THE GLOBAL ECONOMY: CAPITALISM IN CRISIS

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THE GLOBAL ECONOMY CAPITALISM IN CRISIS?

• Jeff Dense
• POLS 221
• Winter 2008

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DEVELOPMENT

• States can be distinguished by their levels of
• Technology
• Population
• Resources
• Which of these is the key to development?

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DEVELOPING STATES

• In order to become developed states must
• Accumulate investment capital
• Build economic infrastructure
• Diversify economy
• Increase labor productivity
• Expand employment

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DEVELOPING STATES

• In order to become developed states must
• Manage natural resources
• Expand trade to obtain capital
• Check population growth
• Reform socioeconomic processes
• Maintain political stability

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ECONOMIC DISPARITY BETWEEN STATES

• States can be characterized as
• Developed- rich, industrialized (USA)
• Less-Developed- poverty stricken 3rd world (most
  of Latin America, Africa, Asia)
• Categorize via simple measures such as
• Per capita income
• Per capita gross domestic product

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GROSS NATIONAL INCOME (GNI) PER CAPITA

• Best single indicator of economic capacity and
  progress
• Includes terms of trade adjustment
• Updated annually
• Adjusted for inflation average of G-5 (US, UK,
  Japan, Germany, France) countries

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GROSS NATIONAL INCOME PER CAPITA

• WORLD BANK INCOME CATEGORIES
• Low Income 750 or less (63)
• Lower Middle Income 756-2995 (54)
• Upper middle Income 2996-9265 (38)
• High Income 9266 (52)
• Problems with this categorical scheme?

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GROSS NATIONAL INCOME PER CAPITA, 2001
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GROSS NATIONAL INCOME PER CAPITA, 2001
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DEBT BARRIER TO DEVELOPMENT??

• SEVERELY INDEBTED (44)
• -debt service to GNI ratio 80 or
• -debt service to export ration 220
• MODERATELY INDEBTED (43)
• -60 of either of above measures
• LESS INDEBTED (60)
• NOT CLASSIFIED BY INDEBTEDNESS (60)
• Who is this money owed to???

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LOW INCOME COUNTRIES UNDER STRESS (LICUS)

• GNI per capita under 875
• Poor policy performance
• Low service delivery capacity
• Lack of responsiveness to citizens
• Need for fundamental government reform
• Ex- Cambodia, Papua New Guinea

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DEVELOPMENT AND THE ENVIRONMENT

• Environmental pressure is a result of
• Increased Affluence
• 24 trillion global Gross National Product
• Despite this outward wealth
• 1.2 billion people live on less than 1 a day
• ½ the world lives on less than 2 a day

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INCREASED AFFLUENCE

• Consumption
• Fuel wood use has doubled last 50 years
• 60 increase in use of paper
• Pollution
• 33 people in developing countries do not have
  clean water
• 60 lack basic sanitation

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DEVELOPMENT AND THE ENVIRONMENT

• Pressure on the environment is also a result of
  persistent poverty
• ¼ of worlds people lack adequate housing
• 1/5 lack access to modern health services
• 1/5 of children do not attend school through the
  fifth grade
• 1.1 billion people are malnourished
• 2 billion people are anemic

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NO EASY ANSWERS

• Q- What is the proper relationship between
• Environmental Degradation?
• Poverty?
• Sustainable Development?
• Q- What are the effects of globalization on the
  above three problematic concerns???

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JUBILEE MOVEMENT 3RD WORLD DEBT

• Reduce people living in poverty by ½ by 2015
• Universal primary education access by 2015
• Equal education for girls by 2005
• Reduce child mortality rates by 2/3 by 2015
• Reduce of women dying from childbirth by 2/3 by
  2015
• Universal access to family planning and
  reproductive health services by 2015

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HUMAN DEVELOPMENT INDEX (HDI)

• The United Nations Development Program (UNDP)
  argues that the linchpins of human development
  are
• A long healthy life,
• Knowledge, and
• A decent standard of living

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HUMAN DEVELOPMENT INDEX (HDI) INDICATORS

• Life expectancy
• Adult literacy rate
• Gross enrollment ratio (GER)
• Gross Domestic Product per capita
• What measures are missing???

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HUMAN DEVELOPMENT INDEX

• HIGHEST
• 1 Norway
• 2 Australia
• 3 Canada
• 4 Sweden
• 5 Belgium
• 6 U.S.A

• LOWEST
• 157 Mozambique
• 158 Ethiopia
• 159 Burkina Faso
• 160 Burundi
• 161 Niger
• 162 Sierra Leone

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GENDER-RELATED DEVELOPMENT INDEX (GDI)

• Female life expectancy at birth
• Female adult literacy rate
• Female estimated earned income
• The above measures contribute to Gender
  Empowerment Measure (GEM)
• -Percentage of Parliamentary seats, legislators,
  senior officials and managers

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GENDER EMPOWERMENT INDEX

• 1 NORWAY
• 2 ICELAND
• 3 SWEDEN
• 4 DENMARK
• 5 FINLAND
• 11 UNITED STATES OF AMERICA

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DEMOCRACY AND DEVELOPMENT

• Political freedom and the ability to make
  decisions that effect ones life is a fundamental
  human right and are an integral facet of human
  development

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DEMOCRACY AND DEVELOPMENT

• Brunei, Qatar, Kuwait, Oman, Saudi Arabia and the
  United Arab Emirates have never recognized the
  right of women to vote
• Persian Gulf War US liberates Kuwait??

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DEMOCRACY AND DEVELOPMENT

• Democracy helps protect people from economic and
  political catastrophes such as famine and descent
  into chaos
• 1958-61 30 million die of famine in China
• 1995-present 10 of North Korean population dies
  of famine

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DEMOCRACY AND DEVELOPMENT

• Political freedom empowers people to press for
  policies that expand social and economic
  opportunities
• Open debates help countries set policy
• Examples Democratization movements in Indonesia,
  Mexico, Poland, Brazil

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REGIMES

• Sets of implicit or explicit principles, norms
  rules and decision-making procedures around which
  actors expectations converge in a given area of
  International Relations.
• -Stephen Krasner
• Examples IMF, WTO

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INTERNATIONAL BANK FOR RECONSTUCTION AND
DEVELOPMENT

• Also known as the World Bank
• Bretton Woods Conference (1944)
• Intent nonpartisan, nonpolitical lender purely
  aimed at developing the 3rd world
• -Finance development projects
• -Collect interest on those loans over time

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WORLD BANK DEMOCRACY

• Equal voting on procedural matters, but
• WEIGHTED VOTING on substantive matters such as
  loans and their terms
• The G-5 countries (USA, UK, Japan, France,
  Germany) control over 40 of voting power
• Is this democratic???

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THE COST OF HELP

• Cash crops as a means to finance loans, but
• Unwilling to fund land reform efforts
• Must be repaid in loaners currency (US)
• Buy American technology purchases favor 1st
  World companies
• Capitalism Forever World Bank wont fund
  reformist (socialist) efforts

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IMF AUSTERITY MEASURES THE COST OF HELP

• Cutback government spending
• Public sector layoffs
• Cut health and pension benefits
• Sell off state enterprises
• Maintain high interest rates

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IMF AUSTERITY MEASURES THE COST OF HELP

• Rise in transportation prices
• Rise in energy prices
• Devaluation of currency
• Cut health and pension benefits
• Massive borrowing and the cycle of debt

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IMF AND MASS PROTESTS

• These austerity measures have sparked protests in
• Argentina
• Indonesia
• Colombia
• Ecuador
• Etc., etc.

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DEMOCRACY IN ACTION
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WORLD TRADE ORGANIZATION

• 140 member states
• Accounting for 97 of world trade
• Decisions made by entire membership
• Most decisions made by consensus
• Majority votes available but have never been used

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WORLD TRADE ORGANIZATION (WTO)

• Only IGO that deals with global rules of trade
  between nations.
• Ensure that trade flows
• Smoothly, Predictably, Freely
• As possible
• Who benefits from this oversight??

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WORLD TRADE ORGANIZATION

• Administer trade agreements
• Act as a forum for trade negotiations
• Settle trade disputes
• Review national trade policies
• Assist developing countries in trade policy
  issues, via technical assistance and training

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GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)

• Rulebook of WTO
• 1986-1994 Uruguay Round
• 30,000 pages
• 30 agreements and separate commitments
• Ex-General Agreement on Trade in Services
• Ex- Intellectual Property

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DEVELOPMENT AND TRADE

• ¾ of WTO members are developing or least
  developed states
• Given longer period to implement agreements and
  commitments
• Helping developing states increase trading
  opportunities or maintain status quo???

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WTO CRITIQUES

• WTO Agreement on Agriculture
• Required states to liberalize and remove
  government subsidies for agricultural commodities
• Northern states (US, eg) continue to provide
  subsidies to agricultural sector
• US, Japan, EU-20,000 a farmer

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WTO CRITIQUES

• The most scathing critiques of the WTO deal with
  its lack of concern for
• Environment
• Labor unions
• The cost of free trade?
• These concerns led to widespread protests in
  Seattle in 1999

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SLEEPLESS IN SEATTLE
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SEATTLES FINEST
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ROOTS OF UNDERDEVELOPMENT

• The most crucial problem facing states is
• How do states meet the most basic needs of human
  needs, providing enough food and overcoming
  chronic hunger
• A person who is always hungry is always poor

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GLOBAL HUNGER
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GLOBAL HUNGER

• 35,000 people a day die of starvation
• 300 million chronically hungry children
• 170 million dont receive food at school
• 130 million dont attend school at all
• This short term hunger impedes a childs ability
  to learn and achieve

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½ of all children in India are malnourished
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WHAT ARE THE CAUSES OF FAMINE???
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WORLD FOOD PROGRAM

• Organize school feeding programs
• Provide meal, enrollment goes up
• 2000-Fed 12.3 million in 54 countries
• 40 increase in academic performance in 2 years

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LONG TERM BENEFITS OF WORLD FOOD PROGRAM

• Reduce stress on household food security
• Encourage family to send girls to school
• -illiterate girls marry younger
• -girls who attend school have less children
• -each year of additional school leads to a 5-10
  reduction in child mortality

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WORLD FOOD PROGRAM

• A hot meal at school in Cambodia strengthens
  minds and bodies for today and tomorrow.  
• Tomorrows leaders need food for thought today.

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HUNGER

• Is the cause of hunger
• Too little food?
• Too many people?
• Too much food for rich elites while the poor go
  hungry?
• Capitalism

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WHAT IS TO BE DONE?

• Need to address the issues of
• Opportunity
• Empowerment
• Security
• Capabilities
• For all human beings.

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WHAT IS TO BE DONE?

• This can be done by
• Increasing the resource base of the poor
• Support of green technology
• Pricing policies that minimize consumption
• Investing in alternative energy sources and
  infrastructure

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WHAT CAN YOU, THE GLOBAL CITIZEN, DO?

• THINK GLOBALLY
• ACT LOCALLY
• WHAT WILL YOU DO???