User:Sooner016/World stratification

In sociology, social stratification is the hierarchical arrangement of social classes, castes and strata within a society. When studying stratification, most social scientists study groups of people within a nation, usually stratifying them based on wealth, power, and occupational structure. Dependency theorists began to think about stratificatin on a global scale. Instead of classes within a society, they studied how societies themselves fit into a world stratification system. Immanuel Wallerstein expanded on dependency theory and started what is known as the world-system perspective. World-systems analysis is the most common way to study world stratification.

Inequality in the world today

Toward the end of the twentieth century the world had more people living in extreme poverty than in any other time in world history. The gap between the world’s rich and poor had grown to unprecedented levels.

World Bank figures show that the number of people existing on less than $1 per day has increased directly with globalization in the last two centuries (see graph). There is disagreement about the World Bank’s estimate of extreme poverty dropping from about 1.4 billion people to 1.2 billion people during the last few years, but any drop is mainly due to much better conditions in the world’s most heavily populated country, China.

• Around 2.8 billion people live on less than $2 per day, almost half of the world’s population.
• One estimate found that the top 20% of people in the world held about 85% of the world’s wealth, while the bottom 20% held about 2% by the end of the 1990s.
• Another estimate found that the top 20% of the world’s population received 150 times in the income of the bottom 20%. 30 years earlier, this income gap had been 60 to 1.
• In 1999, the 3 richest people had more wealth ($135 billion) than all of the combined national incomes of the 43 least developed nations in the world.
• While people in rich nations can expect to live into their late 70’s, the life expectancy in many of the least developed countries is 40 years or less.
• An average of 107 out of 1,000 babies die by the time they are 5 years old in the least-developed nations, compared to only 6 in richer nations.

People in the United States became more interested and aware of world poverty as a result of the protests of the World Trade Organization’s meeting in Seattle during November of 1999. Anti-globalization protesters call for a halt of all investments from multinational corporations going to poor countries, where wages are often $1 a day or less and where child labor is common. In contrast to these protesters, leaders of rich nations such as the United States call for more open markets and free trade, along with more investments from multinational corporations, as part of the remedy for world poverty. This idea of fighting world poverty through open markets and free trade is known as the Washington Consensus, and was agreed upon by rich nations a few years ago.

International organizations dominated by rich nations, especially the International Monetary Fund (IMF) and World Bank, have been the most vocal in pushing the ideas of the Washington Consensus. The IMF usually calls for, and at times forces, basic economic and political reforms in poor nations that create more free markets. However, a growing number of social scientists have charged that organiziations such as the IMF and World Bank are just tools of rich nations, and that the policies pushed by these organizations further the interests of multinational corporations.

Globalization and multinational corporations cannot be held responsible for all the world’s poverty. Factors such as climate, lack of resources, and culture can also help produce poverty and inequality. However, all regions of the world are increasingly interrelated in a worldwide economic system. Because of this system and differing economic interests and differing amounts of power to make sure these interests are met, there is a world stratification system that produces inequality among nations similar to the way people within nations can be stratified into classes.

Many social scientists believe that it is more complicated than either free market proponents or anti-globalization protesters tend to think. Research tends to show that some countries can have economic growth and reduce poverty when multinational corporations bring in new factories, while other poor nations cannot.

Explanations for world poverty and inequality

Over the course of history there have been many social scientists from varying fields that have attempted to explain why some countries are in the condition they are in with respect to poverty and inequality. Most people tend to study and think about the issue on an individual level. Many from rich nations wonder “what is wrong with these people, and why can’t they work as hard as we do?” This idea represents the popular view of most in the U.S., which is to blame the poor for their poverty. Sociologist Max Weber was the first to suggest that it was cultural values that affect how economically successful a person would be. In his The Protestant Ethic and the Spirit of Capitalism, he argues that the Protestant Reformation led to values that drove people toward worldly achievements, a hard work ethic, and saving to accumulate wealth. Others expanded on Weber’s ideas, producing modernization theory and putting forward a process that all nations should follow to become advanced industrial nations. They believed that to reduce poverty, values and attitudes must be changed.

In recent years, cultural explanations have seem to have made a comeback. The 1985 book Underdevelopment Is a State of Mind has recently been reissued, which claims that Latin American poverty is caused by Catholic values inherited by Latin American countries. Political scientist Samuel Huntington collaborated with Harrison on an edited volume called Culture Matters: How Values Shape Human Progress. At the same time, the World Bank began to pick up the theme of cultural explanations, putting millions of dollars into new research and conferences on the subject, and funding projects in poor countries made to change cultural values.

However, a large amount of research has rejected these explanations. Researchers have gathered evidence that suggest that values are not as deeply ingrained as most proponents of cultural theories have assumed. Interviews with poor people in the United States indicate that most actually accept the dominant values, but simply find it difficult to live up to them in their current circumstance. Much research has shown that changing economic opportunities explain most of the movement into and out of poverty, as opposed to shifts in values.

To study inequality within nations, many social scientists use a conflict perspective. They study class divisions and social stratification, the idea that inequality has been institutionalized and that a system of layered hierarchy has been established. They believe that class divisions are based upon a person’s wealth, power, and prestige.

Global inequality from the world-systems perspective

To explain stratification on a global level, many do research from a world-systems perspective. World-systems theory, first proposed by Immanuel Wallerstein, is very similar to Marxism and the ideas of a division of labor:

1. Rather distinct classes are found in relation to the objective divisions created by ownership of the means of production and position in the occupational structure.
2. There is an upper class that owns and/or controls the means of production, with a working class having no ownership and performing occupational tasks for owners. In between these two classes we find a middle class with little or no ownership of the means of production, but with a higher occupational position.
3. The distribution of valued resources is in large measure based on these class positions.
4. There are dynamics of class conflict and change based on the differing distribution of rewards in the class system.
5. Finally, there are various mechanisms to maintain the favored position of those on top of the stratification system.

Unlike the traditional view of economic systems corresponding with political or national boundaries, world-system analysts believe that there is a division of labor that exists beyond national boundaries, bringing national territories within a worldwide economic system. Social scientists that study global inequality from a world-system perspective believe that there is a world stratification system with characteristics similar to the five listed above. The primary unit of analysis is shifted from classes within nations to nations, which are in many ways like classes. Like a class system within a country, nations of the world today are divided into an international class system. Some nations own or control more of the world’s resources, while other nations own little of the resources or control the resources, even when they are located within their country. Similar to an upper class, there exist core nations. Similar to a lower or working class are the periphery nations. Finally, similar to a middle class are semiperiphery nations.

Definition of a world-system

Immanuel Wallerstein defines a world-system as an inter-social system marked by a self-contained division of labor. In other words, the roles and functions needed to main this “world” are contained within it, though they are spread unevenly. Therefore, it is a “world” with some degree of internal coherence and forming a complete unit. Wallerstein says “my ‘world-system’ is not a system ‘in the world’ or ‘of the world.’ It is a system ‘that is the world’”

Wallerstein argues that there have been two types of world-systems in history, a world-empire and a world-economy. The main goal of a world empire was political and economic domination. The modern world-system, which began around 500 years ago, is a world-economy. A world-economy is not bounded by a unitary political structure, but of many political units inside of it, loosely tied together in an interstate system. The modern world-system is a capitalist system. According to Wallerstein, only the modern world-system has been a capitalist system, and that a capitalist system cannot exist in any other framework except of a world-economy.

According to Wallerstein, the modern world-system originated in western Europe between 1450 and 1640. Early capitalists and merchants needed raw materials, labor, and markets, which fueled the expansion of trade networks and led to colonization of many areas of the world.

Characteristics of the modern world-system

Proponents of world-systems analysis see the world stratification system the same way Karl Marx viewed class (ownership versus non-ownership of the means of production) and Max Weber viewed class (which, in addition to ownership, stressed occupational skill level in the production process). The core nations primarily own and control the major means of production in the world and perform the higher-level production tasks. The periphery nations own very little of the world’s means of production (even when they are located in periphery nations) and provide less-skilled labor. Like a class system with a nation, class positions in the world economy result in an unequal distribution of rewards or resources. The core nations receive the greatest share of surplus production, and periphery nations receive the least. Furthermore, core nations are usually able to purchase raw materials and other goods from noncore nations at low prices, while demanding higher prices for their exports to noncore nations. Chirot (1986) lists the five most important benefits coming to core nations from their domination of periphery nations:

1. Access to a large quantity of raw material
2. Cheap labor
3. Enormous profits from direct capital investments
4. A market for exports
5. Skilled professional labor through migration of these people from the noncore to the core.

Example Core Nations
United States
Japan
Germany
Netherlands
England
France
Italy
Canada

Core nations

• The most economically diversified, wealthy, and powerful (economically and militarily)
• Highly industrialized
• Tend to specialize in information, finance and service industries
• Produce manufactured goods rather than raw materials for export
• More often in the forefront of new technologies and new industries. Examples today include high-technology electronic and biotechnology industries. Another example would be assembly-line auto production in the early twentieth century.
• Have more complex and stronger state institutions that help manage economic affairs internally and externally
• Have a sufficient tax base so these state institutions can provide infrastructure for a strong economy
• Have more means of influence over noncore nations
• Relatively independent of outside control

Example periphery nations
Chad
Uganda
Burma
Bolivia
Philippines
El Salvador
Haiti
Dominican Republic

Periphery nations

• Least economically diversified
• Tend to depend on one type of economic activity, such as extracting and exporting raw materials to core nations
• Are often targets for investments from multinational (or transnational) corporations from core nations that come into the country to exploit cheap unskilled labor for export back to core nations
• Tend to have a high percentage of their people that are poor and uneducated.
• Inequality tends to be very high because of a small upper class that owns most of the land and has profitable ties to multination corporations
• Have relatively weak institutions with little tax base to support infrastructure development
• Tend to be extensively influenced by core nations and their multinational corporations. Many times they are forced to follow economic policies that favor core nations and harm the long-term economic prospects of periphery nations.

Example semiperiphery nations
Mexico
Argentina
South Korea
Ireland
Chile
Taiwan
India
Thailand

Semiperiphery nations

Semiperiphery nations are those that are midway between the core and periphery. They tend to be countries moving towards industrialization and a more diversified economy. “While they are weaker than core societies, they are trying to overcome this weakness and are not as subject to outside manipulation as peripheral societies.”

Core conflict and hegemony

Throughout the history of the modern world-system there has been a group of core nations competing with one another for access to the world’s resources, economic dominance, and hegemony over periphery nations. There has been one core nation with clear dominance over others since the beginning of the world-system. According to Immanuel Wallerstein, a core nation is dominant over all the others when it has a lead in three forms of economic dominance over a period of time:

1. Productivity dominance allows a country to produce products of greater quality at a cheaper price compared to other countries.
2. Productivity dominance may lead to trade do trade dominance. Now, there is a favorable balance of trade for the dominant nation since more countries are buying the products of the dominant country than it is buying from them.
3. Trade dominance may lead to financial dominance. Now, more money is coming into the country than going out. Bankers of the dominant nation tend to receive more control of the world’s financial resources.

Military dominance is also likely after a nation reaches these three rankings. However, it has been found that throughout the modern world-system, no nation has been able to use its military to gain economic dominance. Each of the past dominant nations became dominant with fairly small levels of military spending, and began to lose economic dominance with military expansion later on.

According to Wallerstein, there have only been three periods in which a core nation has dominated in the modern world-system, with each lasting less than one hundred years. Around 1450, Spain and Portugal took the early lead when conditions became right for a capitalist world-economy. They lead the way in establishing overseas colonies. However, Portugal and Spain lost their lead primarily due to becoming overextended with empire building. It became too expensive to dominate and protect many colonial territories around the world.

Dutch fluyts of the seventeenth Century

The first nation to gain clear dominance was the Netherlands in the 1600s, after their revolution led to a new financial system many historians consider revolutionary. An impressive shipbuilding industry also contributed to their economic dominance through more exports to other countries. Eventually, other countries began to copy the financial methods and efficient production created by the Dutch. After the Dutch gained its dominant status, the standard of living rose, pushing up production costs.

Dutch bankers began to go outside of the country seeking profitable investments, and the flow of capital moved, especially to England. By the end of the 1600’s, conflict among core nations increased as a result of the economic decline of the Dutch. Dutch financial investment helped England gain productivity and trade dominance, and Dutch military support helped England to defeat the French, the other country competing for dominance at the time.

Map showing British Empire in 1921

As a result of the new British dominance, the world-system became relatively stable again during the 1800’s. The British began to expand all over, with many colonies in the New World, Africa, and Asia. The colonial system began to place a strain on the British military, and along with other factors, led to an economic decline. Again, there was a great deal of core conflict after the British lost their clear dominance. This time it was Germany, and later Italy and Japan providing the new threat.

By 1900, the modern world-system was much different than it was 100 years earlier. Most of the periphery societies had already been colonized by one of the older core nations. In 1800, the old European core claimed 35% of the world’s territory, but by 1914 it claimed 85% of the world’s territory. Now, if a core nation wanted periphery areas to exploit as had done the Dutch and British, these periphery areas would have to be taken from another core nation. This is what Germany, and then Japan and Italy, began to do early in the 20th century.

While these countries were moving into core status, so was the United States. The American civil war led to more power for Northern industrial elites, who were now better able to pressure the government for policies favorable to industrial expansion. Like the Dutch bankers, British bankers were putting more investment toward the United States. Like the Dutch and British, the U.S. had a small military budget compared with other industrial nations at the time.

The U.S. began to take the place of the British as the new dominant nation after World War I. With Japan and Europe in ruins after World War II, the U.S. was able to dominate the modern world-system more than any other country in the history of the world-system. After World War II, the U.S. accounted for over half of the world’s industrial production, owned two-thirds of the gold reserves in the world, and supplied one-third of the world’s exports.

Global corporate class

To date there has been little research on the existence of a global corporate class similar to an upper class or corporate class within a nation. One recent work that attempts to show that a powerful global corporate class exists was by Robinson and Harris in 2000. There are common interests for members of the global corporate class to minimize restrictions on profits and investments, keep trade flowing, and to ensure a supply of materials and cheap labor. Robinson and Harris found that corporate mergers are occurring across national boundaries in record numbers. The authors go on to argue that multinational corporations and production is global today that a global corporate class has come about with no loyalties to any one nation. They argue that the nation-state is not a significant factor any more in the globalization of capitalism. They claim that the multinational class formation “represents the transition from the nation-state phase to a new transnational phase of capitalism.” They claim capitalists from rich nations interact with each other now extensively, sharing cross-corporate positions, therefore holding enough unity to call them a global corporate class. It also has institutional support to protect its interests through organizations such as the World Bank, IMF, World Trade Organization, Asia Pacific Economic Cooperation (APEC), and others.

Criticism

Many would believe that the degree of unity that Robinson and Harris suggest may be overestimated. This overestimation is related to the assumption that national boundaries or even nation-states are no longer important considerations. This idea neglects value and cultural conflicts among a global corporate class. It also neglects nationalism and continued national identities and how it divides a global corporate class. Though one doesn’t need to go to the extreme of Samuel Huntington and his claim of a resurgence of cultural clashes, there is evidence that shows cultural divisions continue to exist. Nor are those who primarily make up any global corporate class—Europeans, Japanese, and North Americans—able to experience anything similar to the common experiences shaping shared worldviews and a “we feeling” described in the research on the corporate class in Japan and the United States. Though there has been a very large increase in mergers across national boundaries, research shows that because of national and cultural conflicts, most of these newly merged corporations have dissolved after a while, or one of the partners ends up almost completely dominating, as with Daimler-Benz becoming the dominant partner after the Chrysler merger

Economic development and poverty reduction

For years economists thought that countries throughout the world would follow a the same basic pattern for economic development. It was thought that with some initial capital investment, nations would continue on a path from pre-industrial agrarian societies to industrialization. However, many today hold that these theories are highly misleading when they are applied to developing nations today. The situation faced by noncore nations today are very different than those faced by the core nations when they were going through economic development. Among the new realities facing noncore nations are a much larger population, fewer natural resources, and a poorer climate. Most importantly, today’s core nations did not have other core nations to contend with during their early process of development. This means that it is much more difficult for noncore nations today to achieve economic development.

Barriers to economic development and poverty reduction

World-systems perspective has generated a great deal of empirical research, mostly showing consistent results. One important question, of course, is like the theory predicts, whether or not periphery countries have less long-term economic growth when they have extensive multinational corporate investment from core nations. Though there is definitely variance among periphery nations, several studies have shown that many periphery nations that have extensive investment from the core do in fact have less long-term economic growth. These nations are likely to have some short-term economic growth (less than 5 years), but the long-term prospects may be harmed by the kinds of outside aid and investment they have received.

There seem to be many reasons for harmful effects of core dominance. The first major reason is the problem of structural distortion. In an undistorted economy some natural resources lead to a chain of activity that creates profits, jobs, and growth. Imagine, for example, a core nation with an extensive amount of copper deposits. Jobs are provided and profit is made first from mining the copper. Even more jobs and profits are created when the copper is refined into metal. The metal is used by other corporations to make products, again making jobs and profits. Next, these products are sold by retail firms, once again resulting in jobs and profits. From this whole process there is a chain of jobs and profits that provide for economic growth as well as revenue that can be used for developing things such as roads, electrical power, and educational institutions within the country.

Imagine now what happens when the copper is mined in a periphery nation with ties to core nations. The copper is mined by native workers, but the metal is shipped to the core where the rest of the chain is completed. The rest of the jobs and profits from the chain of activities are lost to the core nations. This is an example of structural distortion.

Another harmful effect on the economic growth of periphery nations is agricultural disruption. A very important economic activity of periphery nations brought into the modern world-system is export agriculture. Before the modern world-system, agriculture was for local consumption, and there was little incentive for labor-saving farming methods. As a result of these traditional methods of farming and lack of a large market for their products, food was cheaper, some land was left for peasants, and jobs were more plentiful. However, with export agriculture and labor-saving methods of farming, food is more expensive, peasants are pushed off the land so more land may be used to grow products for the world market, and more machines are doing the work, resulting in less jobs. This also causes a higher degree of urbanization as peasants lose their land and jobs and move to the city hoping to find work. Profits are made by a small group of landowners and multinational agribusinesses, with peasants losing jobs, land, and income, which prevents them from being consumers needed for an economy to naturally develop.

A third difficulty for periphery nations are the class conflicts within the nation. Economic and political elites in periphery nations often become more accommodating to corporate elites from core nations that have investments in their country. Of course, these elites in periphery nations receive lucrative profits because multinational corporate investment. These elites know that the corporations are investing in the country because of low labor costs, low taxes, no unions, and other things such as lax environmental policies, that are favorable to multinational corporate interests. For self-serving elites in periphery nations, it creates a conflict of interest between them and the people. These people, of course, want better wages and more humane working conditions, but if these things are worked on it can mean multinational corporations will leave the country. It is important to realize that the problems mentioned above, structural distortion and agricultural disruption, could be reduced. However, the local elites with the power to change these things do not do so in fear of losing the multinational investment.

Following the North American Free Trade Agreement (NAFTA) in 1994, thousands of U.S., Japanese, and European factories moved into Mexico for the free access to the North American market and the low wages. There were about 4,000 of these new factories by 2000. However, by 2002, the factories began moving to nations such as China where wages for factory jobs are as low as $0.25/hour, as opposed to $1.50/hour in Mexico.

Another problem for periphery nations has to do with power imbalances in the world stratification system, and the dominating free market ideology pushed by the U.S. and the International Monetary Fund (IMF), which is influenced heavily by the U.S. One of the things core nations and agencies such as the IMF fail to understand is that in very critical ways the global economy is very different than it was hundreds of years ago. Free markets then were very rare. Open and free markets can contribute to economic efficiency and competitiveness in the core nations today. However, for periphery nations trying to develop, the same open markets are not provided for them as they are with core nations in the global economy today. Open markets do not always help periphery nations when there are already rich nations over them that are able to distort open markets with billions of dollars in subsidies to their own corporations, which prevent developing industries in periphery nations from having an equal chance of survival. These forces were not around at the time most of the core nations were developing because they were the first ones to become rich. Most of the countries that became rich more than 100 years ago did it with unfree markets that protected their infant industries. Now, the world stratification system provides core nations with the power to enforce the rules of the world economy (and avoid some of these rules themselves), which help the core nations and harm the periphery nations.

Core nations want open markets in other countries, not in their own. Core nations can then buy resources cheaply and sell their own goods, especially in periphery nations. Because of trade barriers placed upon them by core nations, global trade has declined for the poorest nations, despite the fact that it has increased around 60% overall in the past 10 years.

File:Comparative Tariff Barriers.JPG

Tariff rates from rich and middle income vs. poor nations

The U.S. has one of the highest tariffs on agricultural imports to protect American agriculture. For example, tariffs on textiles imported into the U.S. are high, unless the clothing is made abroad with U.S.-made textiles by companies such as JC Penny, Target, and The Gap. An African country can export cocoa beans to manufacturers such as Nestle, but if the country processes the beans itself and attempts to sell chocolate to the U.S. or Europe (which would obviously be much more profitable for the country), the tariffs are high. Nestle wants all of the profit that results from processing the cocoa beans and then selling the finished product, but they need the cocoa beans coming from Africa.

Core nations such as the U.S., despite their free market ideology, seem to believe that open markets are best in poor nations rather than than their own. Core nations have the power through organizations such as the World Bank, IMF, and the WTO to protect their industries, but then use their power to make sure periphery nations open their borders to products produced in core nations. It is estimated that the 49 poorest countries in the world lose around $2.5 billion a year due to high tariffs and quotas placed on their products by core nations. For example, Oxfam estimates that the U.S. gets back $7 for every $1 given in aid to Bangladesh because of barriers on imports. They also estimated that rich nations subsidize their own agribusinesses at around $1 billion per day, while the IMF pushes periphery nations to keep their markets open to the food that has flood the market from these countries. When pushed to open their markets to products from core nations backed by subsidies, it is very hard for them to compete.

World system effects on noncore stratification systems

In addition to the effects of the core on the economic development in noncore nations, research also shows that the position of a noncore nation in the world-system has an important impact on the stratification within that nation. In other words, not only does core domination affect a periphery nation’s economic development, but it also has an impact on things such as the extent and power of the small group of elites in periphery nations, working-class powerlessness, the type of political system maintained in the country, the level of income inequality, health and health care inequality, opportunities for social mobility, and other conditions related to the stratification within a country.

Chase-Dunn studied the relation between core influence and income inequality. He found that foreign investment and foreign debt dependency are both related to a higher degree of income inequality. In 1976, Rubinson’s findings supported Chase-Dunn’s findings. Rubinson measured core influence on other nations by the degree of foreign control over internal economic production, dependence on external markets, and the magnitude of foreign debt dependence in the economy. All three conditions were found to be significantly related to greater income inequality in periphery nations. Research by Jackman in 1975 showed that greater economic development is related to less income inequality over time.

An extensive study was conducted by Bornschier and Ballmer-Cao examining the factors producing noncore income inequality. Like in other studies, it was found that greater multinational investment in noncore nations was related to greater income inequality. Second, they also found that less bureaucratic development in noncore nations was related to more income inequality. It was also found that when there was greater multinational influence in the nation, state resources are more likely to be used to help industry than the needs of the poor.

Regional comparisons

Most of the research that has been carried out by world-system analysts have not considered that investments from multinationals can have different effects in different parts of the world. During the 1980’s and 1990’s most East and Southeast Asian countries had rapid economic growth while growth in other regions has been much slower. It is also important to note that varying rates of poverty are not just simply related to economic growth. In recent years some countries in Latin America have had economic growth rates similar to countries in East and Southeast Asia. In general, the difference between countries in these two regions is even versus uneven economic development. In the late 1990’s East and Southeast Asian countries were generally found to have less income inequality than Latin American and African countries. For most of sub-Saharan Africa, there is little to no economic development.

Since most people in developing countries live in rural areas and depend on agriculture for their survival, land distribution is very important. Using a Gini index of land inequality, the International Fund for Agricultural Development found even more extreme differences between Asia and especially Latin America. A Gini index of 1.00 would mean one person owns all the land. Most Latin American countries have figures in the 0.80 range, and some even around 0.90. Asian nations have numbers ranging from 0.30 to 0.50.

Land inequality in the developing world
Country	Gini land concentration index
Southeast Asia
Thailand	0.36
Burma	0.44
Philippines	0.51
Indonesia	0.56
Malaysia	0.58
Africa
Ethiopia	0.47
Guyana	0.68
Ivory Coast	0.73
Liberia	0.73
Kenya	0.77
Latin America
Mexico	0.74
Colombia	0.77
Paraguay	0.78
Costa Rica	0.81
El Salvador	0.81
Ecuador	0.82
Brazil	0.85
Argentina	0.86
Peru	0.91

Organizations such as IMF and the World Bank tend to claim that economic growth always results in poverty reduction. However, research has shown that Latin American countries have had growth since the early 1980’s, but most have not reduced poverty. The World Bank recently estimated that the number of people living on less than $1 a day will be cut by more than 60 percent in East and Southeast Asia, cut by only 5 percent in Latin America, and increase by about 30 percent in sub-Saharan Africa.

Population living on $1 a day or less
	1987	1990	1993	1996	1998	Projected change 1998-2015
East Asia and Pacific	26.6%	27.6%	25.2%	14.9%	15.3%	-61%
(excluding China)	23.9	18.5	15.9	10.0	11.3	-63
Latin America and Caribbean	15.3	16.8	15.3	15.6	15.6	-5
South Asia	44.9	44.0	42.2	42.3	40.0	-21
Sub-Saharan Africa	46.6	47.7	49.7	48.5	46.3	+30

Sub-Saharan Africa

Most countries in Sub-Saharan Africa are the world’s poorest. Though some countries such as Botswana, Mozambique and South Africa have experienced some growth in recent times, almost all of the other countries in this region rank the lowest in the world, from percent of the country’s population living on less than $1 per day, to political violence and instability, to high infant mortality rates and low life expectancy. For example, in Nigeria and Zambia, around 70 percent of the people live on less than $1 per day. Of the 25 counties with the highest rates of HIV infection, only one, Haiti at 24th, is not in sub-Saharan Africa. The U.N. Food Security Report tells us that about 60% of people in central Africa are malnourished, and other sections of Sub-Saharan Africa are only a little better off at about 40%. In periphery nations around the world, especially in Africa, the number one killer is lack of food, while for Americans in 2005, the number one killer was found to be too much food.

African countries tend to be the world’s least democratic and seem to rank among the world’s least efficient state bureaucracies. Countries in Africa tend to have the most unstable governments, changing from one military dictatorship to another. In 2001 Transparency International ranked countries around the world from the most to least corrupt. Of the world’s 10 most corrupt nations, 6 were in Africa. The average score for all countries was 5.5, with the African average score 6.7. The highest was Nigeria with a score of 8.4. Most industrial societies had scores ranging from 2.7 to 0.5.

Latin America

Countries in Latin America have become very unequal societies with extremes of wealth and poverty existing side-by-side. Brazil is the world’s second most unequal country, with the poorest 20 percent receiving about 2.5 percent of national income and the richest 20 percent receiving about 64 percent of all income. Though it has a modern economy making many kinds of industrial goods, it has 17 percent of its population living on less than $2 per day. Other countries in Latin America have very high levels of poverty. Ecuador has over 50 percent of its people living on less than $2 per day.

East and Southeast Asia

Some of the best prospects for economic growth in the last few decades have been found in East and Southeast Asia. The exceptions, however, are North Korea, Laos, Cambodia, and Burma, which are among the world’s poorest nations. China, South Korea, Japan, Thailand, Taiwan, Vietnam, Malaysia, Indonesia, however, are developing at high to moderate levels. Thailand, for example, has grown at double-digit rates most years since the early 1980’s. China has been the world leader in economic growth since 2001. It is estimated that it took England around 60 years to double its economy when the Industrial Revolution began. It took the United States around 50 years to double its economy during the American economic take-off in the late nineteenth century. Several East and Southeast Asian countries today have been doubling their economies every 10 years.

It is important to note that in most these Asian countries, it is not just that the rich are getting richer, but the poor are becoming less poor. For example, poverty has dropped dramatically in Thailand. Research in the 1960’s showed that 60 percent of the people in Thailand lived below a poverty level estimated with cost of basic necessities. By 2004, however, similar estimates showed that poverty there was around 13 to 15 percent. Thailand has been shown by some World Bank figures to have had the best record for reducing poverty per increase in GNP of any nation in the world.

In the late 1990’s a study was conducted in which the researchers interviewed people from 24 large factories in Thailand owned by Japanese and American corporations. They found that most of the employees in these corporations made more than the average in Thailand, and substantially more than the $4.40 a day minimum wage in the country at the time. The researchers’ analysis of over 1,000 detailed questionnaires indicated that the employees rate their income and benefits significantly above average compared to Thai-owned factories. They found the working conditions in all 24 companies far from conditions reported about Nike in Southeast Asia.

Explanations

Hard state

A key question to ask in relation to regional comparisons is what the differences are among nations in these regions. Research seems to suggest that for most countries in East and Southeast Asia, something has made their prospects for economic development and poverty reduction greater than for periphery countries in other parts of the world.

Some researchers have identified some characteristics of Asian societies that are relatively common and in contrast to Western societies. For example, Asian nations tend to have collectivist rather than individualistic value orientations. This means individual desires and interests are secondary when the needs of a broader group such as the local community, the family, work group, or nation come into conflict with these individual interests. However, not all Asian nations equally value the suppression of the individual, nor do Western nations equally value individualism. There are also differences in Western versus Asian nations on values such as “avoidance of uncertainty,” “power-distance” (power and respect for authority), and a “long-term orientation.”

Something else that has been getting recognition lately is that late-developing countries, or countries that have achieved economic development since the nations in Europe and North America, have required extensive state intervention, planning, and even some state ownership of many industries if they are to have significant economic development. For example, the German state used extensive intervention in the economy in the form of planning, state-directed loans, economic incentives to businesses, and extensive government ownership of corporations, to push Germany rapidly into the position of Europe’s largest economy.

Countries trying to develop in the second half of the 20th century, countries Vogel calls “late, late developers,” are even more in need of state assistance in overcoming obstacles created for them by the new global economy. The four Asian tigers (Taiwan, South Korea, Hong Kong, and Singapore) achieved rapid economic growth in the 1980s with extensive state intervention. As many other researchers have shown, it was Japan that led the way as an Asian late-developing nation with extensive state intervention from the late 1800s to become the second largest economic power in the world after the United States. It was Japan that perfected what is now known as the Asian development model that has been copied in one form or another by Asian nations recently achieving at least some success with economic development.

Although statistics about economic growth and inequality in noncore nations suggest something must be significantly different in East and Southeast Asia, it is rarely mentioned in most world-system research. In his recent book ReOrient: Global Economy in the Asian Age, Andre Gunder Frank claims sociologists such as Max Weber and Karl Marx were Euro-centered in developing their theories. He criticizes Marx for is idea of an “Asian Mode” as a rigid form of political dominance that serves only the interests of the rich rather than acknowledging Asian traditions may also restrict elite exploitation of citizens. Scholars have found that Weber and Marx were misinformed about Chinese history, neglecting many periods of change. Frank reserves most of his criticism for Weber’s view that the development of capitalism follows the individualistic principles made possible with the Protestant work ethic. Frank comments,

"The contemporary East Asian experience does not seem to fit very well into any perceived Western theoretical or idealogical scheme of things. On the contrary, what is happening in East Asia seems to violate alls sorts of Western canons of how things ‘should’ be done, which is to copy how ‘we’ did it the ‘Western way.’"

James Fallows also criticized Western economic theory for its inability to explain Asian development, particularly in Japan, because of invalid Western assumptions. He cites four main differences in the value orientations of Asian economic models:

• The purpose of economic life. In the Anglo-American model, the basic reason to have an economy is to raise the inidividual consumer’s standard of living. In the Asian model, it is to increase the collective national strength…
• The view of power in setting economic policies. The Anglo-American ideology views concentrated power as an evil. Therefore it has developed elaborate schemes for dividing and breaking up power when it becomes concentrated. The Asian-style model views concentrated power as a fact of life. It has developed elaborate systems for improving the chances that the power will be used for long-term national good.
• The view of surprise and unpredictability. The Anglo-American model views surprise as the key to economic life. It is precisely because markets are fluid and unpredictable that we believe they “work.” Attempts to outwit the market by “picking winners” or defining “the good life” are bound to fail. Let the market decide. The Asian-style system deeply mistrusts markets. It sees competition as a useful tool for keeping companies on their toes but not as a way to resolve any of the big questions in life—how a society should be run, in what direction its economy should unfold…
• The view of national borders and an us vs them concept of the world. People everywhere are xenophobic and exclusive, but in the Anglo-American model this is defined as a lamentable, surmountable failing. The Asian-style model assumes it is a more natural and permanent condition. The world consists of “us” and “them,” and no one will look out for “us” if we don’t look out for ourselves.”

In countries such as Thailand, Taiwan, Malaysia, South Korea, and increasingly Vietnam, the governments are able and willing to protect their people from the negative consequences of foreign corporate exploitation. They tend to have a strong government, or “hard state” and have leaders who can confront multinationals and demand that they operate to protect their people’s interests. These “hard states” have the will and authority to create and maintain policies that lead to long-term development that helps all their citizens, not just the wealthy. Multinational corporations are regulated so that they follow reasonable standards for pay and labor conditions, pay reasonable taxes to help develop the country, and keep some of the profits in the country, reinvesting them to provide further development. In many other periphery nations around the world, local governments are either to weak to stop foreign corporate exploitation or don’t care, with the corrupt leaders choosing to enrich themselves at the expense of their own people.

It is important to note that a hard state is not to be equated with a military dictatorship. Military dictatorships in periphery nations often develop because the state is unable to provide basic support for the health, welfare, and infrastructure needs of the country. It is in response to the resulting political instability that an oppressive military dictatorship may develop.

Despite all the evidence of the importance of a hard state, some international aid agencies are just now publicly recognizing the fact. The United Nations Development Program, for example, published a report in April of 2000 which focused on good governance in poor countries as a key to economic development and overcoming the selfish interests of wealthy elites often behind state actions in developing nations. The report concludes that “Without good governance, reliance on trickle-down economic development and a host of other strategies will not work.”

Specifically, what is meant by a hard state, or now more commonly called a development state, is a government with sufficient organization and power to achieve its development goals. There must be a state with the ability to prove consistent economic guidance and rational and efficient organization, and the power to back up its long-range economic policies. All of this is important because the state must be able to resist external demands from outside multinational corporations to do things for its short-term gain, overcome internal resistance from strong groups trying to protect short-term narrow interests, reduce corruption, and control infighting within the nation pertaining to who will most benefit from development projects. What this hard state comes down to primarily is leadership and bureaucracy that is honest, efficient, and has the power to back up policy decisions.

One answer to the discrepancies found between multinational corporations in Thailand and the conditions described for Nike workers is that companies such as Wal-Mart, The Gap, or Nike subcontract work to small local factories. These subcontractors remain more invisible, making it more easy to bribe local officials to maintain poor working conditions. When multinational corporations set up business in countries like Malaysia, Taiwan, or Thailand, their visibility makes much less likely employees will have wages and conditions below the standards of living of the country.

More importantly though, what emerged in Thailand was a “semihard state.” Thailand is said to fall between the U.S. model where government has little involvement in economic policy, and Japan which has governed with a very heavy hand for more than 100 years. One focus of Thai development policies was on import substitution. Here, a hard state must be able to tell multinational corporations that goods will be imported, if at all, with tariffs as high as 80 to 150 percent to prevent these goods from competing with goods made in (at least at first) less efficient infant factories in the poorer country. Only a hard state, or at least a semihard state such as Thailand, can have the influence to enforce such a policy on rich multinational corporations (and their governments), and only a hard state can have the influence to enforce such a policy against the demands of their own rich citizens who want the imported goods and want them then at a cheaper price, not waiting for infant industries to produce suitable products. Thailand began placing tariffs of 150 percent on important automobiles, but at the same time telling the foreign auto industries that if they came to Thailand to create joint ventures with a Thai company to build cars—and thus hire Thai employees, pay Thai taxes, and keep some profits within Thailand—the auto company would get many forms of government assistance.

Thailand continued to protect its economy during the 1980’s and 1990’s despite the flood of foreign investment the nation had attracted. Thai bureaucrats started rules such as those demanding a sufficient percentage of domestic content in goods manufactured by foreign companies in Thailand and the 51 percent rule. Under the 51 percent rule, a multinational corporation starting operations in Thailand must form a joint venture with a Thai company. The result is that a Thai company with 51 percent control is better able to keep jobs and profits in the country. Countries such as Thailand have been able to keep foreign investors from leaving because the government has maintained more infrastructure investment to provide good transportation and a rather educated labor force, enhancing productivity.

Ancient civilizations and colonialism

Another logical question is why countries in some regions of the world, such as East and Southeast Asia, have hard states and others do not. Why are some poor counties, especially the elites in these counties, more willing and able to use methods of promoting sustained and even economic development? It may be useful to consider the history of world regions and their ancient civilizations, and how these civilizations may have created a sense of national identity and traditions of elite responsibility. It is also important to understand colonialism and how it disrupted many societies, taking into consideration who the colonizers were, how they ruled the colony, and how they left.

One aspect of having an ancient civilization is more government complexity before colonialism, before the European colonials came to disrupt periphery nations around the world during the high point of colonialism in the 1800’s. This greater complexity before European colonials came to exploit periphery societies, indicates these countries were in a better position to protect themselves during colonial times, minimize disruption, and recover from colonial exploitation after the colonials left.

Africa

Questions regarding country after country in Africa include: why are development policies seldom attempted? When they are attempted, why do they always seem to go wrong? Why is corruption by leaders so common? When examined, one finds that the key to these questions seems to be that most countries in Africa lack what the World Bank calls good governance, or more accurately stated, many of them lack any governance at all. First of all, one finds very few old civilizations in Sub-Saharan Africa that could hand down traditions of government support for its people and moral codes encouraging elite responsibility to all of the people of the nation. There are certainly admirable moral codes a sense of responsibility in Africa. In fact, this is one of Africa’s greatest strengths. However, these codes of responsibility to others are usually rooted in the family structure and within specific ethnic groups. A sense of nationalism and a moral responsibility between elites and masses did not seem to follow the development of nation-states in Sub-Saharan Africa as much as it did in most of Asia.

It is important to consider the effects of colonialism in Africa. Unlike in Asia, there were no strong civilizations still able to confront the European colonials in Sub-Saharan Africa. Except for a few cases in northern Africa and the horn of Africa, old civilizations were mostly destroyed or radically altered by the European colonialists. The colonials could, and did, do almost as they pleased. The colonials did relatively little to develop the infrastructure of their colonial possessions in Africa as was done in Vietnam, Malaysia, or Hong Kong. In Africa the colonials only wanted land for some of their own settlers and natural resources, including the people as slaves to work the new American plantations where the local populations were too small to enslave for agricultural purposes.

With the Berlin Conference of 1884-1885 European nations partitioned Africa into colonies and later nation-states that made no sense socially or culturally. These are the roots of African political instability today with ethnic group conflicts helping spark one civil war after another. With hostile ethnic groups somewhat equally balanced in the national territory the ability to achieve political stability and efficiency is very difficult. It is also argued that ethnic identities were made more important to African people in response to colonial rule. In other words, Africans reverted to ethnic bases social networks to take care of themselves in opposition to European rule, which produced greater ethnic identity. It is also believed that at times the colonials intentionally stimulated these ethnic conflicts to keep Africans fighting each other and not the colonials.

Latin America

In Latin America the European colonialists came to exploit the people and resources, but they also came to stay. North and South America both basically became a new Europe with the native people completely subjugated and mostly exterminated. Today, over 50% of the population in most of the larger countries in Latin America is made up of people of European descent.

About the only thing that exists of the South and Central American ancient civilizations are old stone pyramids. It was just a few hundred years ago that European colonialists began to carve out new national boundaries so that the today the countries of South and Central America are only some 200 years old. By world standards these are infant nations, with none of the traditions of the old civilizations. Even though though the empires we know of as Maya, the Incas, and the Aztecs practised some advanced agriculture for their age and were able to create large cities, it was not sustainable. By the time colonialists arrived, these civilizations had already been in decline for centuries. Military conquest and disease brought by the Europeans finished them off.

By the early 1800’s most countries in Latin America were independent states. However, the impression that the new nations were independent is misleading. These countries entered a new form of colonialism known as neocolonialism. In the case of Latin America, the dominant neocolonial power was the United States. The United States has had veto power over Latin American leaders, and U.S. corporations have had almost complete freedom to do as they please. An individualistic free-market economic model, or a neoliberal political economy, exists that prohibits the kind of development state common in East and Southeast Asian countries. This characteristic helps explain the uneven economic development with less poverty reduction found in the region. In free-market capitalism, the state is minimally involved in the economy and reducing inequality. As of yet, there has not been a single successful developing country that pursued a purely free market approach to development.

Asia

Unlike Latin America and Africa, most Asian countries are the direct descendants or were once central parts of ancient civilizations dating back at least a thousand years ago. Colonialism in Asia was also less likely to result in new nations with boundaries cutting across old civilizations or ethnic groups as it did in Latin American and African countries. Therefore Asian nations today are more likely to make “sociological sense” in terms of natural societal and cultural boundaries.

Of course, there are countries in Asia today that do not fit this rule, but these tend to be the cases of Asian countries with the most instability and the least economic development. For example, Indonesia is a collection of many old civilizations put together by Dutch colonialists. Indonesia has had high levels of political violence recently that has harmed development. One of the poorest countries in Southeast Asia is Laos, which was created by the French in the 1800’s. The national boundaries of Burma, another very poor country, were constructed by British colonialists who fashioned national boundaries that included many people from old civilizations historically opposed to the dominant group. Ever since independence Burma has had contested territory with several groups fighting. Cambodia is just now regaining stability after the Indo-China wars.

It is also important to take into consideration how countries in East and Southeast Asia were treated by the colonialists and how they left the country. For example, the British stayed on for several years in Malaysia to provide advice on running the new nation and to fight communist insurgents. Burma, however, immediately degenerated into violence after the British abruptly left the country.

With ancient civilizations in Asia came a greater sense of national identity and a retention of ancient traditions of authority and elites that strongly identified with national interests. According to Gunnar Myrdal, European colonialism in Asia was less likely to harm “the indigenous system of rights and obligations among the population.”

See also

• World-systems theory
• Social stratification
• Poverty
• Economic inequality
• Globalization
• Global economy