The Structure of the Global Economy

Readings for this past week

• Zakaria, “The Rise of the Rest”
• Marber, “Globalization & Its
Contents”
• Friedman, “It’s a Flat World, after
All”
• Ghemawat, “Why the World Isn’t
Flat”
• Mahbubani. “The Case Against the
West”
• Skinner, “A World Enslaved”
 What is included in the “global economy”

• Those who organize & sustain it

– States & governments
– International organizations & associations
• Those who play a role in it
– Capitalists & investors
– Int’l financial institutions (IFIs)
– Production managers
– Consumers
– Labor
• Those marginal but connected to it
– The global poor, small farmers
– Grey & black marketeers
• Transborder flows of goods, information,
money, people & other things
 There have been/are several “goals” in
constructing this economic system

• National enrichment by Global North

– Facilitating trade & jobs
– Maintaining stability
– Pursuing comp advantage
– Shaping political economy
• Relative global peace by
– Fostering integration
– Fostering dependencies
– Happy consumer-citizens
• There are contradictions
in all of this Global South
As a whole, the world is richer (in money terms)
than ever before in history
This shows “Others”—note the wedge at the upper left
The Global South is growing very rapidly, mostly via Asia
and especially in China and India
According to some scholars, this recapitulates historical patterns

Which raises the

question: what
happened?
On a per capital basis, extreme differences in wealth are
evident across the world
This shows the relative fraction of people in each country living on
$10/day or less (around 2 billion live on $2/day or less)
The distribution of income within a country is measured by
the Gini coefficient: 1 = perfect equality; 0 = complete
inequality (one person receiving 100% of income)
 Numbers obscure a great deal: “There are three kinds of lies:
lies, damned lies and statistics” (Mark Twain quoting Disraeli)

• "The richest 1 percent of people in

the world receive as much as the
bottom 57 percent, or in other
words, less than 50 million richest
people receive as much as 2.7
billion poor." (Milanovic, 2002)

• The three richest people possess

more financial assets than the
poorest 10% of the world's
population, combined.

• "The top 10 percent of the US

population has an aggregate
income equal to income of the
poorest 43 percent of people in the
world, or differently put, total
income of the richest 25 million
Americans is equal to total income
of almost 2 billion people."
These unequal
distributions are
also a function of
factors such as
race, gender &
religion—why?
How might we account for these disparities?
 There are conflicting explanations

• The conventional wisdom is

that capitalism has made the
North wealthy
• Reinvestment, innovation &
industriousness have all made
capitalism “work”
• Just as an ambitious individual
can “get ahead” through hard
work
• So countries can do the same
• This sounds a lot like Weber’s
Protestant Ethic & the Spirit
of Capitalism
 A second account is World Systems Theory

• Through colonization &

exploitation, the Core (Europe &
the US) has systematically
pillaged the world
• Using its advantage in tech. &
capital, it has forced the
periphery into a subordinate
position
• This has resulting in relative
poverty for the periphery, and
an inability to progress to core
status
• Do the BRIC countries constitute
counter-evidence?
• Not altogether clear
 A third is based on the notion of “uneven
development” in capitalism
• Capital seeks to produce in
low-factor cost regions
• It injects money into the local
economy
• It retains control of any
technology it uses
• Goods are exported to zones
where high profits can be
realized
• If this is the same location in
which capital is based, profits
are retained there
• This generally benefits rich
countries and people
• And constrains the options &
possibilities for the poor