Module 3: The Global

Economy
Topic 1: Economic Globalization and Global Trade
o Economic globalization refers to the widespread international movement of goods, capital, services,
technology and information (Joshi, 2009). It is the increasing economic integration and interdependence of
national, regional, and local economies across the world through an intensification of cross-border
movement of goods, services, technologies and capital. Economic globalization primarily comprises the
globalization of production, finance, markets, technology, organizational regimes, institutions,
corporations, and labor.

o According to the United Nations –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.

o There are two different types of economies associated with economic globalization:
1) 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)
Trade protectionism usually comes in the form of quotas and tariffs. Tariffs are required fees on
imports and exports.

2) Trade liberalization or free trade means goods and services move around the world more easily.
Trade liberalization is the removal or reduction of restrictions or barriers on the free exchange of
goods between nations. These barriers include tariffs, such as duties and surcharges, and nontariff,
such as licensing rules and quotas.

o 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 is “fair trade” (Nicholls &
Opal, 2005). Fair trade is defined as “concern for the social, economic, and environmental well-being of
marginalized producers (Downie, 2007).

o Fair trade aims for a more moral and equitable global economic system that is concerned with protection
of workers and producers, establishment 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. A concrete example of fair trade is
the case of American coffee chains where coffee from taken from the South.

o Trade liberalization expands international market beyond boundaries and time zones.

o Free Trade is simply a policy of trading treating foreign goods and services no differently than domestic
goods and services are treated. It is a policy of allowing domestic consumers to buy from abroad just as
freely as they can buy at home.
o Protectionism is a policy of discriminating against foreign goods and services. The policy of saying to
domestic consumers, “If you want to buy foreign-made goods and services, you have to jump through
 some extra-large hurdles to buy those goods and services.”. Protectionist policies introduce hurdles for
consumers and merchants.

o The chief tool of protectionism is a tariff. A Tariff is the tax on imports. It is a special levy that consumers
in the home economy are forced to pay to be able to buy goods made abroad. They are imposed on the
importers of the goods and services, so the consumer never sees the true cost. A higher tariff means higher
prices for the consumer.

o Free trade is more than a theory; it has been practiced. One example is Hong Kong wherein it has no
natural resources but is one of the wealthiest countries because of its policy of unilateral free trade.

Topic 2: Economic Globalization and Sustainable Development

o Globalization creates new opportunities for cooperation, but it also creates tensions and problems. For
example, free trade can generate economic growth, but on the other hand increases pollution and
unsustainable consumption of natural resources. Impacts include tackling the effects of climate change,
pollution and other environmental factors that can harm and do harm people's health, livelihoods and lives.

o There are some significant downsides to globalize trade and perhaps the strongest argument against
economic globalization is its lack of sustainability or the degree to which the earth’s resources can be used
for our needs, even in the future.

o Sustainable development is defined as development of our world today using the earth’s resources and
the preservation of such resources for the future. Common challenges in sustainability are environmental
degradation and food security. Environmental degradation became blatant during the Industrial
Revolution where the concept of efficiency was introduced. Efficiency means finding the quickest
possible way of producing large amounts of a particular product. This process made buying of goods
easier to the people. Then, there is an increased demand.

o There was an increase in demand that yields higher efficiency. This cycle harms the planet in a number of
ways. For instance, the earth’s atmosphere is damaged by more carbon emissions from factories around
the world. Also the destruction of coral reefs and marine biodiversity as more and more wastes are thrown
into the ocean. Harvey (2005) noted that neoliberals and environmentalists debate the impact of of free
trade on the environment. Environmentalist argue that environmental issues should be given priority over
economic issues (Antonio, 2007).

o Neoliberals see the efforts of the environmentalists as serious impediments to trade. But some seek to
integrate in other approaches like ecological modernization theory which sees globalization as a process
that can both protect and enhance the environment (Yearley, 2007). Kyoto Protocol aimed at a reduction
of global carbon emissions, but failed to take off largely because it was not ratified by the United States
(Armitage, 2005). There are measures like “carbon tax” and “carbon neutrality” to deal with
environmental problems (Ritzer, 2015).

o Global food security means delivering sufficient food to the entire world population. It should be a
priority of all countries, it also means the sustainability of 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. A major environmental problem is the destruction of natural habitats, particularly,
deforestation (Diamond, 2006).

o Other challenges are industrial fishing, declining usable farmland, and availability of fresh water. Other
challenges are destruction of water ecosystem, pollution through toxic chemicals, greenhouse gases,
melting of glacial ice, flooding, reduction of alkalinity of the oceans, and other destructions of existing
 ecosystems. Ultimately, global warming poses a threat to the global supply of food as well as to human
health (Brown, 2007). Population growth contributes to increase consumption that intensify ecological
problem.

o The UN promotes sustainable agriculture as the second of its 17 Sustainable Development Goals (SDGs)
for the year 2030. The World Economic Forum (2010) addressed the issue through New Vision for
Agriculture(NVA) where public-private partnerships were established. This is a cooperation that
encourage exchange of knowledge among farmers, government, civil society and the private sectors.

o Sustainable Development is to make the world a better place for everyone without destroying the
possibilities for the next generation. It also means that we need to keep three things - social progress,
economic development, and climate and environment.

a) Climate and Environment: Climate System ensures that the temperature is correct and the
atmosphere emit exactly the right amount of solar energy.
b) Economic: The smarter we use our natural resources and the better systems we create for a fair
distribution, the more sustainable we are.
c) Social Progress: Humans are part of nature, but we are also important resources for the world. Having
equal opportunities, education, safety, food and medicine.

Topic 3: Economic Globalization, Poverty, and Inequality

o Globalization and Poverty are two highly debatable concepts. Some claimed the globalization increases
poverty rate and some claimed it reduces poverty. The relations between the two concepts is also related to
the issue of inequality not only in economy but also in different aspects of life.

o Most big companies search for cheapest sources of raw materials and labor because of economic and trade
globalization. The result is that labor-intensive products like shoes are often produced in countries with
the lowest wages and the weakest regulations.

o The multiplier effect means an increase in one economic activity can lead to an increase in other
economic activities. For instance, investing in local businesses will lead to more jobs and more income.
Economic globalization has helped millions of people get out of extreme poverty but the challenge of the
future is to lift up the poor while at the same time keep the planet livable. Opponents of economic
globalization called the outsourcing of jobs as exploitation and oppression, a form of economic
colonialism that puts profit before people.

o Globalization and inequality are closely related. There are two main types of economic inequality: wealth
inequality and income inequality. Wealth refers to the net worth of a country; all assets of a nation –
natural, physical and human less than liabilities. Wealth inequality speaks about the distribution of assets.
To measure global economic inequality, economists look at income using Gross Domestic Product(GDP).

o This “explosion” of industry and modern technology causes economic differences among nations. The
result is economic gap. Today, economic globalization and international trade are the forces responsible
for global inequality. Access to technology also contributed to worldwide income inequality. In
modernized economies, jobs are more technology-based, generally requiring new skills. This is referred as
skill-based technological change.

o Division of the world comes in different labels. The term “First, Second and Third World” date back to the
Cold War, when Western policymakers began talking about the world as three distinct political and
economic blocs. Western capitalist countries were labeled as the “First World”. The Soviet Union and its
allies were termed the “Second World”. Everyone else was grouped into “Third World”.
o After the Cold War ended, the category of Second World countries became null and void, but somehow
the terms “First World” and the “Third World” stuck around in the public consciousness. The Third
World became associated with impoverished states, while the First World was associated with rich,
industrialized countries. But the term “First World” and “Third World” aside from being outdated, are also
inaccurate because of different levels of economic stability. Another classification was North-South, when
the Second World joined either the First or the Third.

o United States, Canada, Western Europe, and developed parts of Asia are regarded as the “Global North”,
while the “Global South” includes the Caribbean, Latin America, South America, Africa, and parts of
Asia. These distinctions point largely to racial inequality, specifically between the Black and the White.
According to Ritzer (2015), “At the global level, whites are disproportionately in the dominant North,
while blacks are primarily in the south; although this is changing with South-to-North migration”.

o Divisions of the World (Populations):

a) Developing Country
 Heavily agriculture
 Subsistence Farming - does not allow the farmers to get ahead. They are, only if lucky, able to
grow enough to provide for their family.
 Life expectancy is lower.

b) Developed Country
 First World
 Typically located in the middle latitudes. Climate in these regions is favorable for development.
 Has high GDP, life expectancy, literacy rate, energy consumption, infrastructure and control of
their environment.
 Relatively low population growth and low reliance on agriculture as technology has advanced to
lower it dependence.
o Gross Domestic Product (GDP) - value given to the amount of stuff a country produces in a specific
amount of time.

o Literacy Rate - how much the population of a certain age can read.

Topic 4: The Global City

o A global city, also called a power city, world city, alpha city or world center, is a city which is a primary
node in the global economic network. The concept comes from geography and urban studies, and the idea
that globalization is created and furthered in strategic geographic locales according to a hierarchy of
importance to the operation of the global system of finance and trade.

o The rural-urban differentiation has a significant relationship to globalization. Globalization has deeply
altered North-South relations in agriculture. For instance, the relations of agricultural production have
been altered due to the rise of global agribusiness and factory farms (McMichael, 2007)

o In the scenario of relations between North and South in agriculture, the South produces non-traditional
products for export and become increasingly dependent on industrialized food exports from the North.
Consequently, this leads to a replacement of the staple diet as well as the displacement of local farmers.

o Sassen(1991) used the concept of global cities to describe the three urban centers of New York, London
and Tokyo as economic centers that exert control over the world’s political economy. World Cities are
categorized as such based on the global reach of organizations found in them. Not only are there
 inequalities between cities, there also exists inequalities within each city (Beaverstock, 2002). According
to Castells (2000) these global cities can be seen as important nodes in a variety of global networks.

o Although cities are major beneficiaries of globalization, Bauman (2003) claimed that they are also most
severely affected by global problems. Therefore, the city faces peculiar political problems, wherein it is
often fruitlessly seeking to deal locally with global problems and “local politics has become hopelessly
overloaded.

o Global Cities
1) It drives the global economy. They are economic powerhouses with head offices, business services,
legal and consulting expertise, exchanges, banks and global corporations.
2) They drive connectivity. Major airports and solid transit infrastructure make global cities accessible.
3) They unlock knowledge.
4) They are cultural capitals.
5) Led by people who think globally and understand the importance of connecting local politics to world
politics.
6) They are open. Businesses, ideas and people flow freely.

Topic 5: Theories of Global Stratification

o Theories of stratification explain reasons why some parts of the world develop faster economically
compare to others like modernization theory, dependency theory and modern world-system.

o Modernization Theory frames global stratification as a function of technological and cultural differences
between nations. Like the history of Western Europe, the Columbian Exchange –spread of goods,
technology, education and diseases between Americas and Europe after Columbus so called “discovery of
Americas”. An then, the Industrial Revolution, when new technologies allowed countries to replace
human labor with machines and increase productivity. So modernization theory, rests on the ideas that
affluence could be attained by anyone.
o Modernization theory, in general, argues that if you invest capital in a better technology, they will
eventually raise production enough that there will be more wealth to go around and overall well-being will
go up. Furthermore, rich countries can help other countries that are still growing by exporting their
technologies.
 Walt Rostow divided modernization in four stages: traditional stage, take-off stage, technological
maturity and high mass consumption. These stages describe modernization process in the West.

o Dependency theory was a product of colonial experiences. Dependency is a condition in which the
development of the nation-states of the South contributed to a decline in their independence and to an
increase in economic development of the countries in the North. (Cardoso & Felato, 1979). It argues that
liberal trade causes greater impoverishment to less developed countries. Dependency theory focuses on
how poor countries have been wronged by richer nations because global stratification starts with
colonialism.

 Another common assumption of the theory is that even after de-colonization, there are still important
ties between the developed and less developed countries, which mainly consist in the exploitation od
peripheral natural resources and workforce by the center (Anton, 2006). Dependency theorists saw the
development of peripheral nations is stagnant because of the exploitative nature of the core nations
(Ferraro, 2008). Less developed periphery countries are said to primarily serve the interests of the
wealthier countries.

 Cardoso & Felato(1979) believed that Latin American economies were the results of capitalist
expansion in the United States and Europe. The idea of dependence refers to the conditions under
 which alone the economic and political system can exist and function in its connections with the world
productive structure. In other words, it was used to underscore the extent to which the economic and
political development of poor countries was conditioned by the global economy, whose center of
gravity was located in the developed countries.

o The Modern World System was a model by American sociologist Immanuel Wallerstein. He described
high-income nations as the “core” of the world economy. This core is the manufacturing base of the planet
where resources funnel in to become the technology and wealth enjoyed by the Western world today.
Low-income countries, meanwhile, are called the “periphery”, whose natural resources and labor support
the wealthier countries.

 In Wallerstein’s model, the periphery remains economically dependent on the core in a number of
ways, which tend to reinforce each other (also called as neocolonialism). Critics of this theory argues
that the world economy is not a zero-sum game –one country getting richer does not mean other
countries are getting poorer. Innovation and technological growth can spill over to other countries,
improving all nations’ well-being and not just the rich.

o Hegemony is the dominance of one group over another, often supported by legitimating norms and ideas.
The term hegemony is today often used as shorthand to describe the relatively dominant position of a
particular set of ideas and their associated tendency to become commonsensical and intuitive, thereby
inhibiting the dissemination or even the articulation of alternative ideas.

o Cultural Hegemony
 It is the domination and influence of one group or entity, set of ideas over others.
 It is the dominant ideology or belief to find what is natural, ideal and unavoidable.
 How we understand how power works on a cultural level.
 Two Ways on how Hegemony Operates:
1) Direct Force
2) Consensual Control