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Ch 4.docx

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Gabrielle Sauter

Ch. 4: the south in a Globalizing Economy Economic exchange and trade: historical trends -Globalization as a term describing the growing interconnectedness of the world, has a relatively recent history -the importance of trade to access resources which were not locally avaioable has a much longer history, starting from exchanges between local communities with different natural resource endowments - Colonies were viewed as sources of primary resources -Trade and colonialism were therefore intertwined -The economic activities of these European based companies, often linking in with pre-existing trade networks, in the Americas, Asia, and Africa, led to growing links between different parts of the world which can be seen as a precursor to today;s more intense forms of economic interconnectedness -some places would become the heart of trading while other became the periphery -of course, these trading links and economic connections were not neutral. -some seen as exploitation. Particularly in the dealings of Europeans with the Global South -much of the Global South’s population were taken advantage of and the Global South’s economy, just like most of it citizens, went down a negative path Managing the Global Economy -as the world becomes more inconnected (in an uneven way) there have been calls for new forms of governance institutions for certain regulations -Bretton woods conference (after WWII and the great depression) led to the creation of IMF, World Bank, GATT (which became WTO) -not all member of the organizations are equal (ex. IMF voting rights determined by contributions to the IMF funds) -WTO policies been dominated by the Global North but with recent rise of India and China that may be changing -The international financial institutions have been key in shaping the global economy and driving a globalization agenda. -while there are differences between the organizations, they are all broadly in favor of neoliberal policies -because of this, they have all received criticism for imposing external ideas on Southern govts. and peoples, and also for the negative effects of such policies Imperialism, dependency, and Underdevelopment -spread of capitalism to the Global south not only created inequalities but also led to entrenched positions of disadvantage -European exploitation of mineral resources and formal colonialism all contributed to a process of underdevelopment for African societies Natural Resources and Primary Commodities -Global South often seen as a source of agricultural and mineral resources -many countries in the Global South are indeed dependent on the export of primary products for the bulk of their foreign exchange earnings -such dependence on primary commodities can have severe effects on the economic stability of a nation; changes in global commodity prices, crop failures or resource depletion can result in extreme economic hardship if countries do not have diversified sources of income -reliance on resources is seen as bad due to 1. Fluctuating prices (which WTO has greatly affected by promoting free trade; also seen with jumps in price with increase in demand from China back in 2008) 2. manufactured goods are now preferred. -commodity chains: series of economic interactions linking raw materials through production to the final product of sale. -2 types: Producer driven and Consumer driven 1. In producer driven global commodity chains Transnational Corporations (TNCs) play a central role in controlling the process. Ex. Cars; while research and development, production of components and car assembly will be spread globally, the TNC remains in control 2. For buyer driven commodity chains (ex. Clothing), it is they buyer, most notably the major retailers and brand named companies (ex. GAP and Nike) which are directing what is produced -for primary producers, the contribution to the global commodity chains will be early in the production process (like cotton for clothes or aluminum for cars) -promotion of “fair trade” goods, particularly in relation to primary production, is always a way in which the benefits of global trading can be spread more wisely Oil: economic power in the Global South -while primary products are viewed as problematic, not all are the same -majority of Oil comes from the South -Given the Global dependence on oil, not just for fuel, but also in the petrochemical industries, this geographical pattern represents a contrast to the usual position of the Global South in discussion of the Global Economy -in the South oil is key economic and key political resource (OPEC; Organization of Petroleum Exporting Countries) -as with other primary products, reliance on oil export earning can be problematic. As a non-renewable resource, the economic advantages which oil may bring must be viewed as temporary and policies should be implemented to promote diversification, to avoid a massive slump when the resource runs out, or when alternatives are found. -issues in the way the wealth is distributed. Often the oil money goes to the elites and rarely does that money trickle down to the already poor (example Nigeria) Foreign Direct Investment and the New International Division of Labor -Multinational Corporations (MNCs): Corporation that has the power to coordinate the production of goods or services in more than one country -Transnational Corporations (TNCs): A company that operates in more than one country -Foreign Direct Investment (FDI): Investment by govt. or private companies into foreign countries. -improvements in communication and transport means that production does not always have to based in the global north; access to cheap, but appropriately skilled labor, in the Global South became a key factor in decisions regarding industrial location in some sectors.
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