Economy, Globalization, Development, and Urbanization

What is Economy?

Economy is a social relation

Economic practices involve:ProductionDistributionExchangeConsumption

Understanding Economic Production

Cycle

Raw Materials

Raw Materials

Labor

Production Process

Byproduct Product

WasteNew resource or

raw material

“The Economy”

• The concept of “the economy” (as an idea, something that could be spoken about as a separate entity or realm of activity) came into being no more than 300 years ago, alongside a market-based economy predicated on:• Profit-maximization• Rational decision-making

• The economy as a “self-evident totality” is• the outcome of a particular set of economic practices and

relations focused on profit-driven practices of wealth accumulation

• Marked a shift toward thinking of economic relations as separate from other social relations

Market-based economy

Organized and regulated according to the movement of prices (the price of goods, services, etc in a market)

Conceptualizing Economy

Principles of profit-maximization and rational decision-making are taken as essential to “the economy” by classical and neoclassical economistsSome even interpret tribal cultures/economies on

the basis of rational choiceWhat is rational choice?

Self-maximization: the idea that people generally make decisions based on their own self-interest and their ability to accumulate wealth through profit

Neoclassical Economics

Sees economic relations as independent of other social relations, and bound by its own (market) logicAs such, it has power over other social relations

Remember the Tragedy of the Commons?

• Assumes– “rational economic actors” (self-interest)– fixed carrying capacity of land– no communication or trust among users

Alternative views of Economy

Polanyi argued that other forces shape economic behavior

ReciprocationRedistribution

Even market economies depend on non-market social relations

Household laborSharing/givingTrading/bartering

Other Economic Forms and Practices

Hunting-Gathering economies (based on trade, subsistence, etc)

Feudal economies (based on peasants working land and paying tribute to landlords)

Centrally-planned production

Market-oriented post-Fordism

US Economy

• It is common to talk about the United States as a capitalist country

• Criticism of democrats by republicans as socialists (as opposed to capitalists)

• But even in the US, lots of things aren't determined strictly by market forces or logic• Roads, the mail, schools, social security,

medicare/aid, military, some prisons, etc

Economic Determinism

• Marxian view: class relations determine all other social relations

• Neoclassical view: market forces shape all other social relations

Large-scale Economic Forms

Feudalism

• Based on land ownership by a ruling class (lords)

• Workers (serfs) paid tribute to lords in exchange for use of land for subsistence

Merchant Capitalism (800-1600AD)

• Rise of the merchant class•Surplus earned was reinvested in trade routes

• what is surplus?• Eventually, merchants needed another outlet

for investment• Merchants began to invest in handicrafts for

trade, which eventually overcomes profits from trade itself

Industrial Capitalism (1600-1900AD)

• Capitalists continued to invest in the means of production

• Surplus was directed toward building and maintaining ever more concentrated means of production (industrial infrastructure)

• During this time, European economic powers were engaged in colonial practices

Capitalism

During the transition from merchant capitalism to industrial capitalism, a world economic system developed, in which a “core” of countries (in Europe) coordinated economic activity, while a “periphery” provided much of the labor and raw materials

Neoliberalism

Classical Liberalism emphasized free markets and civil liberties

Neoliberalism focuses on free markets and Supply-Side Economic Theory

•reduce government spending•reduce tax rates on income from labor and capital•deregulation•control the money supply to reduce inflation

• extreme reduction in services • release of many thousands of mentally ill patients (dramatic

increase in homelessness) (in the US)• favors wealthy• increased public debt

Globalization

It's a small world after all

• Improvements in transport and communication

• Increased connectivity between distant locations

End of Geography?

• globalization as inevitable

• homogenizing the world• “A state of economic

development where geographical location no longer matters” (O'Brien 1992, Global Financial Integration)

• Local conditions and difference matter less and less

Shrinking World?

• Relative distance between some places and people has become greater (income gap)

• Digital divide – not everyone has access to the technologies that “shrink the world”

• Technologies (like long distance telephony) have reinforced or produced new spatial differentiations: other examples?

• Globalization is not driven by technology, but facilitated by it

• Political forces are also at play

It makes new new relationships between people and things possible.• What does it encourage?• What does it discourage?• Do we live in a global village? What does

that mean? Why or why not?

Views of Globalization

• For: market as Great Equalizer. Globalization goes hand-in-hand with freer markets

• Against: increases inequality• Reformist: globalization as practiced

might be problematic, but might be practiced differently with different outcomes.

Anti-Globalization Movement

• Against corporate/neoliberal globalization

• Argues that neoliberal policies exacerbates poverty, destroys public goods, and degrades the environment

World Systems Theory

Core

• Capital investment• Economic management• Innovation

Periphery

• Export of agricultural products and raw materials

• Manufactured goods tend to be simpler and require high labor inputs

• Manufacturing also often faces looser restrictions (labor, environment, etc)

Semi-periphery

• Performs both functions, but for different parts of the world

• Ex: Mexico• Provides core functions, like economic

management, for Latin America (periphery)• Provides peripheral functions, like labor and

raw materials provision, for the United States (a core country)

Globalization in Historical Perspective

European Colonization

Understanding Economic Production

Cycle

Raw Materials

Raw Materials

Labor

Production Process

Byproduct Product

WasteNew resource or

raw material

Raw Materials

Raw Materials

Labor

Production Process

Economic production

under colonialism

DecolonizationFirst wave - late 1700 and early 1800s (liberation of most colonies in the Americas)

Second wave - post WWII, anti-colonial movement to "respect the right of all peoples to choose the form of government under which they will live"

Cold WarPost WWII struggle between U.S. & U.S.S.R

•Communism vs. Capitalism•regional alliances for defense

• NATO

The (old) New World Order

“We can see a new world coming into view. A world inwhich there is the very real prospect of a new world order, where the United Nations, freed from cold war stalemate, is poised to fulfill the historic vision of its Founders.”-March 6, 1991

Non-State Political Actors

World Trade OrganizationDevelops and enforces international trade regulation

International Monetary FundMonitors international monetary system, promotes free trade, and disseminates information

World BankMakes loans to various states for help economic development

Non-State Political Actors - WTO

"At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. These documents … are essentially contracts, binding governments to keep their trade policies within agreed limits. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives. The system’s overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side-effects. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be “transparent” and predictable."

Non-State Political Actors - WTO

"At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. These documents … are essentially contracts, binding governments to keep their trade policies within agreed limits. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives. The system’s overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side-effects. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be “transparent” and predictable."

Non-State Political Actors - WTO

"At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. These documents … are essentially contracts, binding governments to keep their trade policies within agreed limits. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives. The system’s overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side-effects. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be “transparent” and predictable."

Non-State Political Actors - WTO

"At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. These documents … are essentially contracts, binding governments to keep their trade policies within agreed limits. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives. The system’s overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side-effects. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be “transparent” and predictable."

Structural Adjustment Programs

• Neo-liberal approach initiated by 2 multilateral regulatory institutions• International Monetary Fund (IMF)• World Bank

• Intended to:• reduce state interference in the global ‘Free Market’• decrease corruption

• Privatization of utilities, education, and other previously public institutions and practices

• Encourages the sale of public land to private interest

Questions

Who do Structural Adjustment Programs benefit most?

How do local people & communities manage economies & resources?

What do alternative energy/resource innovations mean to poorer places?

Recent North American Economic History-

Made possible by increasing global economic integration

U.S. has considerable influence in international fields

• United Nations, World Bank, IMF, World Trade Organization

• Tariffs, Trade Barriers, Subsidies, & Competition• develop/foster trade relations that benefit the U.S.

disproportionately

NAFTA (North American Free Trade Agreement)• unbalanced in some arenas (hierarchical) • standardized pollution & transport safety guidelines

Information Technology• Outsourcing (S./SE Asia, E. Europe, & Canada)• Will money saved on wages & infrastructure be reinvested

in U.S.?• create new jobs? When? For whom?

Reaganomics (also "Thatcherism")Supply-Side Economic Theory/Neo-liberalism

•reduce government spending•reduce tax rates on income from labor and capital•deregulation•control the money supply to reduce inflation

•extreme reduction in services • release of many thousands of mentally ill patients (dramatic

increase in homelessness)•favors wealthy•increased public debt•created the most inequality between rich and poor

Agriculture makes up a small share of GDP

•farmers remain economically and politically powerful

•In 2002 the market value of U.S. farm production amounted to more than $200 billion,• $57 billion for livestock • $40 billion for grains (corn, wheat, and soybeans)• $24 billion for poultry and eggs• $20 billion for milk and other dairy products

• U.S. 2 million farms, • 1.6 percent of farms in 2002 accounted for half of all

sales.

Manufacturing•1960s: Decline – Unions

• higher wages & better working conditions • higher costs of production

•1980s: Further Decline – South-east Migration

•1994: NAFTA• removed agricultural tariffs• lowered significantly other trade barriers • many manufacturing jobs move to Mexico

• lower wages• fewer (if any) workplace regulations

Service & Information•¾ of U.S. GDP

•Bimodal Employment– • both low-skilled/low wage & high-skilled/high

wage

•Knowledge Economy• information technology

• more mobility• digital divide

• inner-cities & rural communities left behind

Thinking Critically About Development

What is development?

How do we measure it?

Why do we measure it that way?

Who determines how we measure it?

UN & IMF suggest that every nation should

determine its own “path to development”.

Where is this place called “development”? Who

determines what/where it is?

Does the concept of development require the

peoples of the "Third World" to pursue the

goals/achievements of the First?

Is there “no alternative” to development?

• No clear or standard definition

• Often refers vaguely to "progress", "improvement", or occasionally "growth"

• There is a sense that development makes things better, but how depends of how development is being pursued

What is development?

Third World Debt

• Rooted in colonialism• 1970s energy crisis• Oil shortage• High energy prices required 3rd world nations to

borrow from World Bank/IMF at high interest• Debt is difficult or impossible to pay off• Often partially forgiven in exchange for

privatization and opening markets (esp in the case of socialist states)

Reading Development Policy Critically

UN Food and Agriculture Organization (UNFAO) on

World Hunger

Undernourishment (UNFAO measure)• 1960 – 60% in developing countries• 2006 – 14% (despite population growth)

So, we're in good shape, right?

Then why all the bad press?

Contradictory Evidence?

Increased food production per capita

But this doesn't fit what we normally see. Why not?

Two Critical Methods of Analyzing World Hunger

Critique the measure and its methods

Ask what questions this approach doesn't ask

Critique the Method:Measuring World Hunger

1.How much food is there?

2.How many people are there?

3.Where is the food going?

4.How much food do people need?

5.Who is getting enough and who isn't?

Methodological Summary (FAO method)

1.Determine total food available nationally (in calories)

2.Divide by population for per capita food (by country)

3.Estimate distribution of food among population (simple measure of inequality/wealth – household surveys)

4.Determine threshold of caloric intake below which people are considered “undernourished”

Problems with the FAO's measurement

Biased toward national-level food securityDoes not properly account for poverty-related

food insecurityNormal distribution doesn't capture the situation

“on the ground”Assumes only 'light activity', even in countries

where manual labor is the norm

Critical Analysis #2:What doesn't the statistic show?

Doesn't account for micronutrient or protein intake

Doesn't account for riskAssumes a hypothetical “normal distribution” of

income inequality. Can't account for extreme cases of inequality

Omissions the FAO's measurement

Doesn't account for micronutrient or protein intake

Doesn't account for riskAssumes a hypothetical “normal distribution” of

income inequality. Can't account for extreme cases of inequality

Malnourishment

850,000,000 people without enough food3 Billion without access to proper nutrients,

(esp proteins)Many people have access to food but lack

access to nutritious food

Undernourishment (UNFAO* measure)• 1960 – 60% in developing countries• 2006 – 14% (despite population growth)

• 2006 – >50% malnourished

• Is this progress?

* United Nations Food and Agriculture Organization

Omissions in the FAO's measurement

Doesn't account for micronutrient or protein intake

Doesn't account for riskAssumes a hypothetical “normal distribution” of

income inequality. Can't account for extreme cases of inequality

Risk

Vulnerability Adaptability Resilience

What conditions produce risk?

environmental changes war/conflict economic changes

External events Social Conditions

Problems with the FAO's measurement

Doesn't account for micronutrient or protein intake

Doesn't account for riskAssumes a hypothetical “normal distribution” of

income inequality. Can't account for extreme cases of inequality

Unequal Wealth Distribution at Different

Scales

Consumption Rates by Country

Source: myfairshare.org

Unequal distribution up close:

São Paulo, Brazil

What is sustainable development?

What is Sustainable Development?

• As many as 80 different definitions (Fowke and Prasad 1996)

• Best known from UN WCED Brundtland Report• “development that meets the needs of the

present without compromising the ability of future generations to meet their own needs”

• “Environmental Paradox”• Mismatch between what the world can supply

and what we demand

Three Pillars of Sustainable Development

(Triple Bottom Line)

Approach I:Extend the Resource Base

• Better efficiency• Use of renewables• Replacing depleted resources with other

resources that can be used for the same purpose

• Mitigating effects of depletion

• In short, adapting the planet to fit our needs

Approach II:Reduce Pressure on Resources

• Consume less

• Shape our own behavior to suit the environment's limits

Approach I:

• No need to rethink nature (human centered)• People are separate from nature• Nature is a resource to be used by people• We have a right to dominate nature

• or the meaning and value of development/economic progress

• Assumes we can find the solution to any environmental problem that arises

Examples of Approach I

• Ecological Modernization• Efficient use of resources is the solution to the

environmental paradox

• Environmental Justice• Environmental ills resulting from economic

development must be equitably distributed

Approach II: Changing Demands Placed on Earth

• Sees approach I as “sustaining development” rather than sustaining the environment

• Assumes that nature has its own rights and is not just there to serve people's interests

• Often includes critiques of economic development• Need to redefine wealth and progress in other

terms

Examples of Approach II

Deep ecology• Argues that the rights of nature to exist are not

being respected

Examples of Sustainable Development Efforts

• Microfinance• Ecotourism• Debt-for-Nature• Fair Trade

Ecotourism

Preserving Naturein the Third World:

Debt-for-nature swaps

• Conservation groups buy a country's debt in the form of reduced bonds

• Debt is 'forgiven' in exchange for a commitment to preserve forests, etc

Debt-for-nature problems

• Doesn't overcome the underlying in security of Third World Nations

• Accounts for a tiny portion of debt (book example: $650,000 paid off. $1 trillion is owed)

Fair Trade

• Enterprise Initiatives• Standards determined by a company and used to

track their own production and progress

• Labeling Initiatives• Independent boards determine standards and

evaluate companies/practices

Urbanization

Historical Development of Cities

What first gave rise to cities?• Agricultural revolution probably took

between 4 and 5 thousand years• Hunting/gathering requires large territory

and produces little food• Agriculture uses comparatively little land

and produces surplus

• Farming produced enough food so that people could pursue other occupations (division of labor)

• Allowed for the differentiation of classes, as well as the development of governments, armies, and religious institutions

Characteristics of cities

• The earliest cities (7,500 to 10,000 years ago) didn’t last

• Not until ~3,000 B.C. did “permanent” cities begin to develop

• Division of labor and a ruling elite• Culturally and socially productive• Formalized system of rights and taxation

that supported building of public structures

Graphic of the places around the world where agriculture developed independently

Characteristics of Cities (con’t)

• In early cities, control of food and other resources is highly centralized

• Most likely, cities did not come first. Rather, power structures, in which powerful individuals were able to extract surplus from others, developed first, which enabled the building of cities in order to reinforce that power structure.

• Often religion-based, connecting economy, religion, and government

Characteristics of Cities (con’t)

While cities formed the center of power structures, their power extended into the countryside.

What do cities afford to residents?

• Protection from enemies• Bring together merchants and buyers

(serve as marketplaces)• Large workforce for producing more

complicated products• Opportunities for social interaction

(diversity)

Industrial Towns

• Began to be shaped according to economic activities rather than religious or administrative ones

Social Structure of Industrial Capitalism

• Feudal lords had lost power, replaced by capitalists

• Peasants and artisans were now the working class

Living Conditions in Early Industrialism

• Long working hours (65+)• Work and home became different places• Alternatives to working: prison (vagrancy)

or starvation• Low wages• Water and sewer almost non-existent• Air and noise pollution• Factories emptied waste into nearly bodies

of water

Key Points about Industrial Capitalism

• Cities organized to facilitate production, not health or happiness

• Increasing polarization of wealth

• Commoditized urban space

Urban Growth in Europe1800-1890

Population

City 1800 1890London 864,845 4,232,118

Paris 547,756 2,447,957

Berlin 201,138 1,578,794

Vienna 232,000 798,719

Glasgow 81,048 782,445

Budapest 61,000 491,938

Madrid 156,670 470,283

Lisbon 350,000 370,661

Causes of Population Growth in early Capitalism

• Decrease in death rate (esp infant mortality rate) due to better sanitation, medical advances, etc

• Urban growth due to migration• poor rural people farming on “common” lands in

England were forced to move when lands were privatized for use in raising sheep for commercial consumption

Rise of the Corporate City

• ~1950s, a trend began that privileged profit over the manufacture of goods

• Companies now produce (or put their names on) many different kinds of products, rather than just one

• Buying a company can be more profitable than competing with it

Characteristics of the Corporate City

• Spatially dispersed economic activity• Office space and retail instead of

manufacturing (though that still exists)• Suburban sprawl• Wealthy and middle class moving out to

the suburbs• Changing downtowns

World Urbanization

• Urban populations have been increasing gradually since the development of agriculture

• In 1900, only 13 cities had populations greater than 1 million.

• None of the top 13 are in Europe and only New York and Los Angeles are in a developed country.

• By 2007, there were 300 such cities.

28

Table 22.02

Table 22.01

Causes of Urban Growth

• "Natural" Increase through reproduction• Fueled by improved food supplies and better

sanitation• Immigration

• Caused by push factors forcing people out of the country, and pull factors drawing them into cities

Push Factors• Fleeing

overcrowding in rural areas•Declining productivity of rural areas (fewer jobs)

• Fleeing social, political, economic instability

Push Factors• Jobs• (Relative Freedom

from gender and ethnic/racial oppression

• Entertainment• Social mobility and

access to power• Urban 'gravity' - the

larger the city, the greater the pull (and the growth)

Urban Challenges

Urban Challenges

• Traffic and Congestion• Air Pollution• Sewer Systems and Water Pollution

• Only 35% of urban residents in "developing" world have satisfactory sanitation.

• One third do not have safe drinking water.

Sewage in Jakarta, Indonesia

Current Urban Problems

Housing• At least 1 billion people live in slums (legal but

inadequate multifamily tenements) of central cities and in shantytowns (settlements created when people build their own homes on the outskirts of cities).

• Sometimes people simply occupy land that they neither own nor rent, creating squatter towns which can have thousands of residents.

• Around 100 million people have no home at all.

Shantytown

Current Urban Problems ("Developed" World)

Rapid growth of cities that accompanied industrialization has mostly slowed or reversed

• Many of the environmental problems have been reduced, but not overcome.

• Many of the major polluters have moved to developing countries.

• In U.S., businesses have moved west and south, where wages are lower.

• Automobiles and computers enable workers to live outside cities or in suburbs (but Europe and North America still considered 75+% urban)

But this has created new problems

Urban Sprawl

• In the US, the bulk of new housing is in large tract developments that extend beyond city edges to less expensive land• Consumes about 200,000 ha of U.S. agricultural

land annually• Planning authority is often divided among many

small local jurisdictions, and there is no way to regulate growth.

Urban Sprawl

• New sites must build roads, water, sewers, schools, etc.

• In Atlanta, the population grew 32% between 1990 and 2000, but the land area it occupied grew 305%.

Urban Sprawl

• Distance from work = need a car

• Average U.S. driver spends the equivalent of one 8 hr day/week behind the wheel

• In some areas, it is estimated that one-third of all land is devoted to automobile infrastructure

• Traffic congestion costs U.S. $78 billion annually in wasted fuel and time

Urban Sprawl

• Pop decline in the city → no tax base → neglected infrastructure.

• Poor left behind → few jobs, can't commute• 1/3 of Americans too young, too old, or too

poor to drive. Car oriented development causes isolation.

• Sprawl promotes sedentary lifestyle.

Population DensityRelative to Distance

from CBD

Green Urbanism

• New development is often on farmland or forest.

• Green urbanism redevelops existing cities to be ecologically sound.• Focus on in-fill and brownfield development• Build high density, low-rise, mixed income housing

near city centers• Provide incentives for alternative transportation• Encourage ecological building techniques

“New Urbanism” Movement

• Recapture small town feel in big city• Organize city into modules of 30,000 to 50,000 people• Determine in advance where development will take

place• Locate everyday services more conveniently• Increase jobs in a community by locating offices and

commercial centers near suburbs• Encourage walking and low-speed vehicles• Promote diversity in housing designs• Create housing “superblocks”

Rockville, MD Town Square competition

Rockville, MD Town Square competition

Not for public use

Rockville, MD Town Square competition

Not for public useOpen forbusiness

(by contract)