UNIT 4

Unit Outcome:

GLOBAL

DEVELOPMENT At the end of this unit, the learners

must have:
1.​ demonstrated thorough
understanding on how the
economy progressed
Introduction withstanding challenges of
globalization.

Global development, which is otherwise called as international

development is often used with different implicit meanings. Every country has its
own “differing” levels of development. To be globally developed is a new
challenge specially to the developing countries like the Philippines. Global
development then can be well attributed fully to what we call the economic
globalization.

Economic globalization is the increasing economic integration and

interdependence of national, regional, and local economies across the world
through an intensification of cross-border movement of goods, services,
technologies and capital. It is a historical process, the result of human innovation
and technological progress. It reflects the continuing and increasing expansion of
the consensual unification of the market frontiers and is an irreversible trend for
the economic development in the whole world at the turn of the millennium
(Aldama, 2018). Economic globalization also refers to the increasing integration
of economies around the world, particularly through the movement of goods,
services, and capitals across borders. The term sometimes refers to the
movement of people (labor) and knowledge (technology) across international
borders (IMF, 2008). With the advancement of science and technology, there is
also a significantly rapid growth of productive activities and marketization which
is considered as the two- driving force of economic globalization.

According to historians Dennis O. Flynn and Arturo Giraldez, economic

globalization began when all important populated continents began to exchange
products continuously, directly or indirectly via other continents. The first time
when America were directly connected to Asian trading routes was during the
establishment of the galleon trade connecting Manila to the Philippines and
Acapulco in Mexico. It is important to note that for Filipinos, economic
globalization began on the country’s shores.
Lesson 1. Theories of Economic Development

What is economic development?

Economic development occurs with the reduction of poverty, inequality

and unemployment within a growing economy. To measure income of distribution
Gini coefficient is used. A Gini coefficient of 0 means perfect equality. Human
Development Index (HDI) measures a country’s average achievement in three
basic dimensions of human development: life expectancy, educational attainment
and adjusted real income(media.lanecc.edu). To alleviate poverty, the economy
has to thrived, in order to control its decline. The complications in the study of
economic development have resulted in the development of some theories.
These theories and models seek to explain and predict how economies develop
over time and how barriers to growth can be overcome if not totally eliminated.
While less developed countries share similarities, every country is unique, which
implies that though these theories may help managed the decline, it may vary
from country to country.

There is no agreed model of development. Each theory gives and explains

insights and views into one or two dimensions. Before we proceed to the study of
these theories or models, let us have first the economic development concepts:
(1) Absolute advantage occurs when a country or region can create more a
product with the same factor inputs. (2) Comparative advantage was introduced
by David Ricardo in 1817. Ricardo predicts that all countries gain if they
specialize and trade the goods in which they have the comparative advantage
(media.lanecc.edu).

Theories of Economic Development

1.​ Mercantilism – this theory argues that the wealth of the nation is determined
by the accumulation of gold and accruing trade surplus. Its popularity can
be traced at the start of the industrial revolution. The government seeks to
regulate the economy and trade in order to promote domestic industry–
often at the expense of other countries. Mercantilism is associated with
policies which restrict imports, increase stocks of gold and protect domestic
industries. It stands in contrast to the theory of free trade – which argues
that the country’s economic well-being can be best improved through the
reduction of tariffs and fair trade.

2.​ Classical Theory – was developed by Adam Smith in 1776. He postulated that
there are numerous factors which enable economic growth’s increase.
He emphasized that the role of increasing returns and the role of market is vital
in determining supply and demand.

3.​ Marxism – is a method of socio-economic analysis that uses a materialist

 interpretation of historical development. It originates from the 19th -century
philosophers Karl Marx and Friedrich Engels.This theory examines where
society was, where it is going, and its change process. The movement from
feudalism to capitalism to socialism –is based on changes in ruling and
oppressed classes and their relationship to each other.

4.​ Unbalanced Growth Theory – theorists argue that adequate resources

cannot be mobilized by the government to promote widespread,
coordinated investments in all industries. Therefore, government planning
or market intervention is required in a few strategic industries. Supporters of
the unbalnaced growth theory includes Marcus Fleming, Prof. Rostov and J.
Sheehan.

5.​ The Trickle-Down Theory – this theory claims that the initial benefits of
growth go to the rich, but in the process, it eventually trickles down to the
poor. For example, rich families buy local products and employ servants,
etc. This idea originated from Will Rogers as a jokea nd is often used today
to criticize economic policies.

6.​ Rostow’s Linear Stages Model – this model describes a linear theory of
development which states that economies can be broken down into primary,
secondary and tertiary sectors. He asserted that the history of developed
countries suggests a common pattern of structural change. This was further
explained in five (5) stages namely: (a) Traditional society- is an agricultural
economy where its sustenance is farming where the produce is then traded.
The size of the shares is not sufficient hence, products are of low quality.
This had resulted to a very low labor production with small surplus output
left to sell in local and foreign markets. (b) Pre-conditions for take-off – in
this stage, agriculture started on progressing with the influx of modern
technology in farming. Production had increased and trading also
intensifies. Although the increase in percentage of national income is small,
yet there is an observe growth in savings and investment. With this
concerns, some external funding is required, for example, in the form of
foreign remittances from overseas workers and aids. (c) Take-off – the role
of the manufacturing industry is of great importance; although the number
of industries remains small, political and social institutions may still be
required in raising funds. Savings and investments’ growth rose up to 15%
of GDP. Agriculture was given little importance although the majority of
people may remain employed in the farming sector. (d) Drive to maturity –
the industry, in this stage, becomes more diverse. Growth in production
spread to different parts of the country as the state of technology improves -
the economy moves from being dependent making better use of innovation
to bring about increases in real per capital incomes. (e) Age of mass
consumption – in this stage, production increases, enabling rise consumer
expenditure. There is a gradual shift towards tertiary sector activity and the
growth is sustained by the expansion of middle-class consumers.
7.​ Dependency Theory – refers to dependence to another nation. It uses
political and economic theory to explain how the process of international
trade and domestic development make some LDC’s more economically
dependent on developed countries. It also describes a vicious cycle that
enforces hierarchy of nations across the globe.

8.​ Neoclassicism (Washington Consensus) – is a set of liberalization policies

advocated by free market economists to encourage growth. Economists like
Friedman used the economic turmoil to challenge the consensus around
Keynes’s ideas. What emerged was a new form of economic thinking that
critics labelled “neoliberalism.” From the 1980s onward, neoliberalism
became the codified strategy of the United States Treasury Department, the
World Bank, the IMF, and eventually the World Trade Organization (WTO)-a
new organization founded in 1995 to continue the tariff reduction under the
GATT. The policies they forwarded came to be called the Washington
Consensus. The Washington Consensus dominated global economic
policies from the 1980s until the early 2000s. Its advocates pushed for
minimal government spending to reduce government debt. They also called
for the privatization of government-controlled services like water, power,
communications, and transport, believing that the free market can produce
the best results.

9.​ New Growth Theory (endogenous) – this theory was developed by Paul
Romer and Robert Lucas who placed great emphasis on the concept of
human capital. It explains how workers with greater knowledge, education
and training can help to increase rates of technological advancement. They
argue that increasing capital does not necessarily lead to diminishing
returns as Solow predicted.

10.​ Lewis Model – begins with the classical of Marx, but ends with a much
happier neo-classical result. It is a structural change model that explains
how labor transforms a dual economy. The initial growth in the dual
economy is largely in the form of increased profits made available from
underpayment of wages. Instead of the inevitable crises of Marx, however,
the dual economy of Lewis eventually runs smoothly as a single economy
under neo-classical rules. Lewis model is explained using three (3) key
assumptions. First, the model implicitly assumed that the rate of labor
transfer and employment creation is proportional to the rate of capital
accumulation. Second, the model assumes that labor exists in rural areas
while there is full employment in the urban areas. And the third key
assumption at variance with reality is the notion of the continued existence
of constant real urban wages until the supply of small surplus labor is
exhausted.
11.​ Neo-classical model of Solow/Swan – this neo-classical theory suggests
that increase in capital or labor leads to its diminishing returns. It states that
the increase in capital has a temporary and limited impact on increasing the
economic growth. As capital increases, the economy maintains its steady-
state rate of economic growth.

12.​ Harrod-Domar Model – this was developed in 1930, it suggests savings

provide the funds which are borrowed for investment purposes. Based on
this model, economic growth depends solely on the amount of labor and
capital.

Summary

Global development discusses how globalization influence the flow of

economies and how it strategically spread to almost all-over the continents.
Globalization enables the economy to spread and had permeated even the
remotest place around the globe. Economic globalization as the driver of
globalization identifies some important theories to explain how these
developments helped the economy reach its momentum amidst various hostilities
and issues raised by its critics. These models and theories were important actors
in the interplay in each level of development.

Lesson 2. Asian Regionalism

Introduction

What are regions? Regions are group of countries located in the same
geographically specified area; it can be a combination of two regions or it can be
a combination of more than two regions organized to regulate and oversee flows
and policy choices. Businesses, governments, societies and groups form
organizations as a way of coping with the challenges brought about by
globalization. Globalization made us aware of the world in general. It made
Filipinos aware of the world around us, specifically the Southeast Asia. Later, the
Philippines had united itself with the Southeast Asian region and become part of
the Association of Southeast Asian Nations. (ASEAN)

Processing all these info’s in our little but enormous databank, let’s see how
aware you are of regionalization. Identify whether the country listed below is a
member of ASEAN.

Asian Regionalism

What is regionalism?
Regionalism is created as a sort of counter-globalization. Regional
organizations will always prefer regional partners over the rest of the world.

What is globalization?
Globalization is the expansion and intensification of social relations and
consciousness across world-space and world-time. Studying how regions divide
and why the divides greatly challenged how acquainted we are of how
globalization influenced this phenomenal amalgamation of these countries; who
in the real scenario, are miles, or even thousands of miles apart from one
another.

Regionalization should not be interchanged to regionalism for

regionalization refers to the regional concentration of the economic flows while
regionalism is a political process characterized by economic policy cooperation
and coordination among countries. It is the process of dividing an area into
smaller segments called regions or a division of a nation into states or provinces.
The process of dividing an area into smaller segments are called regions.

The differences regionalization and globalization can be discussed in

terms of: (a) nature, (b) market, (c) cultural and societal relations, (d) aid, and (e)
technological.

Regional Integration
The process by which two or more nation-states agree to cooperate and
work closely together to achieve peace, stability and wealth. The entire world is
moving towards integration which is inevitable. In Asia, the Southeast Asian
countries have already formed ASEAN (ASSOCIATION OF SOUTHEAST ASIAN
NATIONS.

Table 2

Globalization Regionalization
Nature Promotes integration Divides an area into
of economies across smaller segments
state borders all
around the world
Market Allows many Monopolies are more
corporations to trade likely to develop.
on international level; Monopoly means one
it allows free market producer controls supply
of a good or service, and
where the entry of new
producers is prevented
or highly restricted.
Cultural and Societal Acceleration to Does not support
Relations multiculturalism through multi-culturalism
free and inexpensive
movement of people
Aid Globalized international A regionalized area does
communities are not get involved in the
more willing to give affairs of other areas
aids to countries
stricken by disasters
Technological Advances Globalization has Advanced technology
driven great advances is rarely available in
in technology one country or region.

This regional power block appears to work fine, the member states fit very
well together because of the following factors:

The North Atlantic Treaty Organization (NATO) was formed to protect

Europe from the threat of the Soviet Union; and as a response, the Soviet Union
created the Warsaw Pact. The Warsaw Pact is

The ASEAN countries along with China, Japan, and South Korea
established an emergency fund that stabilized Asian economies after the rippling
effect of the Thai economy’s collapse. Countries need to pool their resources
together to make themselves more powerful. The Organization of the Petroleum
Exporting Countries (OPEC) rose in power when they took over domestic
production and controlled crude oil prices across the globe.

The countries under the Non-Alignment Movement (NAM) refused to side

with the capitalists (Western Europe & North America) or the communists
(Eastern
Europe).

There are many factors that are leading the Asian Region into greater
integration.

1.​ TRADE - The world economy is intertwined with each other whether
we like it or not. We all want or need something from another part of
the world, including global trade facilitates. These nations can readily
supply each other’s needs.
2.​ SIMILAR CULTURE - The cultures of Asia is diverse but they do share
many things. This makes it an easier fit during times of negotiations.
3.​ COMMON GOALS - The Asian region recognizes the mutual benefit of
a slow integration, and that is to accelerate the economic growth,
social progress and cultural development and to promote peace.
4.​ SIMILAR SECURITY NEEDS - aside from small localized rebels, this
association needs only to contend with foreign-supported terrorist
groups which are usually handled well.

How do different Asian states confront the challenges of globalization and

regionalization?

ASEAN was founded on 8 August 1967 by Indonesia, Malaysia,

Singapore, Thailand and the Philippines. It promoted economic growth, social
progress and cultural development in the Southeast Asian region through
multilateral cooperation. Below is an excerpt from the speach of Tun Abdul
Razak during the ......

“We the nations and peoples of Southeast Asia must get together and
form by ourselves a new perspective and a new framework for our region. It is
important that individually and jointly we should create a deep awareness that we
cannot survive for long as independent but isolated peoples unless we also think
and act together and unless we prove by deeds that we belong to a family of
Southeast Asian nations bound together by ties of friendship and goodwill and
imbued with our own ideals and aspirations and determined to shape our own
destiny.” He added that, “with the establishment of ASEAN, we have taken a firm
and bold step on that road.” (Tun Abdul Razak)

ASEAN Member Countries

1.​ Indonesia Capital: Jakarta

Population: 264 million (2017)
Type of Government: Democratic Republic
Government Leader: Joko Widodo (President)
Currency: Rupiah (0.0037 Php)
2.​ Thailand Capital: Bangkok
Population: 69.04 million (2017)
Type of Government: Constitutional Monarchy
Government Leaders: Maha Vajiralongkorn
(King); Prayut Chan-o-cha (Prime Minister);
Currency: Baht (1.67 Php)

3.​ Malaysia Capital: Kuala Lumpur

Population: 31.62 million
(2017)
Type of Government: Federal Constitutional
Monarchy Government Leaders:
fMuhammad V of Kelantan (King); Mahathir
Bin Mohamad (Prime Minister)
Currency: Ringgit (12.99 Php)
4.​ Singapore Capital: Pulau Ujong
Population: 5.612 million
(2017)
Type of Government: Parliamentary
Representative Democratic Republic)
Government Leaders: Halimah Yacob
(President); Lee Hsien Loong (Prime Minister)
Currency: Singapore dollar (39.12 Php)
5.​ Philippines Capital: Manila
Population: 104.9 million (2017)
Type of Government: Democratic Republic
Government Leader: Ferdinand Marcos Jr.
(President)
Currency: Philippine Peso

6.​ Vietnam Capital: Hanoi

Population: 95.54 million (2017)
Type of Government: Communist
Government Leader: Nguyen Phu Trong (President &
Head of Party); Nguyễn Xuân Phúc (Prime Minister)
Currency: Vietnamese dong (0.0023 Php)

7.​ ​ Cambodia​ Capital:

Phnom Penh Population: 16.01
million (2017)
Type of Government: Constitutional Monarchy
Government Leader: Hun Sen
(President and Prime Minister)
Currency: Cambodian riel (0.013 Php)
8.​ Brunei​ Capital: Bandar Seri
Begawan Population: 428,697
(2017)
Type of Government: Absolute Monarchy
Government Leader: Sultan Haji
Hassanal Bolkiah Mu’izzaddin Waddaulah
Currency: Brunei Dollar (39.11 Php)

9.​ Myanmar​ Capital: Naypyidaw

Population: 53.37 million (2017)
Type of Government: Parliamentary Republic
Government Leader: Win Myint (President)
Currency: Burmese kyat (0.034)

10.​ Laos​ Capital: Vientiane

Population: 6.858 million (2017)
Type of Government: Communist State
Government Leader: Bounnhang Vorachith
Currency: Lao kip (0.0062 Php)

Non-state Regionalism

States work together in a single cause. Groups also participate in

organizing. This tiny associations that include no more than a few members
varies in form. This is what we call the “new regionalism”. This small organization
concentrate on a single issue, or this continental unions addresses a multitude of
common problems from territorial defense to food security. Groups representing
this “new regionalism” rely on the power of individuals, non-governmental
organizations (NGOs) and other associations in pursuit of a particular goal.
(Claudio and Abinales, 2018)

New regionalism is identified with reformists who share the same values, norms,
institutions and system that exist outside of the traditional order. Likewise, their
strategies vary while some partners with government institutions to have their
voices heard and influenced policy making processes. In the Philippines, we can
associate this scenario to party list representatives, to whom some groups pass
laws to protect and promote human rights. Influences of organizations like the
North America Free Trade Agreement (NAFTA) and other NGOs in Latin America
had enabled them to participate in forums, summits and even dialogues to prime
ministers and presidents. In Southeast Asia, the organization of an ASEAN
Parliamentarians for Human Rights was in part the result of non-government
organizations and civil society groups pushing to prevent discrimination uphold
political freedom and promote democracy and human rights throughout the
region. (Claudio and Abinales, 2018)

Summary

Any country will find it difficult to reject all forms of global integration, at the
same time, it will be hard for them to turn their backs on their region. Even if a
country who is a member of EU will leave, that country will still continue to trade
with its neighboring countries; hence, it will still be forced to implement the rules
of EU. Likewise, if any member will leave ASEAN, it is impossible to stop trading
to its neighbors. The history of regionalism shows that regional associations
emerge as new global concerns arise. With the current speed of how digital
technology influence globalization, the future of regionalism will be dependent on
the unforeseen immense change in global politics that will emerge in the 21st
century.