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CHAPTER 6: GLOBAL DEVELOPMENT

Objectives:
At the end of this module, the learners must have:
∙ demonstrated thorough understanding on how the economy
progressed withstanding challenges of globalization.
∙ explained thoroughly the economic globalization;
∙ compared and contrasted the different theories of economic
development;
∙ reflected on the impact of recession/catastrophes to the economy and
what are the coping strategies used.
∙ differentiated between regionalism and globalization;
∙ explained how regions are formed and kept together;
∙ discussed the advantages and disadvantages of regionalism; and ∙
identified the factors leading to a greater integration of the Asianregion.

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 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
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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 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
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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
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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 capita incomes. (e) Age of mass consumption – in this stage,
production increases, enabling rise consumer expenditure. There is a gradual shift
towardstertiary 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
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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.
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
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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

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Market Allows many Monopolies are more
corporations to trade likely to develop.
on international level;
it 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 Societal Acceleration to Does not support
Relations multiculturalism multi culturalism
through free and
inexpensive
movement of people
 Aid Globalized A regionalized area
international does not get involved
communities are in the affairs of other
more willing to give areas
aids to countries
stricken by disasters
Technological Globalization has Advanced technology
Advances 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).
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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 SoutheastAsian 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

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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:
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
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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)

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
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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.
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Video Links:
https://www.youtube.com/watch?v=3lVhDRyNBM
Q
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.