The Contemporary World

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UNIT 2: Understanding Global Inequalities

Introduction:

What is global inequality and why does it exist? This section of the course desires to
answer this question in light of the contemporary theories and studies that will be discussed in
class. Specifically, it will examine the source of global inequalities and their effects. The theories
that will be discussed in class will give the students a clear understanding of the structures of
global inequalities and their social, economic, and political consequences.

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Learning Objectives:

By the end of this unit students must be able to:

1. Understand and apply theories on examining world inequalities

2. Examine contemporary problems in light of the theories discussed in class
3. Demonstrate critical thinking in comprehending contemporary realities in light of global
economic relationships.

Sections of the Unit:

1. The History of Colonialism

2. The Consequence of Colonialism
3. Theories on Global Inequalities

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The History of Colonialism

Source(s): Lappe, Frances Moore & Collins, Joseph (o.n) Why Can’t People Feed Themselves? Article
33 & Logan, Amanda L. (2016) “Why Can’t People Feed Themselves”: Archaeology Alternative Archive of
Food Security in Banda, Ghana. American Anthropologist. Vol. 118 No. 3

According to Francis Moore Lappe and Joseph Collins, the world is only divided into two:
Minority of Nations and Majority of Nations. The Minority of Nations represents the countries that
prioritize agricultural and industrial revolution. Whereas, the majority of nations are the countries
that remain primitive and underdeveloped. This expresses the conditions of global inequality in
the contemporary world. Francis Moore Lappe and Joseph Collin desire to understand why some
nations are not able to feed themselves. They traced its cause to the history of colonialism.
Colonialism according to Moore and Collins destroyed the already and initially built cultural
patterns of production and change. For them, hunger and underdevelopment must always be
thought of as a process. The reason why so many countries remain to be in poverty and
underdeveloped is its history of colonialism. Lappe and Collins further express the reasons why
colonialism destroyed the initial built cultural pattern of production.

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The Contemporary World

1. Colonial Mind

This is the mentality of the colonizers who colonize other people to be their subjects.
The colonizers see agriculture in the subjugated lands as primitive and backward.
Because of this, their process of colonization is not only justified but they see it as a
necessary process. John Stuart Mill, an English economist, philosopher, and
colonizer-apologist argued that, “ Colonies should not be thought of as civilizations or
countries, but as agricultural establishments whose sole purpose is to supply the larger
community to which it belongs.”

2. Forced Peasant Production

As Walter Rodney recounts in his book, "How Europe Underdeveloped Africa," cash
crops were often grown literally under the threat of guns and whips. The communities
that were colonized by neighboring countries were forced to plant cash crops instead
of food crops. The initial practice of planting food crops was for the sole purpose of
feeding the community; whereas, due to the desire of the colonizing nation to gain
profit through the peasant’s production of crops, they were forced to plant cash crops.
This are the crops that are planted for its market value. They are planted not on the
basis of its ability to feed the populace but rather its price in the global market. Because
of this change the people were no longer dependent to their own practice of
production. More so, the colonial government ensured to continue this peasant
production of cash crops in two ways:

i. Taxation- This was the most preferred colonial technique to

force Africans to grow cash crops. The colonial administration
simply put taxes on cattle land, houses and even to the people
themselves.

ii. Marketing Board- this emerged in the 1930s in Africa. It was

defined as an organization set up by the government to regulate the
buying and selling of a certain commodity such as coffee, cotton
and cocoa. Within a special area. These marketing boards of Africa
were only the institutionalized rendition of what is the essence of
colonialism, which is the extraction of wealth.

3. Plantation- The second approach was direct takeover of the land either by the
colonizing government or by private foreign interests. Some farmers were forced
to work in plantations fields through either enslavement or economic coercion.

4. Suppressing Peasant Farmers - The colonial government formulated a policy of

keeping the price of imported food low through removal of tariffs and subsidies.
Peasants were told that they do not need to grow their own food, for they can
always buy it cheaply through imported goods. However, the cheap food imports

In conclusion, Francis Moore Lappe and Collins answered, why people can’t feed
themselves? It is as they expressed the result of a history of colonialism that has destroyed
the initial pattern of production. Colonialism Forced peasants to replace food crops with cash
crops that were expropriated at very low rates. More so the colonial government, took over
the best agricultural land for export crop plantations and then forced the most able-bodied
workers to leave the village fields to work as slaves or for very low wages on plantations.

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The Contemporary World

Policies that were also implemented encouraged a dependence on imported food; and
blocked native peasant cash crop. Cash produced by settlers or foreign firm.

The Consequence of Colonialism

Colonialism as expressed to be a practice of domination, which involves the subjugation

of one people to another remains in contemporary forms as many scholars would argue. It is
usually called as Neocolonialism. Neocolonialism is an indirect form of control through
economic or cultural dependence. This is expressed in the continued control of former
colonies through ruling native elites compliant with neocolonial powers, populations that are
exploited for their labor and resources in order to feed an insatiable appetite. Neocolonialism
is defined as the continuing active control exercised by the past colonizer government to
control the affairs of the newly independent state. It perpetuates a system where great powers
(usually the past colonizer countries) maintain their exploitative relationship with past colonies.
This covert and indirect form of control creates a system of dependency. The metropolitan
centers in seeking to be even more developed by “underdeveloping” the peripheries through
trade exploitation. The peripheral countries (usually bearing the mark of colonial history) is
extremely vulnerable to fluctuations in price and demand. The products they market have a
higher ratio of competition. It is because many other neighboring countries produce the same
products. According to Harold Nyikal in his article- “Neocolonialism in Africa: The Economic
Crisis in Africa and the Propagation of The Status Quo By the World Bank /IMF and WTO,”
Neocolonialism is colonialism in its modern dress. Western countries masked under the
pretext of economic support for Africa, directly enforced or institutionalized in the World Bank,
the International Monetary Fund ( IMF) and the World Trade Organization ( WTO) . The
policies that are implemented in Africa because of the loan conditionalities with this institutions
chained it to western economies to continue to be dependent upon them. Their discourse on
development prevents self-help programs and perpetuate the continuing relationship of
dependence.

Neoliberal Globalization

Neoliberal globalization is the main driving system that continue systems of exploitation.
It is generally marked by three essential characteristics:

1. Economic Liberalization- it is characterized by the flooding of the local market with

imported goods that destroy the local industries and livelihood of the populace.
Because of this, poverty and unemployment increase because locally produced goods
suffer from the unfair competition brought about by the cheaper imports from the global
market. The consequence of economic liberalization may be expressed in the state of
Food Insecurity in the Philippines. Under the WTO Agreement on Agriculture (AOA)
the Philippines is required to allow the progressive importation of rice ( 1% of domestic
consumption in 1995, 2% in 2000 and 4% by 2004). More so, the unregulated market
cause the transnational corporations and richer foreign nations to control the local
market, forcing local production and local entrepreneurs out of the market.

2. Deregulation – the price of the products sold in the local markets of the peripheral
states are no longer regulated by the government. Many commodities and products
consumed by local consumers are privatized.

3. Privatization- This is the core of IMF/WB’s structural adjustment policies. Trade

liberalization and market deregulation also lead to the privatization of public utility. This

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The Contemporary World

eliminates public subsidies on social services and public sector corporations.

Privatization of state-owned water utilities was one of the conditions for loan in the
1995-1997 structural adjustment of IMF. Metropolitan Waterworks and Sewerage
System was privatized.

4. Labor Export- More so, the exportation of labor force becomes the government’s
strategy to pay debt ad regulate unemployment. In 2000, Philippines become one of
the most top labor exporter. This had also led to the feminization of migrant labor,
since majority of Filipino women comprise majority of the export labor

5. International Division of Labor – Under the old international division of labor,

underdeveloped areas were incorporated into the world economy principally as
suppliers of mineral and agricultural commodities. As developing economies are
merged into the world economy, more production takes place in these economies.

The Unholy Trinity

Sources(s): Cavanagh, John & Manderm Jerry (2003) “World Bank, IMF turned poor Third World nations
into loan addicts” A Critique of Corporate Globalization (Part III). & Peet, Richard (2003) Unholy Trinity,
The IMF , World Bank and WTO London & New York: Zed Books

The World Trade Organization (WTO), World Bank (WB) and IMF (International Monetary
Fund) are usually considered as the unholy trinity. WTO and WB were institutionalized in Bretton
Woods NH in July 1944. It was set up to regulate and govern the contemporary global economy.
IMF was established to promote international monetary cooperation and provide policy advice
and capacity development support to help countries build and maintain strong economies. IMF
provide loans (short and medium term) funded by the pool of quota contributions from its members
to countries that need it. Whereas, the World Bank for a time was called IBRD(International Bank
for Reconstruction and Development) was established to help stimulate economic activity within
poor countries. It was established in the aftermath of World War II to help finance the
reconstruction of European nations. In the modern age, The World Bank promotes long-term
economic development and poverty reduction by providing technical and financial support to help
in countries reform and development projects – such as building schools, health centers, providing
water and electricity, fighting disease, etc. To an unsuspecting eye, these intentions are good
intentions to help developing countries get up on their own feet and compete with other nations
in the global market. The problem however, lies on the loan conditionalities and structural-
adjustment programs imposed on low- and intermediate-income countries by these institutions.
According to Cavanagh and Mander (2003) structural adjustment requires governments to do the
following:

a. Cut government spending on education, healthcare, the environment, and price

subsidies for basic necessities such as food, grains and cooking oil
b. Devalue the national currency and increase exports by accelerating the plunder of
natural resources, reducing real wages and subsidizing export oriented foreign
investment
c. Liberalize (open) financial markets to attract speculative short-term portfolio
investment that create enormous financial instability and foreign liabilities while
serving little, if any, useful purpose

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The Contemporary World

d. Eliminate tariffs and other controls on imports, thereby increasing the import of
consumer goods purchased with borrowed foreign exchange, undermining local
industry and agricultural producers unable to compete with cheap import,
Increasing the strain on foreign exchange accounts, and deepening external
indebtedness.

With these loan conditionalities and structural adjustment programs Countries suffer from
trade liberalization and the increasing privatization of public utility. By Liberalizing the financial
market and eliminating the tariff the country’s local producers suffer because of the global
competition.

Globalization, Liberalization and Protectionism: The Global Framework Affecting Rural

Producers in Developing Countries
Source(s): Khor, Martin (2007) Globalization, Liberalization, and Protectionism: The Global Framework
Affecting Rural Producers in Developing Countries. Malaysia: Third World Network

Globalization according to Khor (2007) is often taken to mean a process that is

synonymous with liberalization, or the opening up of the local and national markets to the global
market. However, the economic globalization process is much more nuanced than this simple or
automatic linkage between globalization and liberalization; for example, the internationalization
of intellectual property rights (IPR) systems through the WTO has led to increased
monopolization, especially by transnational corporations, that are better able to charge higher
prices for their products then if they there were greater competition. Also, the high subsidization
of and high tariffs on agricultural products constitute the continuation of high protection of the
agricultural sector in the rich countries. in many developing countries, the process of liberalization
and trade, investment, and finance has been taking place at significant rate and scope. This
process has promoted by the loan conditionalities of the international finance institutions, the rules
of the world trade organization, and unilateral policy measures.

Thus, the policies associated with the globalization process are a strange combination of
liberalization and protectionism (the theory or practice of shielding a country's domestic industries
from foreign competition by taxing imports). The strangeness is perhaps accentuated by the fact
that in some important instances developing countries are asked to undertake more intensive
liberalization, whilst the developed countries are proposing to retain or even increased protection
is policies. it is strange because normally it is accepted that the poorer and weaker countries
should be given more time and flexibility to liberalize as they have to prepare and be ready to face
competition from the bigger and stronger and surprises of the developing world; and that the
already developed countries should liberalize more and faster as they have already reached a
high level of development and can compete. perhaps the most important aspect of globalization
is the globalization of policymaking. policies and decisions on a range of issues that for once
under the sole or main purview of national governments are now made through international
agencies or under their influence. many developing countries are policymakers in the sense that
they had little "say" in the making of the rules or policies of some of the powerful international
agencies, particularly the International Monetary Fund, the World Bank and the World Trade
Organization, and they have to implement the policies at national level which have been laid out
through these agencies. Ocean, as its decisions are made on a one country one vote system and
as the developing countries are better organized to represent their interests there. However, in
recent years the influence of the united nation over economic and social matters has declined
significantly and the mandate and influence of the IFI ( International Finance Institution) and the
WTO have expanded this shift of power to institutions that are dominated by the developed

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The Contemporary World

countries has meant the reduction of the influence of the developing countries in decision-making
over economic and social issues at the international level

There have been increasing concerns that the policy is adopted at or by some the major
international agencies have not been appropriate or effective in meeting the development needs
of developing countries. in the area of trade and trade-related rules, the concerns of particularly
centered on the disappointment of developing countries that have not benefited much in terms of
trade or income from the implementation of world trade organizations rules and some of them
have suffered cause and losses. they are also concerned that the implementation of the trade-
related aspects of intellectual property rights or TRIPS Agreement in the world trade organization
may arrow the rights of farmers and holders of traditional knowledge. there are also concerns that
alone conditionalities of the IFI have caused many developing countries to liberalize their import
successively and to rapidly, especially as the high subsidies and protection continued to dominate
in the developing countries. for many developing countries, the potential benefits of meeting
export opportunities have not been realized, whilst the risk of import liberalization have become
very real and a half already adversely affected rural livelihood and national incomes.

The Global Agriculture Policy Framework

Source(s): Khor, Martin (2007) Globalization, Liberalization, and Protectionism: The Global Framework
Affecting Rural Producers in Developing Countries. Malaysia: Third World Network

Many developing countries that at one stage or another suffered a debt default situation
came under the purview of the world bank and IMF, which were agreeable to arranging death
rescheduling and new credit on condition the countries agreed to implement conditions, now
commonly known as structural adjustment policies. The policies normally include the following
approaches and measures as they pertain to the rural sectors: the withdrawal of the state from
economic activities, the closure or downgrading of state marketing boards, privatization, reduction
or removal of subsidies, elimination of import control such as quantitative restrictions, reduction
of import tariffs, free orientation towards exports, and investment liberalization and deregulation,
or the opening up of assets to for rent ownership. The structural adjustment policies have had a
major impact on agricultural policies in developing countries. In particular, the removal of
subsidies and protection from imports has made the rural producers more vulnerable to the direct
effects and vagaries of the global markets, as the interventionist measures and capacity of the
state were withdrawn. In many countries, rural producers are facing intense competition from
imports that are cheaper than their own produce. the effects of loan conditionalities began to be
felt in the 1980s and 1990s for most of the affected countries. The WTO made a later entry, as it
is published in 1995. at first, to developing, country governments were hopeful that they would
benefit from the new rules in agriculture, as the incorporation of agriculture into the system of the
WTO would presumably lead to the dismantling of protection in the developed countries.
agriculture is one area where the developing countries are widely believed to have a comparative
advantage, and thus they expected to benefit from expanded exports to the rich markets.

However, they were sorely disappointed, as the expected benefits have not accrued, due
to the continued protectionism in the North. This maintenance of protectionist measures was
allowed within the framework of the Agreement on Agriculture (AoA) On the other hand, the
developing countries had, under the AoA, also committed to play strict limits on their domestic
subsidies, to give quantitative restrictions placed on imports, and to reduce their boundaries.
these commitments made it even more difficult for them to promote and protect the interest of
their rural producers.

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The Contemporary World

The global economic framework on agriculture shaped to a large extent by the loan
conditionalities of the IFS and the rules of the WTO has resulted in a situation where the
developed countries are able to continue with an even expanding domestic subsidies and to
continue with a significant level of export subsidies, as well as high tariffs on their sensitive
agricultural products, while the developing countries are constrained ( by the WTO rules, by loan
conditionalities and by budget constraints) from increasing their farm subsidies, and have strong
pressure( through loan conditionalities) to maintain low applied tariff rates and even reduce these,
as well as to significantly reduce their bound tariffs( through existing WTO rules and new proposed
rules).

The imbalances in the global framework have handicapped to developing countries, which
already have week starting points due to their lack of financial and technical resources and their
low level of development. The unilateral policies taken under structural adjustment have been
reinforced or complemented by multilateral commitments that the countries are obliged to
implement under the world trade organization rules. This combination of policies initiated under
loan conditionality and then reinforce under multilateral rules as bound the developing countries
in a web of commitment and policy constraints and measures and they find it difficult within this
context to maneuver or to be able to choose between policy options that are suitable for their
agricultural development. More so, many developing countries that had faced a debt default
situation has come under the influence of loan conditionalities of the IFI ( IMF and WB). The
'structural adjustment' programs and policies include measures that affect rural producers directly.
These include the liberalization of imports, the dismantling of state marketing boards and state
procurement systems, and the reduction or elimination of subsidies. These policies resulted in
the rural communities of many of these countries facing greater vulnerability.

Effect of Inequality to the Rural Population

Source(s): Ibon Facts and Figures (2014) Worsening Peasant Situation. Vol. 37, No.18

Worsening Exploitation

The exploitative landlord-tenant relationship with crop sharing systems such as 50-50, 1/3-
2/3, ¼-3/4 of the gross harvest in favor of the landlord remain widespread. Farmers get only 21%
of the value of their fross harvest in Southern Tagalog and Only 19% in Eastern Visayas.
Farmworkers also continue to receive low wages ranging from Php35 to Php200 per day. In
Hacienda Luisita, sacadas (farmworker) earn only an average of Php 35 to Php 80 per day. IN
Eastern Visayas, farmworkers earn an average of 18,000 a year or only Php 49 per day. In
Cagayan Valley, farm workers are paid only Php40-Php70 per day in cassava and sugarcane
plantations. All these are way below the so-called minimum wages set by the Regional Wage
Boards. In Eastern Visayas, rice farmers’ incomes average Php 23.50 per day. In Southern
Tagalog copra famers are left with nothing and driven deeper to debt. For fishermen working in
fish cages and fish farms, they earn only Php100 to Php150 for 20 hours of work.

Labor flexibilization is enforced in the plantations through the systems of gang labor and
contractualization. Under these systems, regular farmworkers have been displaced and the
hacienderos deal only with contractors or labor gang foreman. Prices of farm inputs, from seeds
to fertilizers and agri-chemicals, increase every year. Fertilizer prices are now at Php 2,000 per
bag from Php436 per bag in 2001. Other agrichemicals such as pesticides cost between PHp800
to Php1,600 per bag. On the other hand, rent for farm tools is also exorbitant. For example, the
rent for a tractor is Php6,000 per hectare; the rent for thresher is 1/10 of the threshed palay.

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The Contemporary World

Peasant Struggles

Despite the continuing hardship and repression, Filipino farmers are undaunted. For
centuries, they have suffered the same forms of exploitative relation and repression. The
struggles against Spanish and American colonization were largely pushed by agrarian demands
and peasant revolts where hundreds of thousands of peasants fought and perished. Even after
the country gained nominal independence from the US, peasant struggles have continued
precisely because of the same feudal and semi-feudal condition has persisted.

Land Occupation

Farmers and farmworkers also wage successful land occupation campaigns across the
country. The network of advocates from the church and non-government organizations (NGOs)
including lawyers and international organizations provide support to such campaigns. In the
Visayas area members of the San Roque Farmers Association (SRFA) in Bgy. Bonbon,
Aloguinsan, Cebu stood up for their rights over the 168-hectare corn lands claimed by the
Gantuangco family and other vested interests. They made their claim stronger the disputed lands
by cultivating the lands for organic farming and strengthening their organization. In Bohol, the
Trinidad Talibon Integrated Farmers Association (TTIFA) successfully occupied and cultivated
1,900 hectares of idle lands which were once a cattle farm issued to Marcos crony Danding
Cojuangco and partners. The farmers have occupied and cultivated the land since the 1980s and
struggle to have their organization and members reorganized by the DAR and be issued
certificates of land ownership awards (CLOAs). They asserted their rights for support services
such as paved roads and water supply including farm implements from the DA and the LGU. To
date, even as they are threatened with land-use conversion to oil palm plantation promoted by
the DA, the TTIFA members remain steadfast in their struggle to assert their right to decide what
to plant and how to appropriate their produce. They have their rice mill, trade their rice, and set
their price independent from big rice traders in Bohol

Theories on Global Inequality

World System Theory

Source(s): Wallerstein, Immanuel (2006) “ The Modern World System as a Capitalist World- Economy.
The World System Theory Pp 20-29 & Internet Modern History Sourcebook (o.n) Summary of Wallerstein
on World System Theory Modern History Sourcebook

Immanuel Wallerstein in his book, The Modern World System: Capitalist Agriculture and the
Origins of the European World Economy in the Sixteenth Century, developed a theoretical
framework to understand the historical changes involved in the rise of the modern world. The
modern world system of capitalism emerged after the crisis of the feudal system. Wallerstein in
developing this theory explained how Western Europe rose to supremacy between 1450 and
1670. As Wallerstein argued, before the 16th century Western Europe was dominated by the
feudal system. A system of relation between those who “have” and “have not”— the landlords
who own the land and the peasants who do not own the land but work within it for wages.
Wallerstein argued that Europe moved towards a capitalist world economy to ensure the
continuing economic growth of the nation. This however, meant the expansion of geographical
size in controlling the process of production across different states. The new world economy was
not forged through imperial system of government which used political force (usually showing
brute colonial control) to direct the flow of economic goods from the periphery to the center. The
modern world economy did not rely on political force or colonial systems of exploitation but rather

25
The Contemporary World

through economic coercion. Immanuel Wallerstein argues that nations co-exist in a world
economy- a large geographic zone where there is a division of labor, exchange of basic goods
and constant flow of capital and labor. In this kind of world structure capitalism strives. Capitalism
as Wallerstein simply defines is an economic system based on the private ownership of the means
of production and their operation for profit. Characteristics central to capitalism include private
property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive
markets. The World-Economy and a Capitalist System coexist because of the international
division of labor. A capitalist system cannot exist within any framework except that of a world-
economy.

Wallerstein as he defined the world-system as the necessary condition for capitalism to thrive-
the linkage of sate’s economically through the international division of labor. Wallerstein (1974)
said that a world-system is a "multicultural territorial division of labor in which the production and
exchange of basic goods and raw materials is necessary for the everyday life of its inhabitants."
This international division of labor can be illustrated through these categories:

Core Countries

Countries that are classified under the

category of core- exploit other countries for labor
and raw materials. They benefit most from the
capitalist world economy. They are referred to
as the “haves”. These countries have industries,
government, social elites, financial power and
systems of education. For the period under
discussion, Wallerstein argued that much of
northwestern Europe (England, France and
Holland) developed as the first core region.
Politically, these states developed strong central governments, extensive bureaucracies and
large mercenary armies. This permitted the bourgeoisie or the local capitalist to extend his
international commerce to extract capital surpluses from other countries through trade. They

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The Contemporary World

are at the forefront of technological progress and have significant influence on less developed
non-core nations

Semi-Periphery

Between the two extremes the semi-peripheries are the countries that attempt to improve
their relative position in the world economic system. They often serve as buffers between the
core regions and the peripheries. Economically, these countries fail to predominate in
international trade and do not benefit as much from a capitalist world economy as the core
countries. They are countries that are exploited by the core but are also able to exploit other
peripheral countries.

Periphery

These countries are considered to be those who “have not” By contrast, the periphery
countries possess mining, forestry, agriculture, less power, poor systems of education and
low wages that are incapable of sustaining affluent lifestyles. These areas lacked strong
central governments or were usually controlled by other states. They export raw materials to
the core, and relied on coercive labor practices. These countries usually have a colonial
history that have damaged the structures of their local economy. In our context for example,
America is the core state and the Philippines is the peripheral state. We export raw materials
(i.e. electronic parts) to America, which they, in turn, process into a product because they are
the ones who have capital (i.e. cellphones). Then sell it back to us. The core countries
dominate and exploit the peripheral countries for labor and raw materials. The peripheral
countries are dependent on core countries for capital. Moreover, it is usually characterized by
high percentages of uneducated people who can mainly provide cheap unskilled labor to the
core nations. There is also a high level of social inequality, together with a relatively weak
government which is unable to control country’s economic activity and the extensive influence
of the core countries.

Capitalism as a World System

Source(s): Wallerstein, Immanuel (2006) “ The Modern World System as a Capitalist World- Economy.
The World System Theory Pp 20-29
& Internet Modern History Sourcebook (o.n) Summary of Wallerstein on World System Theory Modern
History Sourcebook & Vela, Carlos Martinez A. (2001) World System Theory ESD. 83

Within Immanuel Wallerstein’s work the theme of inequality marks the gap between the Third
World and the West. Only a transformation of the world-system itself, dealing with the structures
of the international division of labor can inequality truly be resolved. According to Wallerstein
Capitalism de-territorialized meaningful state boundaries. As he argued, “the techniques of
modern capitalism and the technology of modern science, the two being somewhat linked as we
know, enabled this world-economy to thrive, produce and expand without the emergence of a
unified political structure.” Wallerstein also mentioned in his book- The Modern World System:
Capitalist Agriculture and the Origins of the European World Economy in the Sixteenth Century,
how capitalism continue to thrive in the modern world economy. He used the Kondratieff Cycle
developed by Nikolai Kondratiev as a reference. In the 1930s the Soviet Union asked Nikolai
Kondratieff a mathematician, to create a model that would prove that capitalism would fall and
communism would endure. However, Kondratiev’s work proved to be contrary to the ideals of the
Soviet Union. In his study of economic history, he reached the conclusion that economics was

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The Contemporary World

better explained by technology than class struggle. Kondratiev observed that technology did not
evolve linearly but rather it leaps every 50 to 60 years.

Cycle Period Description

1st Cycle 1770-1820 Initial mechanization

2nd Cycle 1820-1870 Steam power, railroads and telegraphs

3rd Cycle 1870-1930 Electricity, internal combustion and heavy engineering

4th Cycle 1930-1980 Mass production, Fordism and nuclear energy

5th Cycle 1980-2030 Telecommunications and informatics

6th Cycle 2030-2080 Robotics, alternative energies, and Human Enhancement

Technologies

Karl Marx predicted that capitalism was crisis prone and that it would soon fall apart. But
Kondratieff found that capitalism reinvented itself with each crisis. As the saying goes, “ desperate
times call for desperate measures” Crisis give rise to new solutions( investment in technology
and new business models). These periods of crisis and struggle, lasting generally between 12-
15 years, eventually creates a new form of capitalism.

Crisis Sub-phases of Kondratieff Cycles

Cycle Period Description

Pre-cycles 1770-1820 Seven years’ War (1756-63)

1st Cycle 1820-1870 Napoleonic Wars

2nd Cycle 1870-1930 Crimean War, Triple Alliance War, American Civil War, Unification
of both Germany and Italy

3rd Cycle 1930-1980 World War I and inter-war period

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The Contemporary World

4th Cycle 1980-2030 Vietnam War, Space Race, Cold War, Arab-Israeli Wars
(1967,1973)

5th Cycle 2030-2080 ??

The 1939-1945 period was one of intensive technological development and economic growth, in
the face of massive destruction. The post-war period gave us strong and fast expansion with a
new public “business model” of the Welfare State. As the K wave propose it is in times of
desperation that people are investing in new technologies and thinking out of the box, trying new
things and accepting the previously unacceptable. This is when a set of new technologies that
have bene too risky to develop becomes more feasible due to the increased tolerance of risk.

How Business Models Adapt

When technology changes, capitalism adapts. Business models evolve for companies to
continue to gain profit. As technology and the economy co-evolved new business models are
created. Models like retail business, public companies, franchises, manufacturing, joint ventures,
Private-Public Partnership, etc. have been developed to cope with the increasing complexity of
the modern world. To simplify, Kondratiev argued, every technological revolution gives capitalism
the opportunity to reinvent itself. For example, we have recently seen the invention of new extra-
national currencies such as bitcoin and commercial transactions are focused on reducing
bureaucratic barriers between the provider of service and monetization, like Pay Pal.
Understanding the consumersis important in developing new dynamic business models. The
users may change over time which is why businesses must remain flexible. We could use the
manufacture of drones as an example. It was initially created for military used; however, after
some tie, it is also used as a tor or in agriculture to dust crops with insecticide.

The Kondratieff Cycle or K Wave as some would call it is a long duration economic cycle
of capital goods expansion that plays at over a period of about 50 years and underlies the usual
boom-bust cycles characteristics of a capitalist economy. It may be divided into four phases.

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Spring- A time of new innovation sparks production and growth. People start investing into new
technologies and think outside the box to try and find new things previously unacceptable. This is
when a set of new technologies that had been too risky to develop becomes more feasible.

Summer- increase in the general affluence level leads to changing attitudes toward work that
result in a deceleration of economic growth.

Autumn- Stagnating economic conditions give rise to a deflationary growth spiral that gives rise
to isolationist policies, further curtailing growth prospects.

Winter- Economy in the throes of a debilitating depression that tear the social fabrics of society.
This is when the dwindling number of the “haves” and the expanding number of the “have-nots”
increases dramatically.

The first resulted from the invention of the steam engine and ran from 1780 to 1830.The
second cycle arose because of the steel industry and the spread of railroads, and ran from 1830
to 1880.The third cycle resulted from electrification and innovation in the chemical industry, and
ran from 1880 to 1930.The fourth cycle was fueled by autos and petrochemicals, and lasted from
1930 to 1970.The fifth cycle was based on information technology and began in 1970 and ran
through the present, though some economists believe we are at the start of a sixth wave that will
be driven by biotechnology and healthcare.

Stages of Growth

The development of the modern world economy according to Wallerstein lasted centuries.
During this time, different regions changed their positions within the system. Wallerstein
divided the emergence of the capitalist world economy into four stages.

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Stage 1 & 2

Wallerstein believed that this emerged between 1450-1670m, when the Hapsburg Empire
failed to convert the emerging world economy to a world empire. Since it cannot be politically
united under the same system of empire what emerged was the modern world system
sustained by the international division of labor among states- existing interdependently.
Bureaucratization was the process that aided the limited but growing power of the king.
Because of the state’s power to collect taxes the king increased the state power to borrow
money and thereby further expand the state bureaucracy. Homogenization also helped the
process of solidifying the modern world economy. To underline the state involvement in the
new capitalist system they encouraged the rise of indigenous capitalist groups. Minorities
were expelled from the core states. Spain and France were expelled with the rise of absolute
monarchy. Next, the Expansion of the militia (military force that is raised from the civil
population), to support the centralized monarchy through military resources. More so, it would
prevent the state from invasion. Next, Diversification was also important to improve the
economic activities of the state to maximize its profits and strengthen the position of the local
bourgeoisie. According to Wallerstein, by 1640 northwestern European states secured their
position as core states in the emerging economy. Spain and Northern Italy was displaced;
declining to the category of semi-periphery.

Stage 3 & 4

Industrial rather than agricultural capitalism represented this era. With the shifting
emphasis on industrial production. European state participated in exploration for the
exploitation of new markets across the globe. The competitive world system emerged such
as the Indian Ocean system. Asia and Africa entered the system in the 19th Century as
peripheral zones. During this phase, the core region shifted to a combination of agricultural
and industrial interest to purely industrial concern.

Through this theory, Wallerstein attempts to explain why modernization had such wide-
ranging and different effects on the world. He showed how political and economic conditions
after the breakdown of feudalism transformed northwestern Europe. With his theory in mind,
we could see how the geographic expansion of the capitalist world economy altered the
political system and labor condition wherever it was able to penetrate. In hindsight the world
system analysis gives us a narrative of world historical development from the 16th century to
the present, with boundaries, structures, member groups, rules of legitimation and coherence.

Dependency Theory

The dependency theory explains the economic

development of states. The theory was developed in the 1950s.
to explain how both the development and the
underdevelopment of countries are related in the international
system. It in itself is a mixture of various theories that also
include Wallerstein’s world system theory. This theory simply
answers why there are countries that are poor and some rich.
Economically, it argues that neoliberal policies continue the
system of dependence that chain developing countries’
economic status to the developed countries. This is why
developing countries remain poor. They fit in the mold of the
economic hierarchy of the world economy. The core countries,

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1st world countries perpetuate their dominance through resource bondage. Where instead of the
practice of self-help- where developing countries produce goods and resources for themselves,
they are economically coerced through the neoliberal policies and loan conditionalities
established by the World Bank, World Trade Organization and the International Monetary Fund.
These countries continue to be dependent to the core countries since synonymously the core
countries need the infinite supply of raw material sand cheap labor that these peripheral countries
provide to maintain their economic status.

According to Romanuik (2017) there are three main characteristics of the dependency
theory worth taking note of. First, the international system seen as the sum of two set of states-
the dominant and the dependent. Secondly, the dependency theory holds that external forces are
critical in terms of economic activity of dependent states. Lastly, the relationship of the two is
based on historical patterns and dynamics. The years that followed the end of the Second World
War in 1945 and the swift and extensive process of decolonization could be traced as the roots
of state’s dependency. After the Second World War the United States and the Soviet Union acted
as the new leaders of the new world (a world where there are more independent states liberated
from their past masters). Both acted to lead the world into a new although with opposing ideals in
mind. Neocolonialism was the dominating and expanding ideology of the United States and
Socialism for the Soviet Union. Many countries did not follow the international framework of the
United States, rather they pursued the influence of the Soviet Union’s socialist model. The
economic system established by the neocolonial ideology of the United States explain the
continuing structure of relationship between past colonies to their past colonizers. Peripheral
countries become dominated by the foreign interest that originates from core countries. Although
underdevelopment can be overcome, for it to be accomplished, countries need to be disconnected
from the dominance of the core countries and the system or structure that their interest and
policies produce.

LESSON 2: STRUCTURES OF GLOBALIZATION

UNIT 1: The Globalization of World Economies

Introduction:

We learn that politics, culture, and economy are interconnected. This chapter will focus on
the economic area of globalization and how it came to be. This section will not only focus on the
the global history but apply the theories on the present situation, specifically with the global
pandemic we are experiencing. The discussion will provide how important the economy is. At the
same time the discussion will also focus on the matter of macro (global market) perspective and
micro perspective (community /individuals). The discussion will give the students a clear
understanding of the structure of the global economy and its consequences.

Learning Objectives:

By the end of this unit students must be able to:

1. Define economic globalization

2. Identify the actors that facilitate economic globalization
3. narrate the short history of global market integration in the twentieth century
4. Demonstrate critical thinking in comprehending contemporary realities in light of global
economic relationships.
5. And articulate stance on global economic integration

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