Capitalism and the Global Economy: Impact and Disparities
Capitalism and the Global Economy
What is Capitalism?
Capitalism is an economic system based on private property and the existence of a free market and competition in which products, services, and jobs are traded.
The Global Economy (GLO Economy)
Globalization produces a great interdependence between the economies of different countries and between different production systems. It creates an economy integrated into a single global economic system, organized under the principles of capitalism. The global economy is characterized by the dominant influence of a small group of multinational companies on global production, trade, and finance.
The globalization process has been driven by large multinational companies and markets, as well as some of the most powerful states and international organizations.
- IMF (International Monetary Fund): Supervises and directs economic policy. It provides loans to poorer countries, contingent on the implementation of specific economic policies.
- WB (World Bank): Finances development projects within countries, imposing its model of development.
- WTO (World Trade Organization): Sets the rules of international trade.
- G8 (Group of Eight): A group formed by the eight countries with the most advanced and powerful economies: USA, Japan, Germany, UK, France, Italy, Canada, and Russia.
Centers and Peripheries in the Global Economy
- Countries that are the center of the global economy: USA, Japan, EU.
- Countries that form the periphery of the global economy: Those experiencing extreme poverty (much of Africa).
- Semi-periphery: Countries that have improved income and population welfare (South America and Southeast Asia).
- India and China are becoming increasingly important.
Consequences of Globalization (Economic, Social, Cultural)
- Globalization yields significant benefits for large companies and major global powers but creates inequities between rich and poor countries.
- Profits are poorly distributed; the rich get richer, increasing the misery of the poorest. The income gap grows.
- Relocation of some production processes causes job losses.
- Economic growth has been at the expense of environmental degradation and resource overexploitation.
- Globalization allows for awareness of the customs and lifestyles of other cultures, leading to cultural uniformity.
- Governments lose decision-making power in the economy to large multinationals.
Developed and Developing Countries
Socio-economic inequality has created two very different groups: developed countries and developing or underdeveloped countries.
Socioeconomic Indicators
- GDP (Gross Domestic Product): The wealth produced within a country in a year, divided by the number of inhabitants. (This is economic data, not including health, education, etc.).
- HDI (Human Development Index): Based on three measurable dimensions: living a long and healthy life, having access to education, and having a decent standard of living. It is calculated based on life expectancy, adult literacy rate, enrollment ratio, and GDP.
- PPA (Purchasing Power Parity): A way to express GDP.
Causes of Underdevelopment
- Colonial past: Many of these countries were colonized by European countries, which exploited their natural resources and hindered industrial development.
- Unequal exchange: In the global economy, not all countries participate on equal terms or with similar profits.
- External debt: A country owes money to another country or to international financial organizations due to loans received to finance its development.
United Nations Initiatives
The UN (United Nations) promotes various initiatives to help poor countries:
- 1966: The United Nations Development Programme (UNDP) manages Official Development Assistance (ODA) to developing countries.
- 2000: Millennium Summit. Objectives:
- Eradicate extreme poverty and hunger.
- Ensure universal primary education.
- Promote gender equality and women’s autonomy.
- Reduce child mortality.