Chapter 2:

THE GLOBAL ECONOMY

INTRODUCTION
The United Nations (UN) tried to
address the different problems in the
world. Their efforts were guided by
the eight Millennium Development
Goals, which they created in the
1990s. Among these eight goals, the
eradication of extreme poverty and
The other seven goals include: achieving
universal primary education, promoting
gender equality and women empowerment,
reducing child mortality, improving maternal
health, combating diseases like HIV/AIDS
and malaria, ensuring environmental
sustainability, and having a global
partnership for development (United
Nations, 2015) The UN tried to achieve
them by the year 2015.
Since there are different standards of
living around the world, we can
expect different meanings attached
to it. In the Philippines, a person is
officially living in poverty if he makes
less than 100,534 pesos a year,
around 275 pesos a day.
This is called the poverty line or poverty
threshold. But we are going to focus on
extreme poverty which, according to the
UN (2015), is a 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 a
day. The organization aims to
eliminate extreme poverty for all
people by 2030.
It was three years ago and the results
were in. The UN (2015) reported that
836 million people still live in
extreme poverty but that is down
from 1.9 billion, so there is success or
at least a lot of progress.
The World Bank predicted that by 2030 the
number of people living in extreme poverty
could drop to less than 400 million. Of
course that assumes everything will keep
improving as it has been. However, climate
change has to be considered since it is a
threat to these improvements in global
poverty.
Most people who have been lifted out of
extreme poverty are still poor and being
poor comes with serious problems, from
disease to lack of water. Income inequality
is rampant and one in seven people still
live without electricity. So why is extreme
poverty falling? The answer to this is really
complicated.
A set offactors like better access to
education, humanitarian aid, and the
policies of international organizations like
the UN have made a difference. However,
the greatest contributor is economic
globalization. The world's economies have
become more interconnected and free trade
has driven the growth of many developing
economies.
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." (p. 1)
There are two different types of
economies associated with economic
globalization protectionism and trade
liberalization: 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, p. 1169).
Trade protectionism usually comes in
the form of quotas and tariffs.
Tariffs are required fees on
imports or exports. For
instance, a pen that costs
$1.00 in Country A and in
Country B, it would be given
five-dollar tariff.
The pen would become $6 in
Country B. This policy was
practiced during the mercantilist
era, from sixteenth to seventeenth
centuries until the early years of
the Industrial Revolution (Chorev,
2007).
The Great Depression of 1929 marked
the peak of protectionism. Until today,
protectionism exists in the world
economy despite the growth of trade
liberalization. Countries such as China,
Japan, and the United States are being
accused of practicing protectionism
(Ritzer, 2015).
World War II heavily influenced
the shifting of the dominant
economic policy from
protectionism to trade
liberalization or free trade.
Free trade agreements and technological
advances in transportation and
communication mean goods and services
move around the world more easily than
ever. We are talking about everything
from shoes and bananas to innovations
and ideas.
Let us take mobile phones as
an 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 the developing world. Phones
give people access to banking and
payment systems and better access to
education and information.
In some places, mobile phones
help farmers get information and
get the best price for the crops
they are producing. Installing
cellphone towers is also a lot
cheaper than running thousands of
kilometers of telephone lines.
Economists call this leapfrogging the
idea that countries can skip straight to
more efficient and cost-effective
technologies that were not available in
the past. International trade has also
created new opportunities for people
to sell their products and labor in a
global marketplace.
Globalization made some countries,
especially the developing ones, to gain
more in the global economy at the
expense of 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 environmental well being of
marginalized small producers" (Downie,
2007, pp. C1-C5).
It 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 sound practices and
sustainable production, creation of
relationships between producers in the South
and consumers in the North, and promotion of
safe working environment.
Products like coffee,
bananas, cotton, wine, tea,
and chocolate have been
exchanged in light of fair
trade.
A concrete example of the growth of fair
trade is the case of American coffee
chains such as Starbucks and Dunkin'
Donuts. In 2006, there are $2.2 billion
dollars spent on certified products,
which is 42% greater than the preceding
year (Ritzer, 2015).
In turn, coffee growers such as
those in Brazil "get at least $1.29
per pound of coffee beans
compared to the current market
price of $1.25" (p. 296).
 Presenters:
Mariel Alcazar
Bea Del Rosario
Jamaica Gabarda
Arnellie Mar Balanac
Judelyn Cosepe
Ricca Magpayo
Aic Alberga Llanita
Dendaryl Naño