The Structure of the Global Economy
Readings for this past week Zakaria, The Rise of the Rest Marber, Globalization & Its Contents Friedman, It s a Flat World, after All Ghemawat, Why the World Isn t Flat Mahbubani. The Case Against the West Skinner, A World Enslaved
What is included in the global economy Those who organize & sustain it States & governments International organizations & associations Those who play a role in it Capitalists & investors Int l financial institutions (IFIs) Production managers Consumers Labor Those marginal but connected to it The global poor, small farmers Grey & black marketeers Transborder flows of goods, information, money, people & other things
There have been/are several goals in constructing this economic system National enrichment by Facilitating trade & jobs Maintaining stability Pursuing comp advantage Shaping political economy Relative global peace by Fostering integration Fostering dependencies Happy consumer-citizens There are contradictions in all of this Global North Global South
As a whole, the world is richer (in money terms) than ever before in history
This shows Others note the wedge at the upper left
The Global South is growing very rapidly, mostly via Asia and especially in China and India
According to some scholars, this recapitulates historical patterns Which raises the question: what happened?
On a per capital basis, extreme differences in wealth are evident across the world
This shows the relative fraction of people in each country living on $10/day or less (around 2 billion live on $2/day or less)
The distribution of income within a country is measured by the Gini coefficient: 1 = perfect equality; 0 = complete inequality (one person receiving 100% of income)
Numbers obscure a great deal: There are three kinds of lies: lies, damned lies and statistics (Mark Twain quoting Disraeli) "The richest 1 percent of people in the world receive as much as the bottom 57 percent, or in other words, less than 50 million richest people receive as much as 2.7 billion poor." (Milanovic, 2002) The three richest people possess more financial assets than the poorest 10% of the world's population, combined. "The top 10 percent of the US population has an aggregate income equal to income of the poorest 43 percent of people in the world, or differently put, total income of the richest 25 million Americans is equal to total income of almost 2 billion people."
These unequal distributions are also a function of factors such as race, gender & religion why?
How might we account for these disparities?
There are conflicting explanations The conventional wisdom is that capitalism has made the North wealthy Reinvestment, innovation & industriousness have all made capitalism work Just as an ambitious individual can get ahead through hard work So countries can do the same This sounds a lot like Weber s Protestant Ethic & the Spirit of Capitalism
A second account is World Systems Theory Through colonization & exploitation, the Core (Europe & the US) has systematically pillaged the world Using its advantage in tech. & capital, it has forced the periphery into a subordinate position This has resulting in relative poverty for the periphery, and an inability to progress to core status Do the BRIC countries constitute counter-evidence? Not altogether clear
A third is based on the notion of uneven development in capitalism Capital seeks to produce in low-factor cost regions It injects money into the local economy It retains control of any technology it uses Goods are exported to zones where high profits can be realized If this is the same location in which capital is based, profits are retained there This generally benefits rich countries and people And constrains the options & possibilities for the poor