MODULE: SS02 – THE CONTEMPORARY WORLD

CHAPTER 6 – GLOBAL DEVELOPMENT

A. Demonstrated thorough understanding on how the

economy progressed withstanding challenges of
globalization.
B. Explained thoroughly the economic globalization;
C. Differentiated between regionalism and globalization;

INTRODUCTION:

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
1
 MODULE: SS02 – THE CONTEMPORARY WORLD

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.

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

2
 MODULE: SS02 – THE CONTEMPORARY WORLD

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
3
 MODULE: SS02 – THE CONTEMPORARY WORLD

- 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
4
 MODULE: SS02 – THE CONTEMPORARY WORLD

employed in the farming sector.

. 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 capita
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.
5
 MODULE: SS02 – THE CONTEMPORARY WORLD

. 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
6
 MODULE: SS02 – THE CONTEMPORARY WORLD

important actors in the interplay in each level of development.

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
(d) technological.

Regional Integration

The process by which two or more nation-states agree to

cooperate and work closely together to achieve peace, stability and
7
 MODULE: SS02 – THE CONTEMPORARY WORLD

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

8
 MODULE: SS02 – THE CONTEMPORARY WORLD

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.
9
 MODULE: SS02 – THE CONTEMPORARY WORLD

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)
10
 MODULE: SS02 – THE CONTEMPORARY WORLD

3. Malaysia Capital: Kuala Lumpur Population:

31.62 million (2017)
Type of Government: Federal
Constitutional Monarchy
Government Leaders:
Muhammad 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: Rodrigo
Duterte (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)

11
 MODULE: SS02 – THE CONTEMPORARY WORLD

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)

12
 MODULE: SS02 – THE CONTEMPORARY WORLD

Regional Integration

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

13
 MODULE: SS02 – THE CONTEMPORARY WORLD

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.

Video Links:
https://www.youtube.com/watch?v=3lVhDRyNBMQ
https://www.youtube.com/watch?v=o4olZrhQxOg
https://www.youtube.com/watch?v=q4_XpJYbK70
https://www.youtube.com/watch?v=RzS1UmANgt0

References:
Claudio, L and Abinales, P. (2018). The Contemporary World.
EDSA, South Triangle. Quezon City: C & E Publishing.

Danesi P. R., Cherif H. S., 1996. Environmental changes

in perspective: The global response to challenges.

14