Lesson 2

THE GLOBAL
ECONOMY
 Sub-topics

1. Economic Globalization and

Types of Economics
2. Issues on Economic
Globalization
3. Classification of States
4. Theories of Global
Stratification
Introduction

 The UN tries to address the

different problems in the
world. The 8 Millennium
Development Goals for 2015
created in the 1990s were the
guidance to make effort the
eradication of the following -
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.
topic
Economic
Globalization and
Types of
Economics
I. Economic Globalization and
Types of Economies
 1. 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.
 Definition of Terms
Commodities
Services
Capital
Technologies
 Definition of Terms
http://www.businessdictionary.com/definition/service.html

Commodities
A reasonably
interchangeable good or
material, bought and sold
freely as an article of
commerce. Commodities
include agricultural
products, fuels, and metals
and more.
 Definition of Terms
http://www.businessdictionary.com/definition/service.html

Services
A valuable
action, deed, or
effort performed
to satisfy a need
or to fulfil a
demand.
 Definition of Terms
http://www.businessdictionary.com/definition/service.html

Capital
Factors of
production that
are used to create
goods or services
and are not
themselves in the
process.
 Definition of Terms
http://www.businessdictionary.com/definition/service.html

Technology
the application of
scientific
knowledge for
practical purposes,
especially in
industry.
 Economic Globalization and
Types of Economies
 2. it reflects the continuing
expansion and mutual integration
of market frontiers, and is an
irreversible trend for the economic
development in the whole at the turn
of the millennium. (United Nations)
 There are 2 types of
economies associated
with economic
globalization -
Protectionism –
A policy of systematic
government intervention in
foreign trade with the
objective of encouraging
domestic production.
Protectionism –
This encouragement
involves giving
preferential treatment to
domestic producers and
discriminating against
foreign competitors.
Protectionism –
This comes usually in the
form of quotas and
tariffs. (McAleese,2007)

• Tariffs = required fees

on imports and exports.
Protectionism for Dummies
Trade Liberation / Free Trade –
a policy wherein trade
practices that impede
free flow of goods and
services from one
country to another are
removed or reduced.
Trade Liberation / Free Trade –
this includes
dismantling of tariff
(duties, surcharges,
export subsidies) and
non-tariff barriers
(licensing
regulations, quotas,
arbitrary standards)
The Free Trade
Some key concepts
Leapfrogging
The idea that countries can
skip straight to more
efficient and cost
effective technologies that
were not available in the
past.
 Leapfrogging is the notion that areas
which have poorly-developed
technology or economic bases can
move themselves forward rapidly
through the adoption of modern
systems without going through
intermediary steps.“
 https://leapfrog.cl/en/leapfrogging
Some key concepts
Fair trade
 This is the concern for the
social, economic, and
environmental well-being of
marginalized small producers.
 Aims for more moral and
equitable global economic
system.
topic
Issues on
Economic
Globalization
 II. Issues on Economic
Globalization
1. Sustainable Development
- this refers to the development of our
world today by using the earth’s
resources and the preservation of
such sources or the future. It seek to
set a gold standards or benchmark
the rules between economic growth
and sustainable environment.
 II. Issues on Economic
Globalization
2. Environmental Degradation
- the increased demand in goods and
services brought about harm to the
environment. Negative changes in the
environment made impacts in the
economic and technological
advancements.
 II. Issues on Economic
Globalization
3. Food Security
- delivering a sufficient amount of
food to the entire world population. It
also attached the means of having the
sustainability of society such as
population growth, climate change,
water scarcity and agriculture.
 II. Issues on Economic
Globalization
4. Global Economic Inequality
2 types –

1.Wealth inequality – the

unequal distribution of assets
of nation which are natural,
physical and human.
 II. Issues on Economic
Globalization
4. Global Economic Inequality
2 types –

2.Income inequality – new

earnings are being distributed;
it values the flow of goods and
services, not a stock of assets.
 Graduate sa private
Graduate sa public

sahod sahod
Some key concepts

 Economic Big Bang (Milanovic, 2011) –

a phenomenon wherein the Industrial
Revolution caused the differences among
countries. With this “explosion” of industrial
advancement and modern technology, some
nations became economically developed
while others were developing creating a
economic gap among countries.
 Skill-based Technological Changed –
modern economies highly required new skills
which will be aligned to technology based
making it more a high-paying jobs compared
to unskilled workers. In another situation
manufacturing jobs that require low skills
moved overseas.
topic
Classification
of States
III. Classification of States

The Concept of
First, Second

A
and Third World.
Started during the COLD
WAR (1947)
 The Cold War was a period of geopolitical
tension between the Soviet Union with its
satellite states (the Eastern Bloc), and
the United States with its allies (the Western
Bloc) after World War II. a state of political
hostility between countries characterized by
threats, propaganda, and other measures
short of open warfare.
 The state of political hostility that existed
between the Soviet bloc countries and the
US-led Western powers from 1945 to 1990.
 It happened when the Soviet Union (USSR)
began building missile sites in Cuba in 1962.
Together with the earlier Berlin Blockade,
this crisis is seen as one of the most
important confrontations of the Cold War. It
may have been the moment when the Cold
War came closest to a nuclear war.
Western Capitalist countries
were labelled First World
Soviet Union and its allies
were termed Second World
The rest were grouped into
Third World
After the end of Cold War
(1991), Second World
category disappeared
making the First World
associated as rich and
industrialized nations.
Third World was associated
with impoverished states.
The term is now been
considered out-dated and
inaccurate.
The North-South
Classification

B
 The Global North
It includes the “First World”
nations such as the US,
Canada, W. Europe and
developed regions of Asia.
 The Global South
This includes the Caribbean,
Latin America, South America,
Africa and developing regions
of Asia.
The Global North
The Global South
topic
Theories of
Global
Stratification
 Definition of Terms
http://www.businessdictionary.com/definition/service.html

Stratification
is a system or
formation of layers,
classes, or categories.
 IV. Theories of Global
Stratification

A. Modernization Theory
Frames global stratification as
a function of technological and
cultural differences between
nations.
 IV. Theories of Global
Stratification
Rests on the idea that
affluence could be attained by
anyone.
Argues that the tension
between tradition and
technological change is a
barrier to growth.
 IV. Theories of Global
Stratification
2 historical events that made Western
Europe advanced than much the rest of
the world -

1. Columbian Exchange – refers to the

spread of goods, technology, education,
and disease between the Americas and
Europe after Christopher Columbus’ so
called “discovery of the Americas”
 Landing of Columbus in Americas (1492)
 IV. Theories of Global
Stratification
2 historical events that made Western
Europe advanced than much the rest of
the world -

2. Industrial Revolution (18th & 19th Centuries)

– this is the era that replaced human labor
to machine advantages.
The Industrial Revolution replaced hazardous task to humans
creating more efficient result compared to human labor.
 IV. Theories of Global
Stratification
Walt Rostow’s 4 Stages of Modernization
1. Traditional stage – societies are structured
around small, local communities with
production typically being done in family
setting
Societies are usually have a limited resources
making it difficult for them to have food and
limited technology too. They spent most of the
time labouring to produce food which create a
strict social hierarchy.
 IV. Theories of Global
Stratification
Walt Rostow’s 4 Stages of Modernization
2. Take-off Stage – people begin to use their
talents for greater good and beyond
necessities. It creates new market for trades. In
turn, greater individualism takes hold and social
status is more closely linked with material
wealth.
 IV. Theories of Global
Stratification
Walt Rostow’s 4 Stages of Modernization
3. Drive to technological maturity – nations
begin to push for social change along with
economic change, like implementing basic
schooling and more democratic political
system.
 IV. Theories of Global
Stratification
Walt Rostow’s 4 Stages of Modernization
4. High Mass Consumption –
when a country is big enough that production
becomes more about wants than needs.
 IV. Theories of Global
Stratification
Rests on the idea that
affluence could be attained by
anyone.
Argues that the tension
between tradition and
technological change is a
barrier to growth.
B. Dependency Theory
1. Argues that liberal trade causes greater
impoverishment not economic improvement to
less developed countries.
2. Trade protectionism through import
substitution is the key to self-sustaining path to
development, not liberal trade or export.
3. This theory focuses how poor nations
(peripheral nations) have been wronged by the
rich nations (core nations).
 Peripheral Nations – less developed
countries and received an unequal
distributions of the wealth of the world.
 Core Nations – countries that are more
industrialized who received the majority of
the world’s wealth.