THE GLOBAL

ECONOMY
CHAPTER 2
8 Millennium Developmental Goals
1. Eradication of extreme poverty and hunger
2. Achieving universal primary education
3. Promoting gender equality and women empowerment
4. Reducing child mortality
5. Improving maternal health
6. Combating diseases like HIV/AIDS and malaria
7. Ensuring environmental sustainability
8. Having a global partnership for development
• Poverty line or poverty threshold
• PH is making less than 100,534 pesos a year, or 275 pesos a day.
• EXTREME POVERTY – a condition characterized by sever deprivation of
basic human needs including food, safe drinking water, sanitation facilities,
health, shelter, education, and information (UN, 2015).
• Climate change is a threat to improving global poverty
• Most people lifted out of extreme poverty are still poor.
• BUT extreme poverty is falling because of better access to education,
humanitarian aid, and the policies of international organizations (e.g UN).
• The GREATEST contributor is economic globalization.
• It made the world’s economies become more interconnected; and free trade driven the
growth of many developing economies.
Economic Globalization and Global Trade
• 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…”
• 2 Types of economies associated with economic globalization
1. Protectionism – a policy of systematic government intervention in foreign
trade by encouraging and giving preferential treatment to domestic products
and producers
2. Trade Liberalization (free trade) – allows countries to specialize
production and export of their merchandises and also import products that
other countries can make at lower cost
Economic Globalization and Sustainable
Development
• Sustainable development – it is the development of our world today by
using the earth’s resources and also the preservation of these sources
for the future.
• Seeks to balance the relationship between economic growth and sustainable
environment
• Environmental Degradation
• A cycle of increased efficiency caused by the industrial revolution that
hastened economic development HAS harms the planet.
• Efficiency – finding the quickest possible way of producing large amounts of a particular
product.
• Ex. Earth’s atmosphere is damaged by more carbon emission from factories around the
world.
 Economic Globalization and Sustainable
Development
• Food Security
• By 2050, the challenge of food security requires to feed 9 billion people.
• Global Food Security – delivering sufficient food to the entire world population.
• Environment – closest aspect of human life with food security
• It is a challenge to protect the environment
• Ex. Destruction of natural habitats and ecosystems through deforestation, industrial fishing, etc.
• Ex. Decline in availability of fresh water due to degradation of soil or desertification.
• Ex. Pollution
• Climate Refugees – people who are forced to migrate due to lack of access to water or due
to flooding.
• Sustainability – one of the ways the different organizations try to address the
issue of global food security
Economic Globalization(EG), Poverty, and
Inequality
• According to Hans Rosling the poorest suffer from global deficiency.
• Global deficiency – not being part of the reach of globalization
• Economic and trade globalization is a result of companies trying to
beat their competitors
• Consumers look for cheaper prices, so companies search for the cheapest
sources in different countries
• Corporations and stockholders earn more profit, thus they are WINNERS
• Former high wage domestic workers – loses their jobs (LOSERS)
• New low wage foreign workers – are thrown into hazardous working
conditions (LOSERS)
Economic Globalization(EG), Poverty, and
Inequality
• Multiplier effect – increase in one economic activity can lead to an
increase in other economic activities. (e.g. investing)
• Opponents of EG – views outsourcing of jobs as exploitation, oppression,
and a form of economic colonialism that puts profits before people.
• Pro EG – argues that as developing countries grow, there are more
opportunities for workers, which leads to more competition for labor and
higher wages
• Microcredit – is the giving of small loans (avg. $100) to low-income
people in rural areas.
• The borrowers use the money to start businesses and raise their income.
• It will not solve the problem of extreme poverty, BUT it enables people participate
in the economy and make their lives better
Economic Globalization(EG), Poverty, and
Inequality
GLOBAL INCOME INEQUALITY
• 2 main types:
1. Wealth Inequality
 The distribution of assets
 WEALTH – net worth of a country. The abundance of resources in a specific country.
2. Income Inequality
 The distribution of new earnings
 Values the flow of goods and services
 INCOME – new earnings that are constantly being added to the pile of a countries wealth.
• Gross Domestic Product (GDP)
– used to measure global economic inequality
 Economic Globalization(EG), Poverty, and
Inequality
GLOBAL INCOME INEQUALITY
• In 2016, global wealth is estimated to be about 3.5 trillion dollars and it is not
distributed equally (Global Wealth Report by CSRI)
• “Economic big bang”
- Branko Milanovic (2011)
- The explosion of industrial revolution caused the differences among countries, wherein
some nations became economically developed while others were still developing.
- This resulted in economic gaps
• Access to technology
- Contributed to worldwide income inequality
- Jobs that are more skill- and technology-based PREFER skilled workers than low-skills
workers
- High-skilled workers have higher wages than low-skilled workers
Third World and the Global South
• “First world” – western capitalist countries
• “second world” – soviet union & allies
• “third world” – non-alliance countries

• Nowadays, they use north-south classification

• Global North – US, Canada, Western Europe, developed parts of Asia
• Global south – South America, Africa, Latin America, Carribean, and
parts of Asia.
• Wealthy global north and poor global south “have always possessed a
racial character.
Global City
• New York, London, and Tokyo
• Economic centers that exert control over the world’s
political economy
• Categorized as world cities because of the global reach of
organizations residing in them
• Cities
• Major beneficiaries of globalization
• Most severely affected by global problems
Theories of Global Stratification
1. Modernization Theory
2. Walt Rostow’s Four Stages of
Modernization
3. Dependency Theory (and the Latin
American Experience)
4. The Modern World-System
1. Modernization Theory
• This theory frames global stratification as a function of
technological and cultural differences between nations.

• 2 Historical Events that contributed to Western Europe

developing faster than the rest of the world
1. Columbian Exchange
2. Industrial revolution in the 18th – 19th centuries
2. Walt Rostow’s Four Stages of Modernization
1ST STAGE – TRADITIONAL STAGE
• Refers to societies that are structured around small, local communities
with production typically being done in family settings.
• What your parents do, you will do when you grow up too.

2ND STAGE – TAKE-OFF STAGE

• People move beyond what has always been done
• They begin to use their individual talents to produce things beyond the
necessities. (Individualism)
2. Walt Rostow’s Four Stages of Modernization
3RD STAGE – DRIVE TO TECHNOLOGICAL MATURITY
• Nations begin to push for economic change (e.g. schooling, democratic
political system.
• Results to population growth, reduction in absolute poverty levels, & more
diverse job opportunities

4TH STAGE – HIGH MASS CONSUMPTION

• When a country becomes big enough that production turns into more about
WANTS than needs.
• Have social support systems to ensure all citizens have access to basic
necessities.
 3. Dependency Theory
• Dependency theory – focuses on how poor countries have been wronged by richer
nations.
• Argues that with limited resources, rich nations became rich at the expense of other nations’ poverty.
• Thus, global stratification starts with colonialism

Peripheral nations – countries that are less developed and receive an unequal
distribution of the world’s wealth.
Core nations – more industrialized nations who receive the majority of the world’s
wealth.

“Even after de-colonization, there are still important ties between the developed and less
developed countries, which mainly consist in the exploitation of peripheral natural
resources and workforce by the center” (Anton, 2006)
 4. The Modern World-System
• Immanuel Wallerstein
• CORE (High-income nations) – is the manufacturing base of the planet
where resources funnel in to become the technology and wealth enjoyed
by the Western world today.
• PERIPHERY (Low-income nations) – whose natural resources and labor
support the wealthier countries
• Initially as colonies, now by working for multinational corporations under
neocolonialism
• Remains economically dependent on the core.
• EX. Poor countries export raw materials for a cheap price, then imports manufactured at
expensive prices.
end.