1. GS 1 – Introduction to Global Studies Professor: Dr. Jean-Paul Rodrigue Hofstra University, Department of Global Studies & Geography Topic 3 – Countervailing Forces to Globalization A – Economic Development B – Inequalities C – War, Conflicts and Terrorism

2. © Dr. Jean-Paul Rodrigue Conditions of Usage ■ For personal and classroom use only Excludes any other forms of communication such as conference presentations, published reports and papers. ■ No modification and redistribution permitted Cannot be published, in whole or in part, in any form (printed or electronic) and on any media without consent. ■ Citation Dr. Jean-Paul Rodrigue, Dept. of Global Studies & Geography, Hofstra University.

3. © Dr. Jean-Paul Rodrigue A – ECONOMIC DEVELOPMENT The Notion of Development Themes of Development Waves of Development The First Crisis of Globalization

4. © Dr. Jean-Paul Rodrigue The Notion of Development ■ What is development? Development is a process. Improvement of the welfare of the population: Development is about people, not necessarily the economy. Create an enabling environment for people. Long term process. Different societies can have different development goals: Promote private accumulation of wealth. National and collective interests. Reducing national inequalities. “Hard” (e.g. infrastructure) versus “soft” (e.g. education) approaches.

5. © Dr. Jean-Paul Rodrigue The Notion of Development ■ Development goals Adequate food and water supplies. Healthcare system. Sanitation and disease control. Employment opportunities. Educational opportunities. Rule of law and protection of rights and private property. Access to housing. Low environmental impact of society. ■ Conditions Appropriate social, political, legal and economic conditions.

6. © Dr. Jean-Paul Rodrigue The Notion of Development ConditionsOutcomes -Health -Education -Quality of life -Rights -Equity -Rule of law -Employment -Surplus Human Capital Physical capital Development Social Political Economic

7. © Dr. Jean-Paul Rodrigue The Notion of Development Physical Capital Infrastructures and resources that can be used in a productive manner. Public utilities: Energy, telecommunications, water supply and waste disposal. Public works: Roads, dams, irrigation canals. Transport infrastructures: Ports, airports, railways, public transit systems. Human Capital The total population and its qualification level. Development of human capital: Supported by education systems. Reproduce and improve the productivity of the labor force. Information economy: Human capital a resource that differentiates nations. Not always because of wage differences, but because of differences in the qualification level.

8. © Dr. Jean-Paul Rodrigue The Notion of Development ■ Human Development Index (HDI) Composite indicator developed in 1990 by the United Nations Program for Development (UNPD). Comparative measure of development. Ranges from 0 to 1: The country having the highest score for a variable has a value of 1 and other countries are graded from how far they are from this best score. Three major sets of variables: GNI (Gross National Income) per capita. Health index. Education index.

9. © Dr. Jean-Paul Rodrigue Components of the Human Development Index GNI per capita Reflective of the standard of living. GNI per capita adjusted to take account of the purchasing power parity. Purchasing power parity considers the cost of living in each country and adjusts the GDP accordingly. Health index Life expectancy at birth. A good health system is likely to improve the life expectancy significantly in a nation. Education index Mean years of schooling.

10. © Dr. Jean-Paul Rodrigue Share of the World GDP, 2011 (Current USD)

11. © Dr. Jean-Paul Rodrigue World Nominal GDP, 2007, 2011 (in billion USD)

12. © Dr. Jean-Paul Rodrigue Global Gross Domestic Product and Human Development Index, 2010

13. © Dr. Jean-Paul Rodrigue Measuring Development: Social Indicators DefinitionGlobalization Life expectancy Number of years a person is expected to live. Based on current death rates. Positive impacts (increase) Fertility Number of live births per female of reproductive age (15-49). Indicates population change over a long period of time. Positive impacts (lower) Infant mortality Numbers of deaths of infants (below 5 years) year per 1000 live births of the same year. Reflects the quality of the health system. Positive impacts (lower) Adult literacy People above 15 years able to read standard instructions. Positive impacts (increase) Child labor Economically active children under the age of 14. Can combine work and education. Mitigated impacts

14. © Dr. Jean-Paul Rodrigue Life Expectancy EraLife expectancy Neanderthal (350,000 – 25,000 BC)20 Upper Paleolithic (40,000 – 10,000 BC)33 Neolithic (8,500 – 3,500 BC)20 Bronze Age (3,500 – 1,200 BC)18 Classical Greece and Rome (500 BC – 400 AD)28 Medieval Britain (400 – 1500 AD)33 Late 19 th Century in Western Europe37 Average Global Life Expectancy (2006)66

15. © Dr. Jean-Paul Rodrigue World Average Life Expectancy, 1950-2010

16. © Dr. Jean-Paul Rodrigue Life Expectancy at Birth, Selected Countries (Average for both sexes)

17. © Dr. Jean-Paul Rodrigue Total Fertility Rate, Selected Countries, 1995-2010 Replacement rate (2.1)

18. © Dr. Jean-Paul Rodrigue TFR among Developed Countries, 2005, 2010

19. © Dr. Jean-Paul Rodrigue Infant Mortality Rate, 2000

20. © Dr. Jean-Paul Rodrigue Adult Literacy Rate (% above 15 years), 2002

21. © Dr. Jean-Paul Rodrigue Percentage of Economically Active Children Aged 7-14

22. © Dr. Jean-Paul Rodrigue Growth IndustrializationIndustrialization State Intervention vs. Market Forces State Intervention vs. Market Forces TradeTrade Themes of Development ■ Economic growth Promotion of more advanced and intensive economic activities: Education. Investment. Technical improvement. New enterprises. Economic development is always accompanied by economic growth. Accumulation of a surplus (savings/profits) from individuals and enterprises. Reinvestment of surplus: Expansion of economic activities. Creation of new activities. Surplus

23. © Dr. Jean-Paul Rodrigue Themes of Development ■ Industrialization Increase the output of an economy: Development of manufacturing capabilities. Development of labor capabilities. Additional capacity for innovation. Agricultural productivity: Important to support industrialization and urbanization. Frees labor and induces demand. Globalization and industrialization: Importance of foreign agents (e.g. multinationals). Global markets versus national demands.

24. © Dr. Jean-Paul Rodrigue Themes of Development ■ Trade Reflects the openness of a country to outside influences. Integration to the global economy. International trade: Major way to improve an economy. Selling agricultural products, minerals and manufactured goods. Import equipment, technologies, capital and know-how for expansion of the industrial sector. External demand is the main drive towards the choice of what is being produced. Dependency to foreign market is a drawback of relying strongly on external forces for development.

25. © Dr. Jean-Paul Rodrigue Themes of Development ■ State intervention and market forces Development from above (State) and from below (market). State intervention is dominant as a lever for development: “Protection” of the national economy. Subsidies and regulatory advantages. Contemporary changes in a global economy: Abolition of tariffs and custom limitations. Increased involvement of the private sector. Multinational corporations and deregulation. Constant shift between the level and extent of State intervention versus market forces.

26. © Dr. Jean-Paul Rodrigue Common Problems Linked with Government Intervention Bureaucracy Heavy administrative burden. Slow to respond, adapt and change. Irresponsibility Limited accountability for wrong policies; “No bad deed goes punished”. Misallocations Accumulation (diversion) of scarce capital in non-productive assets. “Pork barrel” politics. Parasitical stance on the productive economy. Corruption Using public power to regulate, coerce and confiscate. “Magic wand” syndrome Belief that any problem can be fixed by an appropriate government policy and regulation. Lead to more policies and regulation.

27. © Dr. Jean-Paul Rodrigue Public Sector Employment, 2005 (in 1,000s)

28. © Dr. Jean-Paul Rodrigue Government Impacts on Economic Growth Economic FactorImpact Increasing savingsLower savings because of dependency on government support (welfare, SS) Increased capitalGovernment absorbs capital instead of private sector Increased earningsReduced earnings because of reduced capital and regulation (compliance) Lower interest ratesArtificial rate settings (boom / bust) Elimination of inefficient producers (bankruptcy) Bailout of politically connected inefficient firms

29. © Dr. Jean-Paul Rodrigue American Government Interventions and their Costs SpendingCostCost (Inflation-Adj.)%GDP (Year) Marshall Plan$12.7 billion$115.3 billion5.20% (1947) Louisiana Purchase$15 million$217 billionunavailable Race to the Moon$36.4 billion$237 billion3.70% (1969) S&L Crisis$153 billion$256 billion2.79% (1989) Korean War$54 billion$454 billion14.23% (1953) The New Deal$32 billion$500 billion56.74% (1933) Invasion of Iraq$551 billion$597 billion5.03% (2003) Vietnam War$111 billion$698 billion6.78% (1975) NASA$416.7 billion$851.2 billion3.02% (2007) WWII$288 billion$3,290 billion129.09% (1945) 2008-09 Credit Crisis Bailout $11,563 billion 81.06% (2008)

30. © Dr. Jean-Paul Rodrigue Waves of Development 17851845190019501990 Water power Textiles Iron Steam Rail Steel Electricity Chemicals Internal-combustion engine Petrochemicals Electronics Aviation Digital networks Software New Media 60 years55 years50 years40 years30 years (?) Pace of innovation 1 st Wave 2 nd Wave 3 rd Wave 4 th Wave 5 th Wave

31. © Dr. Jean-Paul Rodrigue The Five Waves of Development First wave (1785-1845) Beginning of the industrial revolution (England). Agricultural surpluses, savings and investment. Productivity growth in agriculture and in new industrial activities. Textiles, iron and water power. Second wave (1845- 1900) Acceleration in the generation of surpluses. Growth in the investment level. 5 to 10% of the national income. Coal, steam and railways. Third wave (1900-1950) Phase of maturity as investment levels reach 20% of national income. Electricity, chemicals and internal combustion engine. Fourth wave (1950- 1990) Mass consumption society (surpluses, savings and investment). Tertiary sector taking a growing share of the economy. Petrochemicals, electronics and aviation. Fifth wave (1990-2020?) Technology and information are the driving forces. De-industrialization of several developed countries.

32. © Dr. Jean-Paul Rodrigue Relationships between per Capital Income and Economic Employment Sectors

33. © Dr. Jean-Paul Rodrigue GDP Share of Manufacturing, Selected Countries, 1970-2011

34. © Dr. Jean-Paul Rodrigue U.S. Goods and Services Related Jobs, 1950-2008

35. © Dr. Jean-Paul Rodrigue Male Labor Force per Economic Sector, Selected Countries, 2000-2004

36. © Dr. Jean-Paul Rodrigue The First Crisis of Globalization CAUSES Monetary system (fractional reserve banking, fiat currencies) CAUSES SYMPTOMS Debt, asset inflation SYMPTOMS CONSEQUENCES Misallocations (bubbles) CONSEQUENCES Production Consumption Distribution

37. © Dr. Jean-Paul Rodrigue Business Cycles: The Impacts of a Credit-Driven Boom ExpansionRecession Peak Trough Expansion Credit-Driven Boom Depression Recession QE

38. © Dr. Jean-Paul Rodrigue Blowing Bubbles: From Technology to Commodities Tech / Stock Bubble Housing Bubble Commodities / Trade Bubble

39. © Dr. Jean-Paul Rodrigue The Laws of Unintended Consequences SocialismFundamentalismProtectionismEnvironmentalism Concept Distribution (forceful) of wealth through a variety of programs. Retrenchment to religious beliefs. Characteristic of many religions. Mostly associated with Islam. Belief that the national economy is harmed by trade or foreign interests. Identification and mitigation of environmental issues. Issue “Looters and moochers” Refuse (sometimes violently) different forms of globalization (products or culture). Impose higher duties or restriction on trade. Dogmatism. Consequ ences Lead to growing involvement of the government in the economy. Misallocations. Promotes isolation, economic and technological backwardness and a lack of skills. Higher costs and limited opportunities. Constraining legislation and regulation of activities.