity, and velocity of
global interactions can be associated with their
deepening impact such that the effects of distant
events can be highly significant elsewhere and
specific local developments can come to have
considerable global consequences.” (Held et al. 1999)
 Communication & transportation technologies compress and
decouple time, geographic spaces, social distances (“global village”)
 National & regional boundaries grow increasingly permeable
 Cultural / identity groups become detached from their traditional
territorial bases (the diffusion of supraterritoriality)
Cultural Globalization
Globalization institutionalizes the diffusion of a secularized
world culture, Western in origin, that trumps all alternatives.
“Globalization processes spread a legitimated
world cultural order of universally accepted,
rational, & democratic ideas reshaping national
states, organizations, and individual identities.”
(John Meyer et al. 1997)
World-cultural values & norms creates isomorphism among:
• National constitutions everywhere adopt common institutions:
citizenship rights, public education, health, pensions
• International organizations, especially the UN system
• Associations of scientific & professional experts
• Voluntary associations & social movement organizations
Political Globalization
The 1648 Treaty of Westphalia, ending the Thirty Years’ War,
destroyed the Holy Roman Empire and loyalties based on
religion. It created today’s system of sovereign nation-states.
• No governmental authority exists over nations
• National borders are absolute barriers against
interference & intervention by outsiders
• National security requires international balanceof-power (ultimately, by credible threats of war)
Is globalization slowly eroding nation-state sovereignty?
Are new supranational orgs (EU, UN, NATO, World Court)
constructing a multilateral, intergovernmental system?
Will international orgs acquire enough legitimate authority to
gain control over the means of violence among nations?
Economic Globalization
After World War II, trade negotiation rounds under GATT drove
economic globalization, resulting in treaties to remove tariff
barriers to "free trade” – as now interpreted by World Trade Org.
Two definitions of economic globalization:
• World Bank: “Freedom and ability of individuals
and firms to initiate voluntary economic transactions
with residents of other countries.”
• IMF: “The growing economic interdependence of
countries worldwide through increasing volume and
variety of cross-border transactions in goods and
services, freer international capital flows, and more
rapid and widespread diffusion of technology.”
Four key dimensions of economic globalization
involve the flows across national boundaries of:
goods & services; financial capital (FDI); labor
(human migration); technology & knowledge.
What explains the differential economic growth
of nations? Does ΔGDP indicate well-being?
Limits of Economic Growth Models
Developmental economics models try to explain long-run growth
In the neoclassical Harrod-Dobar model, Growth
Rate = s/ β (where s = saving rate; β = capital-output
ratio). If unchanging technology fixes the short-run
capital-output ratio, only saving rate will determine
growth: whatever a nation can save will be invested.
Robert Solow’s exogenous growth model added technological change to
savings, to predict that poor nations’ income levels would catch-up /
converge with the rich nations’. But, the evidence revealed divergence:
a positive slope for the regression of 1960-90 average growth rates
against 1960 GDP per capita. The most developed nations grew much
faster than the LDCs! (Japan’s rapid growth was a notable exception.)
Endogenous growth theories of 1980s proposed that “virtuous cycles” could
generate new technologies and human capital: Incentives to exploit innovations
would improve firm and worker productivity. Then, innovative knowledge
“spills over” to other economic actors, who increase their capacities to innovate.
Hence, governmental investing in education and subsidizing R&D could boost
long-run growth rates, even though aggregate saving rates might be unchanged.
Africa’s Decades of Negative Growth
As measured by changes in Gross Domestic Products, many
LDCs experienced stagnant, lagging, or negative growth rates.*
SOURCE: UNCTAD 2004 Development and Globalization
* In 2004, African nations grew 4.5%, with 5.0% predicted
for 2005, sufficient to increase real per capita incomes.
Africa’s Debt Burden
Two oil shocks & structural adjustment programs left African nations with
massive external debt burdens – a barrier to savings, investment, & growth.
MNC Water Barons at the Village Pump
MNCs commodify, commercialize, & exploit all sources of profit.
For example, since 1990, six water utility firms won contracts to
privatize public waterworks affecting 300M people in 56 countries.
These MNCs – Bechtel (U.S.), Suez,
Vivendi Environnement, Saur (France)
United Utilities (UK), Thames Water
(Germany) – claim to be more efficient
in providing cheaper, clean water than
often-corrupt public utility companies.
Working with the World Bank, water barons lobby governments,
trade & standards INGOs to change municipal and trade laws.
By 2020 these firms may monopolize 67% of current public water.
“Critics say they are predatory capitalists that ultimately plan to
control the world’s water resources and drive up prices even as the
gap between rich and poor widens. The fear is that accountability
will vanish, and the world will lose control of its source of life.”
(Center for Public Integrity: www.icij.org)
WTO – Ensuring Free Trade?
The WTO, created in 1995, is a primary target of
activists in the anti-corporate globalization movement.
“The WTO is the only global international organization dealing with the rules of
trade between nations. At its heart are the WTO agreements, negotiated and
signed by the bulk of the world’s trading nations and ratified in their parliaments.
The goal is to help producers of goods and services, exporters, and importers
conduct their business.”
<www.wto.org>
Core WTO principles are “Trade
without Discrimination” & “Promoting
Fair Competition” among nations.
The WTO multilateral trading system is
negotiated and signed by governments.
These contracts guarantee member
nations’ trade rights & bind governments
to keep trade policies within agreed
limits. Their purpose is to ensure that
trade flows as predictably and freely as
possible, by helping producers,
exporters, and importers of goods and
services conduct their business smoothly.
WTO – A New Evil Empire?
Anti-globalists criticize the WTO for its allegedly undemocratic
decision-making and lack of openness in reaching agreements.
They claim the 25 richest developed nations manipulate trade
deals to the disadvantage of 120 poor developing countries.
LDCs often lack staff and expertise to win
favorable tariff reductions. Textile quotas
block clothing imports from low-wage
countries. US, EU, and Japanese subsidy
rates are $20,000 per farmer.
What should be a “level playing field” in free-trade talks?
• Should all nations have equal access and status in trade
disputes? How can poor nations afford negotiators & experts?
• Should negotiations produce actually equal outcomes and
implementation? Would genuine trade “fairness” require a massive
transfer of wealth from the richest to poorest nations?
A Genuine Progress Indicator
Some analysts denigrate GDP as economic-growth indicator: it
fails to measure national well-being & sustainable development.
(1) GDP omits nonmonetary activities serving basic
life needs: homecare, volunteering, leisure time, …
(2) ignores environmental degradation / depletion costs
(3) adds expenses for diminished well-being (medical
& security costs), disaster clean-ups (hurricanes), …
(See slide note on GPI measurement)
Genuine Progress Indicator (GPI), based distributive justice and sustainable
development ideas, encompasses uneconomic / harmful growth. The GPI
measures whether changes in amount of goods & services really improve or
degrade national welfare. GPI growth = 0, when increased costs of crime,
family breakdown, pollution, … offset growing GDP of goods & services.
What public policy implications might flow from GPI as a measure
national development? Identify necessary changes in taxes, fees, &
fines to redirect resources away from costly to beneficial activities?
Sustainable Development Efforts
The Bruntland Commission defined sustainable development as “meeting
the needs of the present generation without compromising the ability of
future generations to meet their needs” (Our Common Future 1987).
“The intensified and unsustainable demand for land, water
marine and coastal resources resulting from the expansion of
agriculture and uncontrolled urbanization lead to increased
degradation of natural ecosystems and erode the life supporting
systems that uphold human civilization. Caring for natural
resources and promoting their sustainable use is an essential
response of the world community to ensure its own survival
and well being.” (UN: Sustainable Management & Use of Natural Resources)
Some UN and INGO initiatives promote
sustainable development in ecology: using
forests for wildlife tourism, not poaching and
burning trees for charcoal. Others seek
economic development of African and Asian
nations, typically by sponsoring small-scale
demonstration projects in health, education,
agriculture, finance, technical assistance.
Microcredit in Bangladesh
A classic case of sustainable development is the Grameen Bank,
created in 1976 by Prof. Muhammad Yunus, that makes tiny loans
to poor Bangladeshi women for starting small crafts businesses.
Five borrowers from a village form group, but only
two are initially eligible to receive $100-300 loans.
After both borrowers repay principal plus interest
within 50 weeks, then the other group members
become eligible for loans. Peers pressure members
to repay all loans; thus, collective responsibility
serves effectively as collateral and social control
Despite interest rates of 20%, more than 98% of loans are repaid. By
2003, Grameen Bank’s 1,195 branches served 43,681 villages, or 60% of
rural Bangladesh. Grameen has granted $4.18B in small loans to 3.12
million Bangladeshis.
Grameen claims members’ incomes are 50% higher than nonmembers,
while only 20% live below poverty line vs. 56% of nonmembers. A 1998
World Bank study found that extreme poverty (less than $1 per day)
among Grameen Bank’s borrowers fell by 70 percent within five years.
Millennium Development Goals
UN Millennium Development Goals were adopted in 2002 by a consensus of
experts from the UN Development Programme, OECD, IMF, and World Bank.
The goals for 2015:
1. Cut extreme poverty & hunger in half
2. Achieve universal primary education
3. Promote gender equality & empower women
4. Reduce under-five mortality by 2/3rds
5. Reduce maternal mortality by 3/4ths
6. Reverse spread of HIV/AIDS, malaria, TB
7. Ensure environmental sustainability
8. Global development partnership - aid, debt
Are these goals Utopian? Cost estimates for meeting most MDGs by 2015
would require additional $50B/year in official development assistance –
doubling current aid levels. No G-7 nation has reached agreed target of
0.7% of developed countries’ GNP (only Scandinavia & Netherlands have).
“[D]onor resources can play an important role in strengthening the ability
to use resources effectively. This is a focus of UNDP work in many
countries in partnership with governments, donors, and civil society.”
UN’s Civil Society Concept
United Nations Development Programme’s Civil Society Division
works with a differentiated conceptual framework. “The new task of
UNDP … is to identify and work with all parts of the private sphere
that can contribute effectively to [social & human development].”
Dynamic fuzzy boundaries of CSOs
reached at the interfaces with:
• Regime in power
• Public institutions & gov bureaucracy
• Governance system (the way politics
and government interact)
• Market and its actors
• Affinities & obligations of (extended)
families
Fuzzy Boundaries
Civil society develops at the interstices of several subsystems
Where Should Econ Soc Go From Here?
Summing up the complex field of economic sociology isn’t possible.
We’ve much to learn, also much to contribute to economic knowledge.
What direction should theory construction
take? Should economic sociology seek to
maximize its differentiation from mainstream
neoclassical economics? Or should it build
on economics’ utility-maximizing insights,
while extending its explanatory power by
identifying important origins of social action?
How can economic sociology become more
legitimated and institutionalized within
sociology, and the social sciences in general?
What can you do in your career to popularize
and promote this specialty to your colleagues
and students? How might you, as economic
sociologists, influence public policy makers to
make wise decisions for global well-being?