"Economic Development and Globalization"
Economic Development and Globalization Life Expectancy 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 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 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 Economic Development • Globalization: – Not new. What’s new is the scale and intensity of globalization • 3 major waves of globalization or internationalization – Merchant Capitalism – Industrial Capitalism (Colonialism) – Post industrial Capitalism 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 Wealth Flows to Europe 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 British Portuguese French Belgium Colonialism – 3 major impacts • Reorganized the economies of the colonies to suit Europe’s 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 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 Sub-Saharan Africa 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 Neocolonialism – Orchestrated by MNC’s and the new governments of the former colonies • MNC’s (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 Neocolonialism • MNC’s 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) The Economic Muscle of Corporations 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 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 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 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 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) Globalization: other aspects • Increased displacement of environmental impacts • Off-shoring of waste • Production versus consumption of products – Spread of pollution – Globalization of environmental impacts 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 World’s export markets – 75% of world’s telephone lines • Bottom 20% – 1 % of worlds income – 1% of worlds markets – 1.5% of worlds telephones 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