The Structure Of Globalization
THE GLOBAL ECONOMY
INTRODUCTION
⮚ United Nations- address different kinds of problems occur in the world
⮚ 8 Millennium Development Goals (1990s)
⮚ 1st: Eradication of Extreme Poverty and Hunger
⮚ Achieving Universal Primary Education
⮚ Promoting Gender Equality and Women Empowerment
⮚ Reducing Child Mortality
⮚ Improving Maternal Health
⮚ Combating disease like HIV/ AIDS and Malaria
⮚ Ensuring environment sustainability
⮚ Global partnership with development
⮚ There are different standards of living in the world.
⮚ Poverty Line/ Poverty Threshold
⮚ Extreme poverty – characterized by severe deprivation of basic human needs. Eliminate
by 2030
⮚ UN (2015) reported that 1.9 billion down to 836 million extreme poverty.
⮚ World Bank by 2030 predicted down to less than 400 million
⮚ People who lifted out from extreme poverty still considered to be poor.
ECONOMIC GLOBALIZATION AND GLOBAL TRADE
Economic Globalization
- The increasing interdependence of world economies as a result of cross-border scale 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 in
the turn of millennium.’ (Shangquan, 2000)
2 TYPES OF ECONOMIES
1. Trade Protectionism- usually comes in the forms of quotas and tariffs.
Tariffs – are required fees on import/export
Great Depression of 1929- marked the peak of protectionism
2. Trade liberalization/ Free Trade- it means goods and services moves around the world more
easily than ever. It is more on innovations and ideas, Jeffrey Sachs, an economist mobiles
phones are the “single most transformative technology” when it comes to developing the
world.
Leapfrogging – the idea that countries can skip straight to more efficient & cost effective
technologies that were not available in the past.
Fair Trade- concern for the social, economic, and environmental well-being of
marginalized small producers. It aims for a more moral and equitable global economic system.
ECONOMIC GLOBALIZATION AND SUSTAINABLE DEVELOPMENT
Sustainable Development- is the development of our world today by using earth’s
resources and the preservation of such sources for the future.
The relationship between globalization and sustainability is multi-dimensional - it involves
economic, political, and technological aspects.
Positive effects of development put our environment at a disadvantage such as climate
change and global inequality.
Environmental Degradation
Efficiency- finding the quickest possible way of producing large amounts of a particular
product.
This cycle harms the planet in a number of ways.
Ecological Modernization theory sees globalization as a process that can both protect and
enhance the environment.
Food Security
Global food security means delivering sufficient food for the entire world population.The
sustainability of the society such as population growth, climate change, water scarcity,
and agriculture.
The challenges to food security can be traced to the protection of the environment.
Major Environmental problems:
• Destruction of the natural habitats
• Deforestation
• Industrial Fishing
• Decline in the availability of fresh water and water supply
• Pollution
• Greenhouse gases
• GLOBAL WARMING – poses a threat to the global supply of food as well as to human
health. Global Income Inequality
Economic Inequality- the unequal distribution of income and opportunity between
groups in society.
Two types of Economic Inequality
Wealth Inequality- Speaks about distribution of assets
Income Inequality- New earnings are being distributed that values flow of goods and
services
Wealth- Refers to the net worth of a country which is also the abundances of resourceS in
a specific country.
Income- New earnings that are constantly being added to the pile of a country’s wealth
. The Third World and the Global South
First world (Global North)- (US, Canada, Western Europe)- Western capitalist country.
Second World (North-South)- The Soviet union and its allies (Albania, Hungary, Poland
and Romania)
Third world (Global South)- Caribbean, Latin America, South America, Africa, some part of
Asia
Theories of Global Stratification
Modernization Theory- One of the main explanation for global stratification is the
modernization theory. This theory frames global stratification as a function of
technological and cultural differences between nations.
Walt Rostow’s Four Stages of Modernization
1. Traditional Stage- refers to societies that are structured around small, local communities
with production typically being done in family setting.
2. Take-off Stage- people begin to use their talents and skills. This innovations creates new
markets for trade.
3. The drive to technological maturity- nations in this phase typically push for social change
along with economic change.
4. High mass Consumption- your country is big enough that production becomes more about
wants rather than needs.
The Modern World System
Core- high-income nations of the world economy. A manufacturing base of the planet
where resources funnel in to become the technology and wealth.
Semi-Periphery- middle-income countries, due to their closer ties to the global economic
core
Periphery- Low Income countries, whose natural resources and labor support the
wealthier countries.
MARKET INTEGRATION
Market Integration
∙ Occurs when prices among different locations or related goods follow similar patterns over
a long period of time.
In any given economy, production typically splits into three sectors:
1) Primary Sector
2) Secondary/Manufacturing Factor
3) Tertiary/Service Sector
HISTORY OF GLOBAL MARKET INTEGRATION
-The Agricultural Revolution and the Industrial Revolution
-Capitalism and Socialism
-The Information Revolution
-Global Corporations
International Financial Institutions
The strength of a more powerful economy brings greater effect on other countries. In
the same manner, crises on weaker economies have less effect on other countries.”
THE BRETTON WOODS SYSTEM
Five Key Elements
1) The expression of currency in terms of gold or gold value to establish a par value.
(Boughton, 2007)
2) The official monetary authority in each country would agree to exchange its own currency
for those of other countries at the established exchange rates, plus or minus a one-percent
margin.
(Boughton, 2007, pp 106-107)
3) The establishment of an overseer for these exchange rates, the International Monetary
Fund (IMF) was founded.
4) Eliminating restrictions on the currencies of member states in the int’l trade.
5) The U.S. dollar became the global currency.
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)
Substantial reduction of tariffs and other trade barriers and the elimination of
preferences, on a reciprocal and mutually advantageous basis”
WORLD TRADE ORGANIZATION
Responsible for trade in services, non-tariff-related barriers to trade, and other broader
areas of trade liberalization.
INTERNATIONAL MONETARY FUND (IMF)
WORLD BANK
ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD)
ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC)
EUROPEAN UNION (EU)
NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)
Positive Consequences
-if lowered prices by removing tariffs, opened up new opportunities for small and medium
sized business to establish a name for itself, quadrupled trade between the 3 countries, and
created five million U.S jobs.
Negative Consequences
-include excessive pollution, loss of more than 682,000 manufacturing jobs, exploitation
of workers in Mexico, and moving Mexican farmers out of business.