COURSE CODE:

COURSE NAME:
Contemporary World
COURSE MODULE: 3
AUTHOR

Dr. Leoncio P. Olobia

Olobia, L. Contemporary World. Leyte Normal University.

Module 3
Theories of Global Stratification and Market Structure
Overview

In this module, you will learn about global economic stratification in general. Some countries
are blessed with resources and a productive force propelling them as economic giants labeled
as core countries because of their dominant position in the global order while other countries
are underdeveloped owing to fewer resources and a less productive labor force that will divert
attention away from development and progress, labeled them as peripheral countries. Such
discrepancy is a form stratification placing the have-nots, the less-developed in a disadvantage
position with poverty immersion as a burgeoning problem while rich countries continue to
wield domination and power at the expense of developing countries.

Objectives

At the end of this module, you are expected to

 Discuss the theories of global stratification: modernization and dependency theories
 Select the appropriate modernization and dependency theories for the Philippine
economy
 Compare and contrast economies with different levels of economic development
 Analyze how the 5 stages of economic growth by Rostow is practical and unrealistic in
the global economic order.
 Reflect upon issues of stratification and dependency in the context of the Philippine
society.

I. Theories of Global Stratification

Throughout much of history, societies started in poverty but today, some nations have
advanced while others are still developing and some still trapped in poverty. In other words,
income inequalities, differences in opportunities, factor endowments and utilization have all
contributed to global stratification that has swept the world since the dawn of history. You
might ask why some countries developed tremendously while others have not? The following
discusses theoretical groundings of global stratification for your understanding.

A. Modernization Theory. According to this theory, global stratification is a function of

technological and cultural differences between nations (Aldama, 2018). With these, two
historical events are worth pondering. The first was called “Columbus Exchange” which
highlighted exchange of goods, technology, disease and others that occurred between the
Americas and Europe following the discovery of Americas by Christopher Columbus. This
process allowed agricultural producers to increase production and distribution of staple food
like potatoes to European consumers which aided in population growth at the same time
increased merchant power to the detriment of Native Americans inflicted with various diseases
like smallpox and measles.

The second historical event responsible for modernization was the Industrial Revolution that
focused on manufacturing and industrialization with the invention of new technologies such as
steam engine, mechanization that would speed up capital production replacing some labor
inputs. Industrialized countries dramatically improved standard of living of people while those
who did not cope up where left behind.

Finally, you will realize that modernization theory assumes that countries with technological
uptake will achieve affluence, but, based on historical accounts, some countries that possessed
technology did not also progress. The theory explains that such difference accounts for certain
tensions like culture as in the case of traditional societies that wanted to preserve century-old
ways of producing that deterred progress. Indeed, progressive economies in the cities will have
displaced agricultural workers in the field tilling the soil using old means because they are
attached to traditions.

B. Rostow’s 5 Stages of Economic Growth Theory

According to Walt Rostow, developed countries have tended to pass through 5 stages to reach
their current degree of economic development. The study of these theory will help you analyze
the stages of development the Philippines has been following since the beginning.

1. Traditional society. This is an agricultural economy of mainly subsistence farming, little of

which is traded. The size of capital stock is limited and of low quality resulting in very low labor
productivity and little surplus output left to sell in domestic and overseas markets.

2. Pre-conditions for take-off. Agriculture becomes more mechanized and more output is
traded. Savings and investment grow although they are still a small percentage of national
income (GDP). Some external funding is required – for example in the form of overseas aid or
perhaps remittance incomes from migrant workers living overseas.

3. Take-off. Manufacturing industry assumes greater importance, although the number of

industries remains small. Political and social institutions start to develop – external finance may
still be required. Savings and investment grow, perhaps to 15% of GDP. Agriculture assumes
lesser importance in relative terms although the majority of people may remain employed in
the farming sector. There is often a dual economy apparent with rising productivity and wealth
in manufacturing and other industries contrasted with stubbornly low productivity and real
incomes in rural agriculture.
4. Drive to maturity. Industry becomes more diverse. Growth should spread to different parts
of the country as the state of technology improves – the economy moves from being
dependent on factor inputs for growth towards making better use of innovation to bring about
increases in real per capita incomes.

5. Age of mass consumption. Output levels grow, enabling increased consumer expenditure.
There is a shift towards tertiary sector activity and the growth is sustained by the expansion of a
middle class of consumers.

C. Dependency Theory. Initially developed by Hans Singer and Raul Prebisch (1950), two
terms are worth mentioning: “core nations” and “peripheral nations”. Core nations are
generally developed, own majority of the world’s resources while peripheral nations are
perceived to be less developed that receive an unequal distribution of resources. In the
development process, peripheral nations export raw materials to core nations that process
them and in turn sell at much higher prices where less developed countries end up buying.
Aside from raw materials, peripheral nations supply cheap labor which is primarily the reason
why production uses labor from less developed countries. This process puts development of
less developed countries at a disadvantaged position, oftentimes perceived to be stagnant.
History has shown struggles of colonized countries at the mercy of leaders from core countries
that end up experiencing a vicious cycle of exploitation and oppression.

Andre Gunder Frank (1969) developed the North American Neo-Marxist approach where he
lamented that less developed countries can follow development if they follow the path taken
by developed countries. Developed countries started as undeveloped but in time managed to
stay out of the trap while less developed countries immersed in underdevelopment for so long
a time, depended on capitalistic encroachment by developed economies thereby stagnating
their own internal development.

The Modern World-System

In this section, you will learn that sociologist Immanuel Wallerstein’s model called capitalist
world economy explains that ‘core countries’ are developed societies in the West where
resources are abundant making them manufacturing centers while ‘peripheral countries’ are
those countries that possess raw materials as resources that supply ‘core countries’ while
others fall under ‘semi-periphery’ due to their ties with the global economic core (Aldama,
2018).

Aldama (2018) explains that in Wallerstein’s model, the periphery remains economically
dependent on the core in a number of ways, which tend to reinforce each other. First, poor
nations tend to have few resources to rich countries. However, corporations can buy these 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. All of these unequal
trade patterns lead to poor nations owing lots of money to richer nations and creating debt that
makes it harder to invest in their own development.

Overall, dependency is criticized for many reasons. For one, the idea alone of dependency puts
peripheral nations at a disadvantage position but is not always the case. The spillover effects of
capitalistic advancements have also been felt by countries that have not been colonized. This
disproves the assumption that the theory holds almost like a poor-rich relationship where the
former is always at the mercy of the latter. Also, some of the poorest countries in Africa,
Ethiopia, where never colonized and had very little contacts with rich nations (Aldama, 2018). In
such case, poverty must have been acquired internally or some form of perennial poverty
experienced by some sectors in the society.

Another criticism levied against dependency theory is its insistence on capitalism as the main
culprit of economic stratification. This is not always the case as culture and politics are also
among the contributing factors. As discussed previously, some cultures favor old traditions
instead of technological advancement, unyielding and unwilling to change for preservation’s
sake. In politics, imperial domination among elites that continue to wield power brings about
disparaging effects on the lives of ordinary people.

ASSESSMENT

Create a 10-min vlog in answering the following questions. Remember that you have 10 mins
to analyze, reflect, and explore.

1. Discuss the Rostow’s Model of Growth Theory including issues surrounding it. Give
examples and analyze in terms of the relevance of the theory to the Philippines.

2. Differentiate the three theories of Globalization Stratification. Analyze the differences by

pondering issues relevant to the society that connect the various theories.

3. Why is economic stratification an economic problem?

4. What solutions can you suggest in order to solve economic stratification.

Rubric for Assessment

5 3 2 Score
Relevance High relevance Medium Low relevance in
in lesson relevance in lesson
application lesson application
application
Content Exhibits Exhibits average Exhibits low
masterful lesson lesson content lesson content
content
Authenticity Application is Application has Application has
 extremely some relation to low relation to
related to experience experience
experience

Aldama, P. 2018. The Contemporary World. Rex Publishing Company. First Edition.