Lesson 8: International Political Economy - Economic Geography and Globalization
Overview
In this lesson, we will look at the ways in which contemporary globalization creates a world that is highly integrated. Places and regions have become increasingly interdependent, linked through complex and rapidly changing commodity chains that are orchestrated by transnational corporations. The emergence of globalization – with its transnational architectural styles, dress codes, retail chains, popular culture, and ubiquitous immigrants, business visitors, and tourists—seems as if it might inevitably impose a sense of placelessness and dislocation, a loss of territorial identity, and an erosion of the distinctive sense of place associated with certain localities. Yet, the common experiences associated with globalization are still modified by local geographies.
Lesson Objectives
By the end of this lesson, you should be able to:
- describe the changing patterns of interdependence among different world regions;
- compare the three tiers that constitute the modern world system;
- explain how the growth and internal development of the world’s core regions could take place only with the foodstuffs, raw materials, and markets provided by the colonization of the periphery; and
- identify an example of each of the four key issues caused by globalization—environmental, health, core-periphery disparity, and security issues.
Required Readings and Assignments
Please see your Canvas course space for a complete listing of this lesson's required readings, assignments, and due dates.
Questions?
If you have any general course questions, please post them to our Course Questions Discussion located in the General Information Module in Canvas. I will check that discussion forum regularly to respond as appropriate. While you are there, feel free to post your own responses and comments if you are able to help out a classmate.
Globalization
Required Reading Reminder
Please begin by reading Knox & Marston, 2013. Human Geography: Places and Regions in a Global Context. Sixth Edition. Pearson Press. Chapter 2. You can download this reading from the Lesson 8 Module in Canvas.
Globalization
Watch this short video clip on globalization:
The world is becoming more and more interconnected. Never before in human history has there existed such an intense relationship between international trade, communication, and politics. The term globalization is all around us. Sometimes as an opportunity, sometimes as a new challenge, but what exactly does globalization mean and what are its ramifications? Even though the term globalization is frequently used, it is not easy to define. One thing is clear: in today's world economic, environmental, social, and political issues and problems are no longer limited to the national level because the world has become so interdependent. Reasonable governance can only be realized within broader groups of stakeholders. For example state confederation such as the European Union, regional economic organizations like the OECD, or the whole world.
Today modern communication technology and mass media like radio, TV, phones, or internet are global standard. This means that information can be distributed worldwide, in real time at affordable prices. For instance, the average price of a telephone call from New York to London has decreased by 99 percent since 1930. International TV broadcasters deliver information, opinions, and cultural products to the most remote areas. The cost for transportation of products and persons dropped 65% since 1930 due to low fuel prices and the development of new means of transportation, in particular container shipping. Air freight costs dropped even more, 88%. The freight charges per ton of coffee delivered from Asia to Europe only counts for one percent of its price. Such developments are the result of technological advancements, but there are some aspects which were introduced purposefully as well. Since the 1980s, the richer more industrialized countries work towards removing trade barriers such as tariffs, import quotas, and fans worldwide. Thus new technologies decreasing transportation costs, and the liberalization of international trade has made it possible and profitable for major companies to produce and sell worldwide.
Let's take a glance at the three main areas of globalization. The economic sphere is a particular importance. It is a major catalyst for globalization and is at the same time the most affected area. International exports have increased 30-fold in the last 60 years. The foreign direct investment companies and governments has increased substantially. It's written from $13 billion dollars per year in 1970 to more than one point a trillion today. Many companies are searching for new markets and opportunities for cheap production in countries with low wages and soft environmental regulations. The number of such multinational corporations rose from 7000 to 65,000 since the 1990s. Similar to the world economy, international politics is also more interdependent today. Most important policy issues like climate change, the financial crisis, or terrorism do not care about borders. Such problems cannot be solved by a single state alone. Politics tries to react by attempting to make decisions in broader groups of countries like the EU, the G-20, or even the United Nations. At the same time, there are more and more international pressure groups which do not belong to a particular state. These so-called non-governmental organizations or NGOs are able to exert influence in politics related to their field of work. Examples include Greenpeace, Amnesty International, or attack. A global public forum evolves through the previously mentioned new possibilities of communication. NGOs use this in order to influence politics. International political problems and the emergence of new global actors like NGOs in multinational corporations lead to a decrease of the political latitude of single states, especially of small states.
The influence of globalization can be observed in our culture as well. One aspect is often referred to as McWorld. The term describes how Western culture, especially popular culture, becomes dominant and destroys cultural diversity. The global distribution of western music, news, products, and even the English language promotes this effect. To counter globalization, we can also see backlash. For example, people are increasingly returning to local and regional cultural customs. Globalization is a very complex development. Some countries benefit more others benefit less. Newly industrialized countries like Taiwan and South Korea, as well as the rapidly developing India, Brazil, and China, gain considerable advantage from their integration into the world economy. They can build up their factories with foreign direct investment in infrastructure and sell their products internationally. Due to the low wages in these countries, these products are very competitive on the world market. China represents a perfect example of how the broader population can benefit too. It's fast economic growth has enabled 500 million Chinese to leave extreme poverty. On the other hand, there are whole regions who are suffering more than they're benefiting from globalization. This is particularly true for most sub-Saharan African countries. Such countries are not prepared to sufficiently for tightened international competition. The cheap products produced by industrial newly industrialized countries flood the local markets and destroy local production facilities. Moreover, these countries are not attractive for foreign investors. Thus they cannot walk the same road as the newly industrialized countries.
Globalization is both threat and an opportunity for industrialized countries. On the one hand, they can acquire new markets for their industrial goods. On the other hand, they're facing the competition newly industrialized countries that can produce at lower costs. Specifically, the production of simple good is no longer profitable and very few products like textiles, toys, or white goods are still produced in industrialized countries.
It becomes clear that globalization takes place at many areas such as politics, culture, and the economy. Declining costs of transport and communication, and the global liberalization markets, have fueled this trend. While some countries benefit from globalization, it is exacerbated the problems of others. Thus, globalization presents both new opportunities and new challenges.
Globalization is the increasing interconnections of different parts of the world through common processes of economic, environmental, political, and cultural exchange.
It is not new, but it is different than past iterations of globalization. Globalization is recognizable at least as far back as the 16th century. The basic framework for contemporary globalization goes back to the 19th century with the:
- international institutions being formed;
- standardization of time (railway, sea freight/container shipments);
- internationally recognized citizenship and concept of rights; and
- global network of communication (telecommunication).
So, globalization is not new, but contemporary globalization is markedly different. It is:
- faster;
- wider scale (few are untouched);
- broader in scope: global connections are multiple (cultural, economic, technological…);
- more complex connections than ever before (more actors involved, over vaster spaces).
Economic Development and Globalization
One of the economic (geographic) characteristics of contemporary globalization is its geographic unevenness. Using Wallerstein’s categories of Core, Semi-Periphery, and Periphery, we can engage with various theories of economic development to better understand why we see a growing unevenness in development between Core and Peripheral countries.
Compare the following three maps of the expansion of core, semi-periphery, and periphery over the past two centuries.
The unevenness of economic development (as seen in the core-periphery maps above) can be attributed to a number of different and overlapping factors. These include:
Historical legacies (colonialism, decolonization, neocolonialism)
- Think back to the film we watched in the beginning of the course: Africa: The Magnificent African Cake. The legacies of colonial relationships still exist today.
- Neocolonialism is the economic and political strategies by which powerful states in core economies indirectly maintain or extend their influence over other areas or people, including through the presence of transnational corporations and other international organizations that govern the global economy.
Resources (energy, cultivable land, industrial resources)
- Certainly, the environmental endowments make a difference for economic development. A country rich in natural resources (timber, coal, oil) and arable land (fertile soil for agriculture), for example, will be able to exploit these resources for economic gain. However, having such environmental endowments does not mean the country has geopolitical economic power to flex in the global marketplace. Here, again, historical legacies can come back to haunt a country and put them in an inferior bargaining position with respect to the (under)valuation of their country’s natural resources. Furthermore, the country’s geopolitical location matters – is the country land-locked? Does it have access to a port? What is the relationship with the bordering countries?
Economic structure of country/regions
- The political and economic structure of a country can depend (again) on historical legacies of colonialism. Was the decolonization/ independence process a relatively smooth transition? How was the country able to restructure politically, economically, socially and so forth? How is the country funded? Who has political/economic power, and how do they exercise their power? How does this impact the everyday development path of the country?
Neoliberal International trade rules that tend to perpetuate the status quo
- The film “The Luckiest Nut in the World” gives a great summary of trade neoliberalization and four case studies that highlight how the system perpetuates the current core, semi-periphery, periphery relationships.
International debt
- The film, the Luckiest Nut (above) highlights the plight of Senegal (as one example) and the ways in which international debt inhibit their own economic growth.
And so, we continue on to watch “The Luckiest Nut in the World” in the next section.
The International Economic Order - Neoliberal Capitalism
Watch This
SINGER: This is a film about nuts.
CHORUS: Nuts, nuts, nuts.
SINGER: It's a film about nuts.
CHORUS: Nuts, nuts, nuts.
SINGER: That's right. Like peanuts and pecans, pistachios too.
BASS SINGER: Brown nuts, Brazil nuts, and the cashew.
CHORUS: It's nuts.
SINGER: That's what I said. It's a film about nuts.
SINGER 2: It's a film about trade and economics.
CHORUS: It's about nuts.
SINGER 2: It's a film about globalization.
CHORUS: Nuts are grown all over the world.
BASS SINGER: Touching every life in every nation.
CHORUS: Nuts.
PRESENTER: Starring Mr. Peanut, the luckiest nut in the world. And the rest of his gang. Hit it, boys.
CHORUS: Just in case you forgot what this film is about.
SINGER: This is a film about nuts.
CHORUS: Nuts, nuts, nuts, nuts.
PEANUT: OK. Let's get started. This is a bowl of nuts.
PRESENTER: Typically eaten as a savory snack, nuts have a wide range of culinary uses. Nuts are grown all over the world and often traveled many miles to get to your table.
PEANUT: And some of them have had a bumpy ride, but not me. Because I'm an American peanut. I was born in Georgia, in the deep South, with a silver spoon sticking out of my mouth. I sure was surprised when I realized I was allowed luckiest nut in the world. I traveled around all over the globe. And I was pretty shocked at what I seen. All around there were nuts struggling to survive.
CHORUS: While he was living the American dream.
PEANUT: Our politicians tell us that trade liberalisation is going to make things better. But what exactly is trade liberalisation?
PROF BROWNE: Liberalization is the process of becoming more liberal or free. Trade liberalisation is therefore making trade more free by removing trade restrictions.
PEANUT: Well, I suppose in theory it sounds pretty good. We all like freedom. But from what I've seen, things aren't exactly working out as planned.
CHORUS: We're going to tell you some stories that'll make it clear why these problems won't disappear.
PEANUT: By making trade free indiscriminately,
CHORUS: It's only making things worse. It's not a blessing, but a curse.
PEANUT: And it's happening more every year.
This is a groundnut.
CHORUS: He's a ground nut.
PEANUT: Ground nuts are part of the peanut family.
CHORUS: Cousin of the peanut.
SPEAKER 1: Did you know that peanuts and ground nuts aren't really nuts at all?
SPEAKER 2: What are they, then?
SPEAKER 1: They're legumes.
PEANUT: This groundnut originated in Senegal, a country in west Africa.
CHORUS: Ground nuts have been grown in West Africa for centuries.
PEANUT: They were brought to Africa by the Portuguese in the 16th century. And later on--
CHORUS: Ground nuts replaced slavery as Senegal's biggest industry.
PEANUT: And by the time Senegal got their independence in 1960, ground nuts were their main export crop.
PROF BROWNE: By specializing in the thing that a country does best and then trading for the other things it needs, it maximizes its productivity.
CHORUS: But like many newly independent African states,
PEANUT: Senegal lacked the resources to invest in their development.
CHORUS: They needed cash.
PEANUT: So they got some help from the World Bank.
SINGER: There's a lot that you need if you want to succeed as a viable industrial nation. You need car parts and roads, bridges, telephones, dams, drains, and irrigation. If you need a little cash, we'll help you in a flash. The World Bank will come to your aide. We'll loan you some dough, so that you can grow and compete in international trade.
LENDER: We're satisfied as to your credit and income and we're glad to make you the loan.
PEANUT: The World Bank encouraged Senegal to focus on exports to earn the cash to repay this debt.
CHORUS: And Senegal's main export was groundnuts.
PEANUT: But then in the '80s, something happened that no one had counted on. Because groundnuts appeared to be a lucrative and stable export crop, other developing countries began to focus on producing ground nuts as a means of earning foreign currency.
PRESENTER: Across the globe, groundnut production is booming. From the Far East in China to the wilds of Ghana, farmers are saying goodbye to their traditional crops, hoping to get it on the ground floor of this thriving industry.
PEANUT: As more and more countries were producing groundnuts, more groundnuts were on the market. And so the price fell.
PROF BROWNE: It's the law of supply and demand. When supply goes up without a corresponding increase in demand, the price will go down.
CHORUS: With the bottom falling out of the groundnut market, Senegal, Senegal, Senegal was getting less for their nuts.
PEANUT: And they had to borrow even more money just to keep their head above water. Facing bankruptcy, Senegal implemented an economic reform program with the aide of World Bank economists.
SPEAKER 3: See, The World Bank doesn't just lend money. But the also lend expert advisors.
SPEAKER 4: Yeah, right. Experts in making sure they pay the debt.
PEANUT: This program followed the economic thinking of the time and called for--
CHORUS: Trade liberalization.
PROF BROWNE: Which begins with the removal of tariffs and duties.
PEANUT: So taxes on imports of foreign nuts were removed.
CHORUS: And privatization.
PROF BROWNE: Reducing government's involvement in industry.
PEANUT: The state-run groundnut company, Sonacost, which had guaranteed prices to the farmers was partially privatized.
CHORUS: And caps in public spending.
PEANUT: So state programs to help farmers by seeds, fertilizers, and tractors were all cancelled. They implemented the new strategy for 10 years, but the situation only got worse.
CHORUS: As the price of nuts went down, the debt got out of control.
PEANUT: And today, Senegal is officially one of the world's most indebted nations.
CHORUS: They spend more on paying their debt than they do on health and education combined.
PEANUT: So the theory goes that you should borrow to invest, and put the money in the one thing that you do best. Well, the Senegalese, they put their faith in nuts and they ain't exactly impressed. With all the payments to me, it's hard to stay on your feet, let alone compete with the rest.
PRESENTER: Now let's have a look at this cashew nut. He originated in Mozambique, a country in East Africa.
CHORUS: Cashew nuts are one of Mozambique's main exports.
PEANUT: That's right. And cashews are grown all over the country.
CHORUS: By people like this man and these two.
PRESENTER: Cashew nuts grow from trees, suspended beneath the cashew apple. Once separated from the apple, the removal of the hard outer shell must be done with care, as the shells are highly toxic. With this is achieved, the nuts can be enjoyed and have a rich, succulent flavor.
PEANUT: In the 1990s, there was a growing processing industry. Over 10,000 people were employed in the factories, shelling and roasting cashew nuts.
CHORUS: People like this man and this man and these.
PROF BROWNE: Processing increases the value of the nuts, and allows Mozambique to profit more from their exports.
CHORUS: This is what we mean by industrial development, oh yeah.
PEANUT: But a processing industry needs nuts to process, and too many raw nuts were being sold abroad.
PRESENTER: Down in Mozambique, cashew nuts are leaving in the thousands, bound for parts unknown. Good luck, Mr. Cashew. And bon voyage.
PEANUT: But the government had a plan. To keep enough raw nuts in the country, the Mozambique government would impose a tax on the export of raw nuts.
EXPORT OFFICER: I'm sorry, sir, but you will have to come with me.
PEANUT: Once processed, the nuts could leave at no charge.
EXPORT OFFICER: Right this way, sir. Good day, sir. Right this way.
PEANUT: That way, more raw nuts would stay in the country.
CHORUS: And the factories would have enough nuts to keep them busy.
PEANUT: Like Senegal, Mozambique was deeply in debt and they desperately needed some help.
SPEAKER 5: What collateral can you offer for this loan?
SPEAKER 6: I can offer only my record and my present salary.
SPEAKER 5: I'm very sorry, but I'm afraid we can't accommodate you.
PEANUT: Then the IMF and the World Bank came to their aide.
CHORUS: Oh, oh, oh, they would be saved.
SINGER: If you get it in a sweat because you can't pay your debt, things aren't working out as planned. The International Monetary Fund will come and lend a helping hand. The first thing they'll do is they'll give to you a little bit of emergency lending. We'll send our top economists who will probably insist you embrace free trade, open up your markets and cut back on public spending.
PEANUT: But the help would come at a price. As a condition of their loan, Mozambique would have to abandon its plan to tax raw nut exports.
PROF BROWNE: The IMF's policy was based on the concept of the free market.
PEANUT: Their economists believed that a free trade in cashew nuts would allow the farmers to sell to the highest bidder.
AUCTIONEER: And let's have the beginning bid. Thank you, sir. Thank you at the back. Yeah.
PEANUT: The Mozambique government disagreed with this analysis, but the IMF insisted.
CHORUS: Oh, oh, oh, they put their foot down.
PRESENTER: Of course, Mozambique didn't have to comply. But if they didn't, they face bankruptcy.
PEANUT: At first, it seemed that the IMF was right.
CHORUS: For a while, the price of cashews did go up.
PEANUT: Farmers were getting more for their nuts, as foreign companies competed with local factories to buy their crops.
CHORUS: Yeah, the price went up, up, up.
PEANUT: The price went so high, the local factories could no longer afford to buy them. The industry dwindled.
CHORUS: And one by one, the factories shut down.
PEANUT: By 1999, 9,000 people had lost their jobs.
SPEAKER 7: Unemployment is just a fact of life.
SPEAKER 8: Yeah, and what I hear is, it was good for the farmers. And there's over a million of them.
PEANUT: But that was only the beginning. With no competition from the local factories, the market became dominated by two export companies, who could dictate their price.
AUCTIONEER: Sold at half the going rate.
PEANUT: The farmers had to sell their nuts to them, whatever the offer.
CHORUS: And the price went down, down, down, lower than it was before.
PEANUT: So within a few years, the cashew processing industry had been destroyed. Thousands of factory workers were without jobs and the farmers were getting less money for their raw nuts.
CHORUS: No, things haven't worked out well for Mozambique.
PEANUT: And now after all this, the IMF has conceded that they were wrong and is allowing Mozambique to implement their original plan. So you see what havoc the free market can wreck on a poor country like Mozambique. Free trade may be swell when you're doing well, but it ain't always great for the weak.
NUT 1: Coming up--
NUT 2: The Brazil nut.
PEANUT: This is a Brazil nut.
CHORUS: Brazil nuts only grow in the Amazon rainforest.
PEANUT: But unlike the name suggests, most Brazil nuts don't come from Brazil. They come from Bolivia.
CHORUS: Three quarters of the world's Brazil nuts come from Bolivia.
PEANUT: Brazil nut trees can only grow under the protection of the rainforest canopy.
PRESENTER: This specific species of bee, which pollinates the Brazil nut flower lives in the orchids which occur naturally in the grooves surrounding the Brazil nut trees. The trees will not bear fruit without these little helpers.
PEANUT: And because they provide an economic alternative to clear cutting and open mining--
CHORUS: Brazil nuts have been singled out as a good example of sustainable agriculture.
PRESENTER: The traditional harvesting method involves waiting for the pods to fall to the ground, and then gathering them from the rainforest floor. The pods are then opened with a hatchet or similar tool, and the nuts taken to the processing plant to be deshelled.
PEANUT: Brazil nut harvesting encourages the Bolivian people to take advantage of the natural resources of the rainforest.
CHORUS: Oh, that's conservation.
PEANUT: Like Mozambique, Bolivia has encouraged the development of a processing industry to get added value from their nut exports.
CHORUS: That's industrialization.
PEANUT: In the 1990s, with the help of charities and NGOs, the Brazil nut industry boomed in Bolivia.
CHORUS: They helped them to build factories and to get their nuts to market.
PROF BROWNE: In the Amazon region of Bolivia, 80% of households live in extreme poverty.
PEANUT: Expansion of the Brazil nut industry gave these people a significant rise in their standard of living.
CHORUS: They got roads, power, clean water, and medicine. Things were looking up.
PEANUT: However, in 1999 a change in EU health and safety regulations seemed to threaten the future of the Bolivian Brazil nut industry.
SPEAKER 9: All tree nuts are susceptible to a naturally occurring fungus, which can leave traces of a carcinogen known as aflatoxin. Aflatoxins are measured in parts per billion, which is one particle per billion other particles.
PEANUT: Because of the way Brazil nuts are harvested from the rainforest floor, they often have a slightly higher level of aflatoxin compared to nuts grown on industrialized plantations.
CHORUS: The internationally recognized safety level for aflatoxins is 20 parts per billion.
PEANUT: Bolivian Brazil nuts have complied to this standard for years.
CHORUS: Then in 1999 the EU lowered its accepted level to four parts per billion.
SPEAKER 9: Four parts per billion is easily achievable on industrialized plantations.
SPEAKER 10: But it's much more difficult in the Amazon rainforest.
CHORUS: Because you can't build a factory there.
PEANUT: So although this new health and safety regulation applied to all nuts imported to the EU, it happened to hit Bolivia the hardest.
CHORUS: So much for sustainable agriculture.
SPEAKER 11: Did you know that Europe is the biggest single market for Brazil nuts?
SPEAKER 12: Yes. And they're considered to be a luxury commodity.
PEANUT: Europe and Bolivia are both members of the World Trade Organization.
SINGER: With 137 member nations, we have no geographical affiliations. From the Sahara to the Pacific, our aim, it is quite specific. Through a process of complex negotiation, we encourage and promote trade liberalisation. We're the final arbiter in any dispute. Our members must accept our rules as absolute. We never rest in our crusade to grease the wheels of trade. We're the World Trade Organization.
PROF BROWNE: Within the WTO, countries are allowed to set their own health and safety standards for food imports. But they are expected to provide scientific evidence to back them up.
PEANUT: Bolivia argues that there is no scientific evidence to suggest that four parts per billion is any safer than 20 parts per billion. The EU claims that it is just being cautious.
DOCTOR: Just how many Brazil nuts did you say you ate?
SPEAKER 13: You know, they could just be doing this to protect their internal nut producers.
SPEAKER 14: Well, that would be difficult to prove.
PEANUT: Whether safety precaution or trade protection, the EU's new regulation is certainly causing trouble for Bolivia.
CHORUS: So what can they do about it?
PEANUT: Bolivia has complained in WTO committees.
CHORUS: So far, with little success.
PEANUT: They're planning to launch an official dispute process.
CHORUS: But that could take years and meanwhile, Bolivia's a mess.
PEANUT: So with a natural monopoly on the Brazil nut, Bolivia was onto a good thing, but one little change in EU legislation put the industry in a tough situation. If everything was equal and the playing field level, they could tell the Europeans to go to the devil. But when you need your partner more than they need you, you have to do just what they tell
The Luckiest Nut in the World [3] from Emily James [4]
The film follows an animated American peanut, who sings about the difficulties faced by nuts from developing countries.
Supported by a mixture of animation and music, our American peanut takes the viewer through the stories of the cashew, brazil, and ground nuts — all of whom suffer as world trade is liberalized. But, it is a different story in America — where the peanut is protected by tariffs and heavily subsidized, and worth over four billion dollars a year to the American economy. Certainly, the luckiest nut in the world.
The film helps people to understand how the pressure to embrace “free market” economics, with its promise of a wealthy, abundant market place has actually driven many countries further into poverty.
International Development Patterns, Strategies, Theories & Explanations
Modernization Theory (Rostow)
The following information is quoted from Jacobs, J. (n.d.). Rostow's Five Stages of Economic Growth and Development are Widely Criticized [5]. Retrieved March 26, 2015.
Rostow's Five Stages of Economic Growth and Development are Widely Criticized
By Juliet Jacobs
Development Theories in Geography
Geographers often seek to categorize places using a scale of development, frequently dividing nations into the "developed" and "developing," "first world" and "third world," or "core" and "periphery." All of these labels are based on judging a country's development, but this raises the question: what exactly does it mean to be "developed," and why have some countries developed while others have not? Since the beginning of the twentieth century, geographers and those involved with the vast field of Development Studies have sought to answer this question, and in the process, have come up with many different models to explain this phenomenon.
W.W. Rostow and the Stages of Economic Growth
One of the key thinkers in twentieth-century Development Studies was W.W. Rostow, an American economist, and government official. Prior to Rostow, approaches to development had been based on the assumption that "modernization" was characterized by the Western world (wealthier, more powerful countries at the time), which were able to advance from the initial stages of underdevelopment. Accordingly, other countries should model themselves after the West, aspiring to a "modern" state of capitalism and a liberal democracy. Using these ideas, Rostow penned his classic Stages of Economic Growth in 1960, which presented five steps through which all countries must pass to become developed: 1) traditional society, 2) preconditions to take-off, 3) take-off, 4) drive to maturity and 5) age of high mass consumption. The model asserted that all countries exist somewhere on this linear spectrum, and climb upward through each stage in the development process:
- Traditional Society: This stage is characterized by a subsistent, agricultural based economy, with intensive labor and low levels of trading, and a population that does not have a scientific perspective on the world and technology.
- Preconditions to Take-off: Here, a society begins to develop manufacturing, and a more national/international, as opposed to regional, outlook.
- Take-off: Rostow describes this stage as a short period of intensive growth, in which industrialization begins to occur, and workers and institutions become concentrated around a new industry.
- Drive to Maturity: This stage takes place over a long period of time, as standards of living rise, use of technology increases, and the national economy grows and diversifies.
- Age of High Mass Consumption: At the time of writing, Rostow believed that Western countries, most notably the United States, occupied this last "developed" stage. Here, a country's economy flourishes in a capitalist system, characterized by mass production and consumerism.
Rostow's Model in Context
Rostow's Stages of Growth model is one of the most influential development theories of the twentieth century. It was, however, also grounded in the historical and political context in which he wrote. Stages of Economic Growth was published in 1960, at the height of the Cold War, and with the subtitle "A Non-Communist Manifesto," it was overtly political. Rostow was fiercely anti-communist and right-wing; he modeled his theory after western capitalist countries, which had industrialized and urbanized. As a staff member in President John F. Kennedy's administration, Rostow promoted his development model as part of U.S. foreign policy. Rostow's model illustrates a desire not only to assist lower income countries in the development process but also to assert the United States' influence over that of communist Russia.
Click to expand to provide more information
Flowchart of Rostow’s Stages of Economic Growth
The flowchart starts at the bottom left with traditional society and moves up and to the right through the following steps.
1. Traditional society
a. Limited technology; static society
b. Transition triggered by external influence, interests, or markets
2. Preconditions for take-off
a. Commercial exploitation of agriculture and extractive industry
b. Installation of physical infrastructure (roads, railways, etc.) and emergence of social/political elite
3. Take-Off
a. Development of a manufacturing sector
b. Investment in manufacturing exceeds 10% of national income; development of modern social, economic, and political institutions
4. Drive to Maturity
a. Development of wider industrial and commercial base
b. Exploitation of comparative advantages in international trade
5. High Mass consumption
Rostow's principal argument is that some places have progressed further than others in terms of economic development (as represented by the map of GNP). Rostow believes that poorer places are in an initial or beginning stage of development, while countries with higher levels of GNP are in a later stage of higher development. All places, therefore, are at some stage in a development sequence.
The sequence of development that Rostow outlines include the following five stages:
- traditional society
- preconditions for change
- take-off
- drive to maturity
- mass consumption
These stages suggest that a society moves from a traditional phase which is characterized by a lack of exposure to Western society, a lack of science or technology, a dependence on agriculture, and a high level of poverty to a modernized, industrialized, and developed economy. Rostow argues that through increased investment, increased exposure to modernized, Western society, and changes in traditional culture and values, societies will become more highly developed.
What is presumed goal and model?
The goal is industrialized, capitalist liberal democracy; the U.S. is the model. Modernization theory is basically a diffusionist theory: the premise is that development in the U.S. and Europe can be copied elsewhere. It purports that what developing countries need is at least an initial stimulus from an outside source, a developed country perhaps, to jumpstart the process. It, therefore, posits that internal development is unlikely. [Note the focus on external stimulus: how did it happen in the first cases, then?]
The following information is quoted from Jacobs, J. (n.d.). Rostow's Five Stages of Economic Growth and Development are Widely Criticized [5]. Retrieved March 26, 2015.
Continued: Rostow's Five Stages of Economic Growth and Development are Widely Criticized
By Juliet Jacobs
Stages of Economic Growth in Practice: Singapore
Industrialization, urbanization, and trade in the vein of Rostow's model are still seen by many as a roadmap for a country's development. Singapore [6] is one of the best examples of a country that grew in this way and is now a notable player in the global economy. Singapore is a southeast Asian country with a population of over five million, and when it became independent in 1965, it did not seem to have any exceptional prospects for growth. However, it industrialized early, developing profitable manufacturing and high-tech industries. Singapore is now highly urbanized, with 100% of the population considered "urban." It is one of the most sought-after trade partners in the international market, with a higher per-capita income than many European countries.
Criticisms of Rostow's Model
As the Singapore case shows, Rostow's model still sheds light on a successful path to economic development for some countries. However, there are many criticisms of his model. While Rostow illustrates faith in a capitalist system, scholars have criticized his bias towards a western model as the only path towards development. Rostow lays out five succinct steps towards development and critics have cited that all countries do not develop in such a linear fashion; some skip steps or take different paths. Rostow's theory can be classified as "top-down," or one that emphasizes a trickle-down modernization effect from urban industry and western influence to develop a country as a whole. Later theorists have challenged this approach, emphasizing a "bottom-up" development paradigm, in which countries become self- sufficient through local efforts, and urban industry is not necessary. Rostow also assumes that all countries have a desire to develop in the same way, with the end goal of high mass consumption, disregarding the diversity of priorities that each society holds and different measures of development. For example, while Singapore is one of the most economically prosperous countries, it also has one of the highest income disparities in the world. Finally, Rostow disregards one of the most fundamental geographical principals: site and situation. Rostow assumes that all countries have an equal chance to develop, without regard to population size, natural resources, or location. Singapore, for instance, has one of the world's busiest trading ports, but this would not be possible without its advantageous geography as an island nation between Indonesia and Malaysia.
In spite of the many critiques of Rostow's model, it is still one of the most widely cited development theories and is a primary example of the intersection of geography, economics, and politics.
Sources:
Binns, Tony, et al. Geographies of Development: An Introduction to Development Studies, 3rd ed. Harlow: Pearson Education, 2008.
"Singapore." CIA World Factbook, 2012. Central Intelligence Agency. 21 August 2012.
Critiques of Rostow’s Modernization theory:
- The goal is industrialized, capitalist liberal democracy; the U.S. is the model.
- The model assumes development in the U.S. and Europe can be copied elsewhere. One size fits all.
- It ignores a lot of geography and history, such as the impact of colonization on economic development.
- It does not address the obstacles to development that previously colonized regions face: exploitation of resources, genocide, political domination during long periods of time, civil unrest, extreme poverty, artificial boundaries (Africa).
- Countries that do not develop like the U.S. or Europe are seen as “problems”.
- There are ecological limits to high mass consumption (the final goal).
Dependency Theory: The Development of Underdevelopment (Frank)
- Scale of analysis: Regional / Global
- Through historic (colonial) and contemporary (neo-colonial) interaction, developing countries have seen change, but for the worse.
- Source of cheap labor and raw materials for the developed countries, through which these poor countries were then further depleted & impoverished.
- Unequal exchange and declining terms of trade.
- Lack of institutions and infrastructure not necessarily the problem.
- i.e., infrastructure in Africa, MNCs, IMF & WB
- The question of who they serve is integral.
Critiques of Dependency Theory:
- Since the problem is the international capitalist system, the solution is a revolution of the capitalist system.
- Views core countries as the obstacle to peripheral countries' well-being.
- Heavy weight on the role of the government - to serve the people.
Import Substitution
Import substitution industrialization (ISI) is a trade and economic policy that advocates replacing foreign imports with domestic production. ISI is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products. Early European merchants and manufacturers as far back as the 1400s became adept at import substitution (copying and making goods previously only available by trading). This process facilitated the rise of Western Europe as a core region of the world (Knox & Marston, 2013).
As a contemporary economic development strategy, import substitution industrialization is much more challenging. The goal here is to develop a diversified economy, rather than specialize in a primary commodity.
Export-Led Trade Based on Comparative Advantage
The export-led growth paradigm rose to prominence in the late 1970s when it replaced the import-substitution paradigm that had dominated development policy thinking (especially in Latin America) in the thirty years after World War II. Export-led growth is a development strategy aimed at growing productive capacity by focusing on foreign markets.
Mainstream examples would probably include coffee in Peru and parts of sub-Sarahan Africa; low-wage labor forces for manufacturing in Vietnam, Thailand, Mexico; software from Silicon Valley and Seattle; etc.
Comparative Advantage: The advantage in the production of a product enjoyed by one country over another.
This is the model favored by most mainstream economists and by major international institutions such as the World Bank and IMF.
Late Developers’ Model: Learn from Predecessors
This is Gerschenkron's concept of the late developers. His idea was that there were countries in Europe that wanted to follow in the industrial footsteps of Britain. The problem was, how could they compensate for the huge lead that Britain had already developed? If you wanted to get into the game, you had to come in incredibly big. You had to have leading-edge technology, and you had to raise or save huge amounts of capital to compensate for the lead that Britain had, and come on board producing with the very latest technology and competing aggressively for market share. There are advantages to late development, though: you can learn from your predecessors' mistakes, borrow their best and latest approaches, and plan the timing of your market entry.
An example of this at the firm level would be the car manufacturer, Kia. This South Korean company has had tremendous growth in US sales over the past six years, basically by replicating Honda’s earlier strategy of producing basic, reliable cars for the very low end of the market. Kia did exactly what Honda did starting in the 1970s, but with even cheaper cars, more efficient production methods, and a lot of help from the South Korean government.
State Intervention
Compatible w/ any of above, coordinated by the state to reduce inefficiencies.
- Common concerns include raising national savings rates; balancing growth in different sectors of the economy; managing the demographic and economic shifts that go along with transitions from a rural, agrarian society to an urban, industrial one; managing monetary policy so that foreign investors will invest in the country and trust the national currency, and so on.
- Very often, the state has to raise huge amounts of capital by borrowing on the international lending markets. The government itself may intervene in shaping industrialization.
- For example, the South Korean government has acted as an entrepreneur, a banker, and a shaper of industrial structure. The Korean state has deliberately adjusted economy through subsidies, protection, price controls (food, etc.), and restrictions on foreign direct investment.
There is no one formula that works equally well for all countries. Each of the models or strategies above will or won’t work (in the form mentioned or in some hybrid or modified form) depending upon historical contingencies, government structure, geopolitical positioning, environmental resource endowments, and so forth. And, of course, the international organization of the global economy—how the rules are made, regulated and evolve over time will work to determine how any one strategy will fare in the global market.
Nonetheless, though each country has its own set of circumstances that facilitate its economic development path, all countries and their economies are linked to the global economy. One way to learn more about this is to investigate global commodity chains (also known as the “global assembly line”) that produce our everyday products.
Commodities, Commodity Chains and the Global Assembly Line
Fetishism of Commodities
Let's begin by watching this video on “Fetishism of Commodities”.
On screen text: "A commodity is, therefore, a mysterious thing, simply because in it the social character of men's labor appears to them as an objective character stamped upon the product of that labor..." "..to find an analogy, we must have recourse to the mist-enveloped regions of the religious world. In that world, the production of the human brain appear as independent beings endowed with life and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men's hands. This I call the Fetishism which attaches itself to the products of labor..." -Karl Marx, Capital vol. 1]
There are a lot of people that are really powerful in the world. Presidents, CEOs, bankers, leaders of movements, but there is an object, a thing, that is more powerful than any of them. This object is money. Money is really powerful; it makes people, societies, and countries do all sorts of things. The pursuit of money as an end in itself occupies many people's lives and is the driving force of economic growth. All over society money acts as the symbol, status prestige, and social power. The funny thing about money is that it is just an object. Nowadays it's not even a valuable object like gold. It's just pieces of paper or digits on a computer screen. It has all this power and influence and it needs no will, weapons, or words. This phenomenon where objects have social power in which things act as if they have a will for their own is what Marx sought to unravel with this notion the fetishism commodities.
When Marx talks about fetishism, he wasn't talking about whips and chains and leather outfits. He was talking about the way the relations between producers in a capitalist society take the form of relations between things. The word fetishism originally was used to describe the practices of religions that distributed magical powers to objects like idols or charms. If the Israelites of the Old Testament won a battle with the Philistines, they attributed their victory to the powers of the arc of the covenant that they carried around. If they lost, it was because they had pissed off the arc. Of course, in reality, it was their own actions that caused them to win or lose. Attributing their own powers to an object is fetishism. For Marx, money and commodities are much like this. We think that they have mystical powers if their powers really come from us from our own creative labor.
Let's take a look inside a workplace. It could be any workplace. A capitalist factory, a peasant commune, the family farm, whatever. Here the relations between different workers are direct. I make a widget and I hand it directly to the next person. If something needs to change about the labor process someone brings workers together and says now we will organize things differently. Whether it is a democratic or hierarchical form of organization, it is an organization that happens directly between people.
Now let's take a look outside the workplace at the market. In the market things are different. The organization of work, the division of labor, doesn't happen through direct social relations between people. In the market, the products of labor confront each other as commodities with values. These interactions between things act back upon production. They are what send signals to producers to change their labor, to produce more, produce less, go out of business, expand business, and so on. Farmers, electricians, and auto workers don't directly relate to each other as workers. Instead the products of their labor meet in the market and are exchanged with one another. The material relations between people become social relations between things. When we look at toasters, corn, and TV's we don't see the work that created them. We just see commodities standing in relation to one another as values. A TV's value is worth so many ears of corn. A car's value is worth so many jars of peanut butter. The value, the social power of the object, appears to be a property of the object itself, not a result of the relation between workers.
We are atomized individuals wandering through a world of objects that we consume. When we buy a commodity we are just having an experience between ourselves and the commodity. We are blind to the social relations behind these interactions. Even if we consciously know that there's a network of social relations being coordinated to this world of commodities, we have no way of experiencing these relations directly because they are not direct relations. We can only have an isolated intellectual knowledge of these social relations, not a direct relation. Every economic relation is mediated by an object called a commodity. This process whereby the social relations between people take the former relations between things Marx calls reification. Reification helps explain why it is that in the capital society things appear to take on the characteristics of people. Inanimate objects spring to life endowed with the value that seems to come from the object itself. We say a book is worth twenty dollars, a sweater worth twenty five dollars, but this value doesn't come from the sweater itself. You can't cut open the sweater and find $25 dollars inside. This twenty-five dollars is an expression of the relation between this sweater and all of the other commodities in the market. And these commodities are just material forms have a social labor process coordinated through market exchange Its because people organize their labor through the market the value exists. The illusion that value comes from the commodity itself, not from the social relations behind it, is a fetish. A capitalist society is full of such illusions. Money appears to have god-like qualities yet this is only so because it is an object which is used to express the value of all other commodities. Profit appears to spring out of exchange itself, yet Marx worked hard to explain how profit actually originates in production for the unequal relations between capital and labor in the workplace. Rent appears to grow out of the soil yet Marx was adamant that rent actually comes from the appropriation of value created by labor. We see these fetishistic ideas in modern-day mainstream economic theory in the idea that value comes from the subjective experience between a consumer and a commodity and the capital creates value by itself. Yet the theory of commodity fetishism isn't just a theory of illusion. It's not that the entire world is an illusion reality existing somewhere far below the surface always out of site. The illusion is real. Commodities really do have value. Money really does have social power. Individual people really are powerless and material structures really do have power. There is not a real world of production existing below the surface in which the relations between producers are direct. Relations between people or only indirect, only coordinated to the mystifying world of commodities.
The theory of commodity fetishism is central to Marx's theory of value and it's one of the things that sharply distinguishes him from his predecessors. Adam Smith and David Ricardo, both held that prices were explained by labor time, but Marx's value theory is much more than a theory of price. It's a theory of the way social relations between people take on material forms that then act back upon and shape these social relations. Labor takes the form of a value embodied in commodities. Money price becomes the universal expression of this value. The pursuit of money as an end in itself dominates society. Means of production become capital. Money, commodities, and capital as representatives of social value become independent forces in their own right out of the control of society. The law of value is the law of these forces. Attempts to exert some control over these forces for monopoly or the state always become immeshed in the social antagonisms of value.
Definitions
Commodity Fetishism is the "mysterious" process by which the external appearance of goods conceals the story of who made them and under what conditions. Commodity Fetishism is the belief that commodities fall from the sky into our shopping basket. Commodities appear simple, and give the impression that they consist of only things. However, commodities are really crystallizations of social and material relationships, which are often invisible to us.
As William Blake said, “To see the world in a grain of sand.” So, too, did Karl Marx explain that to understand commodity fetishism is to, “To see capitalism in a papaya.”
So, how do we uncover the hidden social and material relationships that are embedded within a commodity? You must follow the commodity chain – the series of locations where resource extraction and labor processes are invested into making the final commodity. This process of expanding the production of a commodity from local to global follows the transition from Fordist production systems (assembly-line production in one factory—a la Henry Ford’s auto factories) to a Post-Fordist production system (where the assembly-line is stretched throughout the globe).
For More Info
The website, followthethings.com [8] is also an interesting website to look through to investigate commodity chains and global assembly lines.
Following along commodity chains help us to demystify the commodity—to uncover the opaque social relationships and environmental impacts of the products we buy. Furthermore, we start to see the economic relationships between core, semi-periphery and periphery to identify where resource extraction and cheap labor are located and how these resources and laborers are used by their governing bodies and corporation for economic development and profit.
China Blue
Let’s take a moment to wrap up this lesson and transition into the next (the Rise of China), by watching the film “China Blue” via this link [9] — which takes a look at the process of making blue jeans in China.
Geopolitical Analysis Blog Post 2B
Please visit the Lesson 8 Module in Canvas for a detailed description of this assignment.
Summary and Final Tasks
Summary
You should now be able to:
- describe the changing patterns of interdependence among different world regions;
- compare the three tiers that constitute the modern world system;
- explain how the growth ad internal development of the world’s core regions could take place only with the foodstuffs, raw materials, and markets provided by the colonization of the periphery; and
- identify an example of each of the four key issues caused by globalization—environmental, health, core-periphery disparity, and security issues.
Reminder - Complete all of the Lesson 8 tasks!
You have reached the end of Lesson 8! Double-check the Lesson 8 module in Canvas to make sure you have completed all of the activities listed there before you begin Lesson 9.