Economic Development and Globalization

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Economic Development and Globalization
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Life Expectancy
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Overall Economy

• Economy
• 2 dimensions
• Formal economic activity that takes place
  within official channels
• i.e., subject to formal rules, taxes, legal
  structure
• Informal Not officially recognized
• i.e., not reported as income
• Work done in the home
• Subsistence farming (growing crops for food)
• Barter
• Much street trading, informal services
• informal maybe as much as 1/3 of all economic
  activity
• Maybe as much as 2/3 in poor countries

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Formal Economy

• 4 major groupings
• Primary/extractive
• Agriculture, mining and forestry
• Secondary/industrial
• Manufactured goods
• Tertiary/service
• All those activities that are services to others
• Transportation, banking, office work, child
  care, middle management
• Quaternary
• Activities that use and manipulate high-end
  information
• Financial investment, specialized law, medicine,
  communications, banking etc.
• Profits greatest in the Quaternary sector

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Geography of economic sectors

• Primary
• Much of Africa, Asia.
• 50-75 of labor force (5-10) in West
• Secondary
• Most in West and some developing countries
• 75 in West but declining
• Rapidly expanding
• in China, Brazil, S. Korea, Mexico,
• Taiwan, India and Argentina
• Tertiary/Quaternary
• Mostly in core, e.g., U.S.
• 4 primary
• 22 secondary
• 50 tertiary
• 22 quaternary

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Economic Development

• Globalization
• Not new. Whats new is the scale and intensity
  of globalization
• 3 major waves of globalization or
  internationalization
• Merchant Capitalism
• Industrial Capitalism (Colonialism)
• Post industrial Capitalism

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Merchant Capitalism

• 16th century
• European Merchant Capitalists push overseas in
  search of profits
• Early penetration is mostly just trading links
• Large flows of wealth to Europe
• Fuels the industrial revolution

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Wealth Flows to Europe
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Colonialism

• By the time of industrial revolution
• Direct control
• due to need to standardize inputs to factories
• greater needs for commodity crops and raw
  material inputs

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British
French
Portuguese
Belgium
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Colonialism

• 3 major impacts
• Reorganized the economies of the colonies to suit
  Europes needs
• Raw materials, food
• Colonies not allowed to industrialize
• e.g., Indian Cotton industry
• to stop competition from Indian producers the
  British banned looming in India so you could not
  buy Indian cotton only grow raw cotton
• Prices paid for extracted raw materials was
  merger
• Profits went to colonial elite
• Profits consumed
• Reinvested in the home country
• Invested in further extraction

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Colonialism

• Severely upset the developing cultural, political
  and social structures of the countries
• Repressed the rights of individuals
• Carved up cultural groups into different
  countries
• Set different cultural groups against each other
• Forced people to work as cheap unskilled
  laborers, domestic servants or beggars
• E.g.,
• Sub-Saharan Africa

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Sub-Saharan Africa
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Neocolonialism

• 1950s 1970s
• Period of independence for most colonies
• Replaced by NEOCOLONIALISM
• Political Independence / Economic dependence
• i.e., economic situation remains the same
• Former colonies controlled by strategies such as
• International financial regulations
• Trade agreements
• Covert intelligence
• Sanctions, war

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Neocolonialism

• Orchestrated by MNCs and the new governments of
  the former colonies
• MNCs (Multinational Corporations) --see over
• Evolved into conglomerate companies that loosely
  tie together dozens of large companies
• control the flow of investment across the globe
• Influence the foreign policy of western
  governments
• Influenced the economic and political policies of
  former colonial governments

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Neocolonialism

• MNCs continued
• Highly integrated international systems
• Extracting resources from several places
• locating factories to take advantage of
• cheap labor, lax environmental laws
• transportation facilities
• and selling products to the biggest markets
• (including the elites of the developing
  countries)

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The Economic Muscle of Corporations
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Post colonial governments

• Governments of the former colonies
• Corruption
• Authoritarian
• Anti-democratic
• Ruled by privileged, Europeanized elite
• Dependent upon export of raw materials
• Buy into the neocolonial relationship with the
  West
• Elites profit enormously
• But very little positive economic impact on the
  well-being of the majority of the population

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Globalization

• Neocolonialism have become more complex since the
  1970s
• Increasing investment in some developing
  countries
• Led to significant manufacturing industries in
  some areas of the developing world
• Some former colonies have developed western
  type economies
• 4- tigers (S. Korea, Taiwan, Singapore, Hong
  Kong), Ireland
• Mexico, Brazil, China, moving up
• 2nd tier Thailand, Malaysia, India, Chile,
  Argentina
• But very uneven advances and frequent setbacks!
• Not enough MNC investment to bring development to
  the developing world
• In most cases the dominant relationship continues
  to be raw material exports from the former
  colonies to the West

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Globalization other aspects

• Localities are increasing tied to global trade
• Many places have little control over that
  activity
• Countries are having increased difficulty
  controlling economic flows in and out of their
  country
• International migration is becoming more
  important
• Not just low end laborers but also highly
  professional folk

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Globalization other aspects

• Digital divide
• Most internet connection is between the western
  world
• and upper middle classes and above in rest of
  world
• Billions (85) of people are outside the
  digital world

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Globalization other aspects

• Increased homogenization of culture
• esp. modern popular culture
• But also some backlash
• Cultural retrenchment (sense of loss of national
  identity)
• Cultural rediscovery (regional cultural identity)
• Cultural withdrawal (looking backward to better
  times or rejection of modern culture)
• Cultural hybridization/fusion (music styles, food
  etc)

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Globalization other aspects

• Increased displacement of environmental impacts
• Off-shoring of waste
• Production versus consumption of products
• Spread of pollution
• Globalization of environmental impacts

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Consequences of globalization

• Increased polarization
• gap between the rich and the poor has expanded 3
  fold since 1960
• Top 20 of people (mostly Developed countries and
  the elite of developing countries)
• 75 of worlds income
• 83 of Worlds export markets
• 75 of worlds telephone lines
• Bottom 20
• 1 of worlds income
• 1 of worlds markets
• 1.5 of worlds telephones

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Consequences of globalization

• Increased flows of illegal drugs
• Greater freedom of movement for terrorists and/or
  WMD
• Greater flows of weaponry
• Rising Anti-Western attitudes
• Americans (West in General!) tend to think
  globalization and modernization are good
• Because we benefit from it (we control much of
  it)
• Others see it as a result of their exploitation
  and humiliation
• Only the elites of the periphery benefit from
  globalization
• U.S. actions versus words

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