Development Economics

By: Mr. Yonis Musse

Bashir “ugaaska”
 Chapter Five
Globalization and Sustainable Development

6.1. Meaning of Globalization

 Globalization can be defined as the transfer

technology, trade, finance, communication, soc
systems, culture and patterns of living across t
national boarder.

 Globalization is a process of economic, political and cultural integration and unificatio

 The implications of the globalization concept can be
expressed as:

• International interdependence or international integration is

growing;

• Trade, global financial flows, technology, international

convergence of real wages are the main aspects of globalization;

• Globalization involves free trade agreements.

 6.2. Dimensions of Globalization
 The dimensions of globalization include:
i. Economic globalization- economic interrelations aroun
the globe.
ii. Political globalization- intensification and expansion o
political interrelations around the globe
iii. Cultural globalization - the intensification an
expansion of cultural flows across the globe
iv. Ecological globalization - global environmental issues
v. Ideological globalization - way of looking at the worl
in specific terms.
vi. Technological globalization: Convergence of th
world with expansion of communication &
transportation technologies.
6.3.Genesis of Globalization/Waves of globalization

 The first wave:

 Spanning the period 1870-1914
 Triggered a massive increase in the flows of goods, capital and labor
 Exports relative to world income nearly doubled
 Foreign capital more than trebled relative to income in the colonies and
developing countries
 Migration boomed
 Genesis of globalization cont’d
 The second wave:
 The period after the Second World War - roughly spanning 1950 to 1970
 It is also known as the Golden Age of economic development
 The term Third World was being given for developing countries
 Promoted economic integration of Europe, North America, and Japan
 Most developing countries remained trapped in primary commod
exporting and were largely isolated from international capital flows.
 Genesis of globalization, second wave
cont’d
 The countries belonging to the Organization of Econom
Cooperation and Development (OECD) economica
converged.
 The gap between rich and poor countries continued to increa

 Development assistance was introduced - in the form o

continuation of former colonial relationships.
 Aid was used by the superpowers as an instrument to g
Third World support in the fight against communism
capitalism.
 Genesis of globalization cont’d
 The third wave:
 This started around 1980 and is continuing till today

 It was encouraged by a lowering of tariffs, technological advance in transport an

communication technologies.

 It was also stimulated by the choice of large developing countries, notably Chin
and India, to improve their investment climates and to open up to foreign trade an
invest­ment.

 For the first time, poor countries were able to use the potential of their abunda
labor to break into global markets for manufactured goods and for services.

 The more globalized developing countries have increased their per capita grow
rate.

 It is not being accompanied by massive migration, as in the first wave

globalization
 6.4. Debates on Globalization

 Three scenarios of globalization for Afri

countries:
1. The pessimistic scenario

2. The moderately optimistic scenario

3. The radically optimistic scenario

 Debates on globalization
1. The pessimistic scenario :
 African states are unable to progress from “guarding the gate”
o This situation will continue for generations to be weakened by internal
conflicts and inter-state wars.
 External pressure on Africa’s resources will increase,
primarily from China, India and Japan, in competition with
Western firms.
o As a result, huge assets are taken from the continent without any positive spillover.

 The new superpower of China will have a negative political

influence.
 Globalization continues while Africa and other developing
countries remain marginalized.
 Debates on globalization
2. The moderately optimistic scenario:
 New opportunities for African to overcome old-ag
communication problems.
 Exports of raw materials at higher prices provide growin
and relatively stable government revenues
 Open access to Western markets for export
 Security for investors is increased through more effecti
rule of law, financial reforms and anti-corruption measure
 The regional organizations will be strengthened .
 China could have a positive influence; Chinese demand an
investments are beneficial and create new opportunities f
African and other developing states.
 International development assistance is maintained at
stable level.
 Debates on globalization
3. The radically optimistic scenario:
 Represents a new vision, a new approach to developing countries’ probl
 Globalization brings the countries of the world closer together;
 Countries are more dependent on each other, and consequently are in g
need of collective action.
 Reformed globalization is needed, where international measures are us
strengthen the use of common goods.
 Global identity will be ensured – every citizen will think him/her self li
other people and citizen of the world.
 Global social contract – rich and poor countries bind each oth
commitments in the interest of the common global good (aid, invest
trade, migration, climate change, etc)
 Global justice – narrowing the gap between poor and rich; reducin
vulnerability of poor to adverse shocks; ending hunger, starvation, dis
exclusion, violence, etc.
 Debates on Globalization

 Generally, globalization has the following advantages and disadvantag

A. Advantages of Globalization
• Bring economic efficiency and prosperity to the entire world;
• Remove trade barriers and make local industries more efficient and effective;
• Increase the mobility of foreign capital;
• Create strong bondage among countries through the revolutions in the technologie
transport, travel, communications, and information systems.
• Resources of different countries are used for producing goods and services they are
to do most efficiently.
• Consumers to get much wider variety of products to choose from.
• Consumers get the product they want at more competitive prices.
• Companies are able to procure input goods and services required at most compet
prices,
• Businesses and investors get much wider opportunities for investment, etc.
B. Disadvantages of globalization
 Developed countries can stifle development of undeveloped and under-develo
countries.

 Economic depression in one country can trigger adverse reaction across the glo

 It can increase spread of communicable diseases.

 Companies face much greater competition.

o This can put smaller companies, at a disadvantage as they do not have resources to compete at global scale.

 Loss of culture - Most of the people choose the well advanced world rather tha
live just like the way before.

 Environmental Degradation: Most companies often destroy the land which o

contains lots of minerals and resour
6.5.The Role of Global Institutions in Develo

 Today’s globalization era necessitates thinking globally eve

though we need to act locally.
 Four important global conferences have produced resolutio
agreements and commitments for globalization a
development :
1. The Global Compact
o Formed in 1999
o By UN and business leaders
o Focused on advancing the contribution of corporations to
development action
o Focused on corporate social responsibility (CSR)
o It emphasized a voluntary compliance and learn
approach, rather than international regulation.
 The Role of Global Institutions in Development

2 The Monterrey conference

 Held in 2002.
 Brought together governments, civil society organizations,
the business community and institutional stakeholders on
global economic issues.
 Committed to the question ‘how can development be
financed’? - particularly in relation to MDGs.

 Focused on increasing donor allocations to development

budgets and on reducing the debt burden of developing
countries.
 To increase the commitment of governments of developed
countries to support poor countries - US & EU.
 The Role of Global Institutions in Development

3. The Doha Meeting on Trade and Development

 The Doha Ministerial meeting of the World Trade

Organization in 2001 was intended to strengthen the
development role of opening up global trade.
 The World Trade Organization (WTO) is the global body established
to regulate trade relationships and mediate in trade disputes.
 Generally accepted that appropriate reform in trade conditions is needed.
 Focused on strengthening the development role of opening up global trade.
 Paid attention to the concern of developing countries.
 Developing countries demanded for Special and Differential Treatment .
 The Role of Global Institutions in Development

4. The Johannesburg Summit on Sustainable Development

(JSSD)
 The Johannesburg Summit on Sustainable Developm
held in 2002.

 Focused on how to align and apply economic and soc

development with environmental protection.

 UN launched a WEHAB initiative focusing on f

thematic areas: water, energy, health, agricultu
productivity and biodiversity
 The meeting was both to assess progress of the 19
meeting in Rio de Janeiro and to agree on an upda
plan of implementation to guide future financi
partnerships and development priorities.
 6.6. Development Policies in Africa

 In the case of Africa, there are two areas of polic

1. Africa Growth and Opportunity Act (AGOA)

2. The New Partnership for African Development (NEPAD) and the

 Development Policies in Africa

1. Africa Growth and Opportunity Act (AGOA)

 It is a legislation that has been approved by the US
congress in May, 2000.
 The purpose of this legislation is to assist the econom
of Sub-Saharan Africa and to improve economi
relationship with the US and the region.
 AGOA extended market access to textile and appare
goods into the US though many other goods are
included .
 Offers tangible incentives for African countries t
continue their efforts to open their economies and buil
free market.
 African Development Policy cont’d

2. New Partnership for African Development (NEPAD):

 NEPAD is a vision and a socio-economic development framework

Africa.

 The need of African countries has necessitated the transformatio

the Organization of African unity (OAU) into the African Union (
in 2002 and adopted the New Partnership for Africa’s Developm
(NEPAD).
 The Primary Objectives of NEPAD
 To eradicate poverty;

 To place African countries, both individually and collectively, on a path of sustainab

growth and development;

 To halt the marginalization of Africa in the globalization process and enhance its f
and beneficial integration into the global economy;

 To accelerate the empowerment of women.

 6.7. Sustainable Development

6.7.1. Meaning of Sustainable Development

 Sustainable development is “Development that meets the needs

of the present without compromising the ability of future
generations to meet their own needs”.

 Sustainable Development is a development that is maintaining

a balance between the human needs to improve lifestyles and
feeling of well-being on one hand, and preserving natural
resources and ecosystems, on which we and future generations
depend.
 Sustainable development cont’d

6.7.2. The dimensions of sustainable development and

3-pillar model
 Sustainable development encompasses three dimension
three pillar models:

1). Environmental (conservation),

2). Economic (growth), and

3). Social (equity)

 Figure 6.1: The three pillars of Sustainable Development

SOCIAL SOCIAL ECONOMIC

Equity & ECONOMIC
WELFARE
Efficiency DEVELOPMENT

Sustainability

Habitability & Carrying Capacity

Accessibility

ECOLOGICAL INTEGRITY

ENVIRONMENTAL
1). Environmental sustainability

 Environmental sustainability includes the management of elements l

Climate change, Air pollution, Ozone depletion, Oceans, Freshwater, Wild
Soil, Land use, Waste, Radioactivity, Noise pollution, and Light pollution.

2). Economic sustainability

 To make the economy sustainable, investment needs to be increased; stab

promoted; the skills of the work need to be improved and workers empowe
and rewarded.

 Economic sustainability includes the elements: energy, transport, employm

poverty reduction, investment; competition and stability, business
industry, trade, tourism, etc.
3. Social sustainability

 The goal with social sustainability is a sense of social cohesi

cultural inclusion and people empowerment.

 The key elements within the social sustainability pillar a

culture, health, education and skill, communities, housi
crime, recreation, consumption, food safety, etc.
6.7.3. Dominant Views on Sustainable Development

 The objectives of sustainability require the protection of

resource based upon which future development depends.

 It seeks to reconcile the ecological, social and economic di

development, now and into the future, and adopts a global p
this task.

 It aims at promoting a form of development that is containe

ecological carrying capacity of the environment, which is
and economically inclusive.
 6.7.3. Promoting Sustainable at g

 In order to promote sustainable development at grass root lev

is important to consider the elements like:
A). Context and Local Knowledge
 The local people irrespective of how poor they are, usually
the appropriate information about any development program t
suited to their particular conditions.

o It is not up to the outsiders to prescribe to the local p

what the local priorities are in terms of development.

o The local people are the experts in their particular area

the value of their knowledge should not be undermined.
 Promoting Sustainable at grass root level

B). Participation and Local choice

• Collective participation of the local people should be co

unlock the collective knowledge of the social and ecologic
• The process of participation should be managed in an
way to ensure that there is continued space for new in
process.
• The local people should have the choice to determine
destiny.
Promoting Sustainable at grass root level
C). Devolution of Power
• To enhance effective local knowledge and participation in the local
development efforts, the local people should have access to
decentralized institutions at the local level to honor their priorities.
• The local institutions should empower local people to tackle many
issues collectively through the application of their own knowledge
and skills.
• Local communities should enjoy a partnership approach to
development with formal development institutions and informal
community based organizations.

• The formal development institutions should be able to reach the

people with appropriate information through mass media, and
creating links with community based organizations.