CHAPTER II

THE GLOBAL ECONOMY

Introduction

The United Nations (UN) tried to address the different problem in the world. Their efforts were guided by the eight Millennium Development goals,
which they Created in 1990s.

In the Philippines a person is officially living in the poverty if he makes less than 100,534 pesos a year, around 275 pesos a day. This is called the
poverty line or poverty there hold. But we are going to focus on extreme poverty which, according to the UN (2015) is condition characterized by
severe deprivation of basic human needs including food, safe drinking water, sanitation, facilities, health, shelter, education, and information. The
UN defines extreme or absolute poverty as living on less than 1.25 dollar a day the organization aims to eliminate poverty for all people by 2030.

8 Millennium Goals

Eradicate poverty and hunger

Economic Globalization and Global Trade

According to the United Nations (as cited in Shangquan,2000), “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. It reflects the continuing expansion and mutual integration of market frontiers, and is an irreversible trend for the
economic development in the whole world at the turn of the millennium.

Two different type of economies associated with economic globalization:

 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 as cited in Ritzer, 2015).

 TRADE PROTECTIONISM- usually comes in the form of quotas and tariffs. Tariffs are required fees on imports or
exports. For instance, a pen that cross 1 dollar in country A and in country B, it would given 5 dollars tariff.

World War II heavily influenced the shifting of the dominant economic policy from protectionism to trade liberation or free trade. Free trade
agreements and technological advances in transportation and communication means good and services move around the world more easily than
ever. We are talking about everything from shoes and bananas to innovations and ideas.

Example:
Mobile phones seem to have good consequences for everything including reducing poverty. According to economist Jeffrey Sachs, mobile phones
are the “single most transformative technology” when it comes to developing world. Phones give people to access to banking and payment system
and better access to education and information.

Globalization made some countries, especially the developing ones, to gain more in the global economy at the expense of the 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 and Opal 2005) Fair trade, as defined by the international fair trade Association, is the concern for the social
economic and environment well-being of marginalized small producers. Its aims for a more moral and equitable global economic system
Specifically, it is concerned with protection of workers and producers, establishment of more just prices, engagement in environmentally sounds
practices and sustainable production, creation of relationship between producers in the south and consumers in the north, and promotion of safe
working environment.
 Economic Globalization and Sustainable Development

There are some significant downsides to globalize trade and perhaps the strongest argument against economic globalization is its lack of
sustainability to the degree to which the earth’s resources can be used for our needs, even in the future.
 In the other word development has to ensured in and for the future generation.one of the significant of global response or
approach to economic globalization Is that of sustainable development which seek to chart a middle path between economic
growth and sustainable environment.

The continuous production of the world’s natural resources, such as water and fossil fuel allows humanity to discover and innovate many
things. We’re able to utilize energy, discover new technologies, and make advancement in transportation and communication.

Environmental degradation

Development, especially economic development, was hastened by the industrial revolution. This period made possible the cycle of efficiency.
Efficiency means finding the quickest possible way of producing large amount of a particular product. This cycle harm the planet in a number of
ways.
 Earth atmosphere I damaged by carbon emission form factories around the world.
 Destruction of coral reef and marine biodiversity as more and more waste thrown in ocean.
 Deforestation and pollution and climate change
Various effort are underway to deal with the climate change. However, strong resistance on the part of government and corporation counters
these. For instance, the 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 dealing with environmental problems.

Food Security

 The demand for food will be 60% greater than it is today & the challenge of food security requires the world to feed 9 billion people
by 2050 (Breene, 2016). Global food security means delivering sufficient food to the entire world population.
 The security of food also means sustainability of society such as population growth, climate change, water scarcity and agriculture.
 Agricultural accounts for 18% of the economy's output and 47% of its workforce. India is the second biggest producer of fruits and
vegetables in the world. According to the Food and Agriculture Organizations (FAQ) of United Nations, some 194 million Indians are
undernourished, the largest number of hungry people in any single country.

The challenge 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). Industrial fishing has contributed to a significant destruction of marine life & ecosystems
(Goldburg, 2008).

Significant environmental challenge is that of the declined in the availability of fresh water (Conca, 2006). The decline in the water supply because
of degradation of soil or desertification (Glantz, 1977), transformed what was once considered a public good into a privatized commodity.

Pollution through toxic chemicals has had a long-term impact on the environment. The use of persistent organic pollutions (POPs) has led to
significant industrial pollution (Dinham, 2007). Greenhouse gases, gases that trap sunlight and heat in the earth's atmosphere, contribute to global
warming. This process causes the melting of land-based and glacial ice with potentially catastrophic effects (Revkin, 2008). Ultimately, global
warning poses a threat to the global supply of food as well as to human health ( Brown, 2007).

Economic Globalization, poverty and Inequality

The Swedish statistician Hence Rosling once said, "The 1to2 billion poorest in the world who don't have food for the day suffer from the worst
disease, globalization deficiency. The way globalization is occurring could be much better, but the world thing is not being part of it.

Economic and trade globalization is the result of companies trying to outmaneuver their competitors. While you search for the cheapest place to
buy shoes, companies search for the cheapest place to make those shoes. The result is that labor-intensive product like shoes are often produced in
country with the lowest wages and the weakest regulation.

Economic globalization has helped millions of people get out of extreme poverty but the challenges of the future is to lift up the poor while at the
same time keep the planet livable. One of the best ways to help those in extreme poverty is to enable them to participate in economy. A perfect
example is microcredit.

 Microcredit means lending of small amount of money a low interest to new business in the developing world. But by itself, microcredit is
not going to solve the problem of extreme poverty but it supports the idea that enabling people to participate in the economy can make
their live better.
 Global Income Inequality

Globalization and Inequality are closely related. We can see how different nations are divided between the north and south, developed and less
developed, the core and periphery. These differences mainly reflect one key aspect of inequality in the contemporary world-global economic
inequality. The main types of economic inequality,wealth inequality and income inequality

 wealth refers to the net worth of a country. It takes into account all the assets of a nation may they be natural, physical, and human less
the liabilities. This means wealth inequality speaks about distribution of assets.
 Income is the new earnings that are constantly being added to the pile of a country's wealth. When we talk about Income Inequality, we
mean that new earnings are being distributed, it values the flow of goods services, not a stock of assets (Economist, 2012)

Economic big bang – Branko Mlillanoic (2011) an economist, explained that economist big bang is the revolution caused the differences among
country. Though this “explosion” of industry and modern technology, some nation become economically developed while other are developing.
Ultimately the result is economic Gap among countries. The Gap between the richest and the poorest nation are greater than in the past.

 Access to technologies also contributed to worldwide income inequality, it complemented skilled worker but replaced by many unskilled
worker. In modernized economist, job are more technology-based, generally requiring skills
 Worker who are more educated and more skilled get a higher wages. On the other hand unskilled worker will fall behind

The third world and the Global South

Let us begin by deconstructing the idea of the First, Second, and Third World hierarchy by looking at their origins and their implications. The terms
date back to the Cold War, when Western policymakers began talking about the world as three distinct political and economic blocs (Tomlinson,
2003).

 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."

 After the Cold War ended, the category of Second World countries became null and void, but somehow the terms "First World" and "Third
World" stuck around in the public consciousness. Third World countries, which started as just a vague catchall term for non-alliance countries,
came to be associated with impoverished states, while the First World was associated with rich, industrialized countries.

 In addition to being outdated, these terms are also inaccurate. There are more than 100 countries that fit the label of "Third World," but they
have vastly different levels of economic stability. Some are relatively poor, but many are not. Nowadays, social scientists sort countries into
groups based on their specific levels of economic productivity. To do this, they use the Gross Domestic Product (GDP), which measures the total
output of a country, and the Gross National Income (GNI), which measures GDP per capita (World Bank, n.d.).

 A new and simpler classification, North-South, was created as Second World countries joined either the First World or the Third World. First
World countries, such as the 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.

 The term "Global North" and "Global South" are a way for countries in the South to make a stand about common issues, problems, and even
causes in order to have equality all throughout the world. These distinctions point largely to racial inequality, specifically between the Black and
White. In other words, the differences between the Global North and the Global South are shape migration and globalization. Nevertheless, the
economic differences between the wealthy Global North and poor Global South "have always possessed a racial character" (Winant, 2001, p.
131).

The Global City

 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). Schlosser (2005) pointed out that as commercial agriculture replaces local provisioning, the relations of social production
are also altered. Rural economies are exposed to low prices and mass migration.

Theories of Global Stratification

On Human History, all the societies is poor. The Poverty is the only norm for all but it is not the cases of society anymore. You will find the any
Stratification in socioeconomic classes like the Philippines society. And sees the crosses of the Global Stratification in this world by pattern with
inequalities of the power and wealth in societies.
Modernization Theory

On Human History, all the societies is poor. The Poverty is the only norm for all but it is not the cases of society anymore. You will find the any
Stratification in socioeconomic classes like the Philippines society. And sees the crosses of the Global Stratification in this world by pattern with
inequalities of the power and wealth in societies.

Walt Rostow’s five stages of Modernization

Traditional Stage- This refers to societies that are structured around small, local communities with production usually being done in family settings.
Because this society have limited resources and technologies.

Precondition to takeoff – At this stage science and technology start to grow, which aids in economic productivity

Takeo-off– Rostow describe this stage as a short period of intensive growth, in which industrialization begin occur and worker concentrated
around a new industry

Drive to maturity – this stage is about diversification and expansion. The economy in this stage of growth will be developing new and more
sophisticated industries

Mass Consumption – it is when your country is big enough that production become more about wants than needs. Many of these country put
social support system in place to ensure that all of their citizen have access to basic necessity.

Dependency theory and the Latin American Experience

Starting in the 1500s, European spread throughout the American, African, and Asia claiming land for Europe. At this point British Empire covered
about one-fourth of the world. With the colonization came the exploitation of both natural and human resources. After the second world war,
there were many question about international relation. One of those question was “why are many countries in the world are not developing?”. The
traditional answer to this is countries is not pursuing the right economic policies or their government are authoritarian and corrupt. Latin American
scholar, however, are of critical that answer and are intrigued by their region’s underdevelopment.

Dependency theory was initially developed by Hans Singer and Raul Prebisch in the 1950s and has been improved since then. The term “core
nation” and “peripheral nation” are the heart of dependency theory

 Peripheral nation- are countries that are less developed and receive an unequal distribution of the world’s wealth.
 Core country – are more industrialized nation who received the majority of the world’s wealth

Dependency theories saw that the development of peripheral nation is stagnant because of the exploitation nature of the core countries. The
theory point-out that the economies of peripheral countries rely on manual and to export of raw material to core country.

The modern world system

Immanuel Wallerstein an American sociologist, called the history of colonialism as the capitalist world economy. He describe high-income nation as
the core of the world economy. This core is manufacturing base of the planet where resources funnel to become technology and wealth enjoyed by
the western world today. Meanwhile the low-income countries are called “periphery” whose natural resources and labor support the wealthier
countries.

In Wallerstein’s model, the periphery remains economically dependence as the core in a number ways, which tend to reinforce each other first,
poor nation tend to have a few resources to export rich countries. However, corporation can buy this raw materials cheaply and then process and
sell them in richer nations. As a result, the profits tend to bypass the poor countries. Poor countries are also more likely to lack industrial capacity,
so they have to import expensive manufactured goods from richer nations. Dependency theory is also very narrowly focused. It points the fingers
on the capitalist market system as the sole cause of stratification, ignoring the role of things like how culture and political regimes play in
impoverishing countries. There is also no solution to global poverty that comes out of dependency theory, most dependency theorist just urge poor
nations to cease all contact with the rich nations or argue for a kind of social globalism. However, these ideas do not acknowledge the reality of the
modern world economy, which makes them not very useful for combating the real pressing problem of the global poverty.