COMMISSION ON HIGHER EDUCATION

CATAINGAN MUNICIPAL COLLEGE

COLLEGE OF TEACHER EDUCATION

GE 3 THE CONTEMPORARY WORLD

CHAPTER 2: THE GLOBAL ECONOMY
LEARNING MODULE 2
(Prepared by Blessed Gem H. Adolfo)

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 INTRODUCTION

Since there are different standards of living around the world, we can expect different meanings attached to it. 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 of factors like better access to education, humanitarian aid, and the policies of international
organizations like 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.
Learning Outcomes
At the end of this module, you will be able to:
1. Define economic globalization
2. Value the importance of ecological modernization theory
3. Understand the effects of global stratification on a countries growth

Learning Experiences and Self-Assessment Activities

Chapter 2: The Global Economy

The United Nations (UN) tried to address the different problems in the world. Their efforts were guided by the eight
Millennium Development Goals:
1. the 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
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.

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. 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.”
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.” Trade liberalization or free trade agreements and technological advances in transportation and communication mean
goods and services move around the world more easily than ever.
Leapfrogging, the idea that countries can skip straight to more efficient and cost effective technologies that were not available
in the past.
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.” 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.

LEARNING TASK 1
1. Do you think that the Philippines is harmed as other countries transfer their activities to us through outsourcing?
2. In what ways do international organizations help our country’s economy?
3. Does the position of rich countries as giants in the economic chain threaten the status of less developed countries in the global
market?

Economic Globalization and Sustainable Development

Sustainable development is the development of our world today by using the earth’s resources and the preservation of such
sources for the future. In other words, development has to be ensured in and for the future generations. The continuous production of
the world’s natural resources, such as water and fossil fuel allows humanity to discover and innovate many things. However, these
positive effects of development put our environment at a disadvantage. Climate change accelerated and global inequality was not
eradicated. This means that development, although beneficial at one hand, entails cost on the other.

Environmental Degradation
Development, especially economic development, was hastened by the Industrial Revolution. This period in human history that
made possible the cycle of efficiency. Efficiency means finding the quickest possible way of producing large amounts of a particular
product. This process made buying of goods easier for the people. Then, there is an increased demand. Ultimately, there was an
increased efficiency. This cycle harms the planet in a number of ways.
Neoliberals and environmentalists debate the impact of free trade on the environment. Environmentalists argue that
environmental issues should be given priority over economic issues. Free trade, through its emphasis on the expansion of
manufacturing, is associated with environmental damage. For their part, neoliberals see the efforts of the environmentalists as serious
impediments to trade. Some seek to integrate these approaches. For instance, ecological modernization theory sees globalization as a
process that can both protect and enhance the environment.

Food Security
The demand for food will be 60% greater than it is today and the challenge of food security requires the world to feed 9 billion
people by 2050. Global food security means delivering sufficient food to the entire world population. It is, therefore, a priority of all
countries, whether developed or less developed. The security of food also means the sustainability of society such as population
growth, climate change, water scarcity, and agriculture.
The closest aspect of human life associated with food security is the environment. The challenges to food security can be traced
to the protection of the environment. A major environmental problem is the destruction of natural habitats, particularly through
deforestation. Industrial fishing has contributed to a significant destruction of marine life and ecosystems. Biodiversity and usable
farmland have also declined at a rapid pace.
Another significant environmental challenge is that of the decline in the availability of fresh water. The decline in the water
supply because of degradation of soil or desertification, has transformed what was once considered a public good into a privatized
commodity. The problem is further intensified by the consumption of “virtual water”, wherein people inadvertently use up water from
elsewhere in the world through the consumption of water-intensive products. The destruction of the water ecosystem may lead to the
creation of “climate refugees, people who are forced to migrate due to lack of access to water or due to flooding.”
The United Nations has set ending hunger, achieving food security and improved nutrition, and promoting sustainable
agriculture as the second of its 17 Sustainable Development Goals (SDGs) for the year 2030. The World Economic Forum (2010) also
addressed this issue through the New Vision for Agriculture (NVA) in 2009 wherein public-private partnerships were established. It
has mobilized over $10 billion that reached smallholder farmers. The Forum's initiatives were launched to establish cooperation and
encourage exchange of knowledge among farmers, government, civil society, and the private sector in both regional and national
levels.

Economic Globalization, Poverty, and Inequality

The Swedish statistician Hans Rosling once said, “The 1 to 2 billion poorest in the world who don’t have food for the day
suffer from the worst disease, globalization deficiency. The way globalization is occurring could be much better but the worst thing is
not being part of it.
Economic and trade globalization is the result of companies trying to outmaneuver their competitors. While you search for the
cheapest place to buy shoes, companies search for the cheapest place to make those shoes. They find the cheapest sources of leather,
dye, rubber, and of course, labor. The result is that labor-intensive products like shoes are often produced in countries with the lowest
wages and the weakest regulations. This process creates winners and losers. The winners include corporations and their stockholders
who earn more profit. They also include consumers who get products at cheaper price. The losers are high wageworkers who used to
make shoes. Their jobs moved overseas. But what about the low wage foreign workers? Are they winning or losing? A lot of workers
are thrown into hazardous working conditions but it’s also true that many workers in developing countries are at least making more
money. These jobs pay above average wages. People want these jobs and although the pay would be unacceptable in developed
countries, they are often the best alternative.
The multiplier effect means an increase in one economic activity can lead to an increase in other economic activities. For
instance, investing in local businesses will lead to more jobs and more income.
In absence of regulation, it is possible that workers would not be horribly mistreated and so they must remember the following
steps. First, public awareness is growing along with the pressure from the international community to take steps to protect workers.
The second step comes from those that support globalization. The pro-globalization set argues that as developing economies grow,
there are more opportunities for workers, which leads to more competition for labor and higher wages.
Economic globalization has helped millions of people get out of extreme poverty but the challenge of the future is to lift up the
poor while at the same time keep the planet livable. One of the best ways to help those in extreme poverty is to enable them to
participate in the economy. A perfect example is microcredit. In 2006, a Bangladeshi professor Muhammad Yunus won the Nobel
Peace Prize for implementing a simple idea. He gave small loans, on average around $100 to low income people in rural areas. The
borrowers, who are mostly female, often used the money to fund plans that could raise their income. For example, they started small
business.
By itself, microcredit is not going to solve the problem of extreme poverty but it supports the idea that enabling people to
participate in the economy can make their lives better.
Global Income Inequality
Globalization and inequality are closely related. We can see how different nation’s are divided between the North and the
South, developed and less developed, and core and the periphery. These differences mainly reflect one key aspect of inequality in the
contemporary world-global economic inequality. There are two min types of economic inequality: wealth inequality and income
inequality. Wealth refers to the net worth of a country. It takes into account all the assets of a nation-may they be natural, physical,
and human-less the liabilities. In other words, wealth is the abundance of resources in a specific country. This means that wealth
inequality speaks about distribution of assets. However, there is no widely recognized, monetary measure that sums up these assets.
In order to measure global economic inequality, economists usually look at income using the Gross Domestic Product (GDP).
Income is the new earnings that are constantly being added to the pile of a county’s wealth. When we talk about income inequality,
we mean that new earnings are being distributed; it values the flow of goods and services, not a stock of assets.
Branko Milanovic, an economist who specializes in global inequality, explained all this by describing an “economic big bang”
wherein the Industrial Revolution caused the differences among countries. Through this “explosion” of industry and modern
technology, some nations became economically developed while others were developing. Ultimately, the result is the economic gap
among countries. The gap between the richest and the poorest nations are greater today than in the past.
Access to technology also contributed to worldwide income inequality. It complemented skilled workers but replaced many
unskilled workers. In modernized economies, jobs are more technology-based, generally requiring new skills. This is what economists
referred to as skill-based technological change. As a result, workers who are more educated and more skilled would thrive in those
jobs by receiving higher wages. On the other hand, the unskilled workers will fall behind. They will be left or overtaken by machines
or more skilled workers. In addition, manufacturing jobs that require low skills are moved overseas.

The Third World and Global South

What are the implications of talking about countries as First or Third? Where did these terms come from? These terms are
outdated and inaccurate ways of talking about global stratification. How then are we going to talk about global stratification?
Let us begin by deconstructing the idea of the First, Second, and Third World hierarchy by looking at their origins and their
implications. The terms date back to the Cold War, when Western policymakers began talking about the world as three distinct
political and economic blocs. Western capitalist countries were labeled as the “First World”. The Soviet Union and its allies were
termed the “Second World.” Everyone else was grouped into “Third World.” After the Cold War ended, the category of Second World
countries became null and void, but somehow the terms “First World” and “Third World” stuck around in the public consciousness.
Third World countries, which started as just a vague catchall term for non-alliance countries, came to be associated with impoverished
states, while the First World was associated with Rich, industrialized countries.
In addition to being outdated, these terms are also inaccurate. There are more than 100 countries that fit the label of “Third
World”, but they have vastly different levels of economic stability. Some are relatively poor, but many are not. Nowadays, social
scientists sort countries into groups based on their specific levels of economic productivity. To do this, they use the Gross Domestic
Product (GDP), which measures the total output of a country, and the Gross National Income (GNI), which measures GDP per capita
(World Bank, n.d.).
A new and simpler classification, North-South, was created as Second World countries joined either the First World or the
Third World. First World countries, such as the United States, Canada, Western Europe, and developed parts of Asia are regarded as
the “Global North,” while the “Global South” includes the Caribbean, Latin America, South America, Africa, and parts of Asia. These
countries were used to be called the Third World during the Cold War. By noting that countries are south of 30 degrees north latitude,
they are able to say that these areas share common problems and issues having to do with economy and politics. The terms “Global
North” and “Global South” are a way for countries in the South to make a stand about common issues, problems, and even causes in
order to have equality all throughout the world.

The Global City

Sassen used the concept of global cities to describe the three urban centers of New York, London, and Tokyo as economic
centers that exert control over the world’s political economy. World cities are categorized as such based on the global reach of
organizations found in them. Not only are there inequalities between these cities, there also exists inequalities within each city.
Alternatively, these cities can be seen as important nodes in a variety of global networks.
Although cities are major beneficiaries of globalization, Bauman claimed that they are also the most severely affected by global
problems. Therefore, the city faces peculiar political problems, wherein it is often fruitlessly seeking to deal locally with global
problems and “local politics has become hopelessly overloaded.”

LEARNING TASK 2
1. What is the impact of global flows on the global South?
2. Examine the gap between rural and urban areas across the globe. How is that gap affected by globalization?
3. What do you think is the impact of urbanization and the rise of global city on the agricultural sector?

Theories of Global Stratification

1. Modernization Theory
 One of the two main explanations of global stratification is the modernization theory. This theory frames global stratification as
a function of technological and cultural differences between nations. It specifically pinpoints two historical events that contributed to
Western Europe developing at a faster rate than much of the rest of the world. The first event is known as the Columbian Exchange.
This refers to the spread of goods, technology, education, and disease between the Americans and Europe after Christopher
Columbus's so-called “discovery of the Americas.” The second historical event is the Industrial Revolution in the eighteenth and
nineteenth centuries. This is when new technologies, like steam power and mechanization, allowed countries to replace human labor
with machines and increase productivity.
Modernization theory rests on the idea that affluence could be attained by anyone. But why did the Industrial Revolution not
take hold everywhere? Modernization theory argues that the tension between tradition and technological change is the biggest barrier
to growth. A society that is more steeped in family systems and traditions may be less willing to adopt new technologies and the new
social systems that often accompany them.

Walt Rostow's Four Stages of Modernization

According to American economist Walt Rostow, modernization in the West took place, as it always tends to, in four stages.
1. Traditional stage – this refers to societies that are structured around small, local communities with production typically
being done in family settings. Because these societies have limited resources and technology, most of their time is spent on
laboring to produce food, which creates a strict social hierarchy.
2. Take-off stage – people begin to use their individual talents to produce things beyond the necessities. This innovation
creates new markets for trade. In turn, greater individualism takes hold and social status is more closely linked with material
wealth.
3. Drive to technological maturity – in which technological growth of the earlier periods begins to bear fruit in the form of
population growth, reductions in absolute poverty levels, and more diverse job opportunities.
4. High mass consumption – it is when your country is big enough that production becomes more about wants than needs.
Many of these countries put social support systems in place to ensure that all of their citizens have access to basic
necessities.
Modernization theory, in general, argues that if you invest capital in better technologies, they will eventually raise production
enough that there will be more wealth to go around and overall well-being will go up.

Dependency Theory and the Latin American Experience

Dependency is the condition in which the development of the nation-states of the South contributed to a decline in their
independence and to an increase in economic development of the countries of the North. In addition, it argues that liberal trade causes
greater impoverishment, not economic improvement, to less developed countries. Trade protectionism through import substitution is
the key to self-sustaining path to development, not liberal trade or export. In other words, rather than focusing on what poor countries
are doing wrong, dependency Theory focuses on how poor countries have been wronged by richer nation’s. It further argues that the
prospects of both wealthy and poor countries are inextricably linked. In addition, it argues, that in a world of finite resources, we
cannot understand why rich nations were rich without realizing that those riches came at the expense of another country being poor. In
this view, global stratification starts with colonialism.
Dependency theorists saw that the development of peripheral nations is stagnant because of the exploitative nature of the core
nations. Less developed periphery countries are said to primarily serve the interests of the wealthier countries and end up having little
to no resources to put toward their own development. The theory points out that the economies of periphery countries rely on manual
labor and to the export of raw materials to core nations. The core countries then process these raw materials and sell them at a much
higher price. Some of these manufactured goods go right back to the periphery countries from which the raw materials came.
Periphery nations end up spending more money on the processed goods. Their small economies may also rely on core nations for
medical and nutritional aid. The dependency Theory describes a vicious cycle that enforces a hierarchy of nations across the globe.
Some countries were not developing around the world because the international system was actually preventing them from doing so.

The Modern World System

This history of colonialism inspired American sociologist Immanuel Wallerstein model of what he called the capitalist world
economy.
 high-income nations as the “core” of the world economy – this core is the manufacturing base of the planet where resources
funnel in to become the technology and wealth enjoyed by the Western world today.
 middle-income countries, are called the “semi-periphery” – countries such as India or Brazil belong here due to their closer
ties to the global economic core
 low-income countries are called the “periphery” – whose natural resources and labor support the wealthier countries, first as
colonies and now by working for multinational corporations under neocolonialism.

LEARNING TASK 3
1. In the case of the Philippines, how much do you think are we involved in the modern world-system? What do you think are
the advantages and disadvantages of being part of such?
2. How can we “upgrade” our economy given the strength of the global economy, especially the giant economies like the
United States and Japan?
 SAA Answer Sheet
Direction: Answer the following questions.
1. What are the 8 Millennium Development Goals of United Nations?
2. What is the difference between protectionism and trade liberalization? Explain in your own words.
3. What role does sustainable development take on economic globalization?
4. What does “globalization deficiency” mean?
5. How does microcredit help people participate in economy?
6. What are the two theories of stratification?
7. Enumerate the four stages of modernization.

END OF MODULE ASSESSMENT

A New Economic Map of the World

In order for you to visualize Immanuel Wallerstein’s idea of the modern world system, this activity will involve a construction
of a “new” map of the world. The foundation of constructing this map is the three hierarchies of areas in the modern world-system
discussed.
1. Identify whether the following countries fall under core, periphery or semi-periphery category.

Australia China Indonesia Malaysia Philippines Sudan

Bangladesh France Italy Mexico Singapore Turkey
Brazil Germany Japan Nepal South Africa UK
Canada Hungary Kenya Nigeria Spain USA
Chile India Madagascar Panama Sri Lanka Uruguay

2. Print/draw the map of each country. (A ¼ of a bond paper is enough for the size of each map.)
3. Group the maps according to the category of the country in which they belong. Paste the maps in a ½ Manila paper.
4. Put the core countries at the center. Surround the core countries with the states under the semi-periphery. Place the
peripheral countries as the outer ring of the map.
5. Compare the map you created with the original world map. Write your comparison at the back of the manila paper.

SELF AND MODULE EVALUATION

 Please take time to evaluate this module by indicating the rating for each indicator. Be guided by the scales as follows:
Rating Scale Descriptive interpretation
1 Bad
2 Good
3 Great
4 Excellent

Indicator Rating
 It creates attention-grabbing introduction
 It informs you about the objective of the lesson
 It stimulates recall of prior knowledge
 It provides adequate exercises
 It allows you to reflect on what you have learned and
how you will use that knowledge in the future

 Rate this module by indicating the rating for each indicator. Be guided by the scale as follows:
Rating Scale Descriptive interpretation
1 Negative
2 Positive
3 Slightly Positive
4 Very Positive
 Learning Outcome Rating
 I was able to define globalization in different perspectives
 I was able to understand the concept of globalization with different
metaphors
 I was able to appreciate the different views of globalization and
globalization theories of scholars
Note: Please feel free to contact me if you need further assistance in this module.

09468172902 Megumareta Desu (Teacher Blessed Adolfo)

“Education is the most powerful weapon which you can use

to change the world.”
- Nelson Mandela

REFERENCES
 The Contemporary World by Prince Kennex Reguyal Aldama, Published and distributed by Rex Book Store

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