Through the use of descriptive and comparative analysis, the authors intend on demonstrating that the convergence of the industrialization gap was not accompanied by a convergence in the income levels gap between former First World and Third World countries. Thus, the North-South divide still exists. Through economic models, the persistence of the North-South income divide is explained. Simultaneously, the authors discuss the development project and globalization project and how the shifts occurred. Additionally, the reproduction of the North-South divide is discussed.
The paper is concluded with a highlight on the factors destabilizing the new illusio and the long-term future of the Northern-dominated hierarchy of wealth. The paper is separated into four subsections. In the first subsection titled World Income Inequality, Development and “Globalization”, the authors examine the theoretical framework of the paper. Firstly, the authors discuss income inequality between countries and highlight that debates on world income inequality do not completely address the persistence or non-persistence of the North-South divide issue.
Thus, the paper addresses this. The authors state that in theory, the North-South divide could decline in significance even if extreme inter-country income inequality persisted. They further state that this would be the case if inter-country inequality was accompanied by switches within the distribution of income between former Third World countries and former First World countries. Furthermore, the authors suggest that unequal income distribution is characterized by less long-term upward/downward mobility of countries from Third world to First World and vice-versa.
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This can reflect a hierarchy of wealth. Previous research showed that this upward/downward shift was achieved by few countries. Additionally, the authors mention that there is a consensus in relevant literature that global hierarchy of wealth is a legacy of industrial and territorial expansion of Western nations. Due to this legacy, it is anticipated that decolonization and industrialization of Third World countries would reduce the North-South divide.
The authors moreover, explain that theories of national development believed that industrialization was essential for Third World countries to attain wealth standards of the First World countries. This became the objective of the Third World development efforts and the narrowing of the industrialization gap was the instrument through which this would be achieved (Arrighi,G,. Silver,J,B,. and Brewer,D,B,. 2003. p. 6). This subsequently led to synonymous use of industrialization and development. To conclude this subsection, the authors provide reasons to why the paper focuses on industrialization and the North-South divide.
Firstly, the reasons for focusing on industrialization are because the authors wish to verify empirically the validity of the theory (or assumption) that industrialization is the most effective means of achieving the development efforts objective. Further reasons include that industrialization has costs and benefits, but these quantifiable costs are visible and invisible. On the other hand, the focus on the North-South divide is aimed at assessing the success or failure of the Third World development efforts.
In the next subsection, the authors use empirical analysis to investigate the impact of the change in the global political-economic environment on Third World developmental efforts. This is completed by comparing changes in industrialization and income over two periods (1960-1980 and 1980-1998/9) in a particular country. The main findings were that for pre-1980, the industrialization gap was narrowed. This was due to de-industrialization in the First World countries and not because of industrialization of the Third World countries. Conversely, the income gap was not narrowed.
For post-1980, the new environment was unfavourable to the success of the efforts as the industrialization gap was narrowed but the income gap increasingly diverged between First and Third World and among Third World countries. The authors conclude the subsection by stating that the discrepancy between convergence in industrialization and the lack of income convergence between First World countries and Third World countries in both periods is a result of no positive correlation between industrial and income performance (Arrighi,G,. et al,. 2003. p. 15).
To explain the recurring failure of industrialization in achieving the development efforts objective, economic development models were utilized in the third subsection of the paper. Firstly, according to Joseph Schumpeter’s creative destruction theory, major profit-oriented innovations are the main impulses that generate and sustain competitive pressures in a capitalist system. This theory further elucidates that the occurrence of innovations under capitalism “increasingly revolutionizes the economic structure from within, increasingly destroying the only one, increasingly creating a new one” (Arrighi,G,. t al,. 2003. p. 16).
This results in immediate gains by wealthy countries but also intensifies competition and causes losses or moderate gains for poorer countries. Secondly, Raymond Vernon’s “Product life cycle” and Akamatsu’s “Flying geese” theories portray the diffusion of industrial innovations as a spatially structured process starting in wealthy countries and progressing to poorer countries. Both authors of the models emphasize that the innovation process tends to begin in wealthier nations.
Higher rewards (spectacular prize) are therefore generated or won by the wealthier countries and poorer countries generate fewer or no rewards at all. The reason for this is that when poorer countries adopt “new” innovations they are subjected to intense competition and no longer yield high returns. In light of this, the First World countries gained Oligarchic wealth through industrialization. Oligarchic wealth is wealth attained by a few as attempts to attain it raises costs and reduces benefits.
The authors further explain that due to unequal opportunities for economic advancement, a problem of adding up was created. This problem affected countries that wished to attain Oligarchic wealth and countries that wished to maintain it. In addition, the intense competition that resulted from generalized industrialization efforts prevented First World countries from attaining their wealth and undermined the industrial foundations of oligarchic wealth of First World countries.
In the 1970’s, this was actualized as intense worldwide competition adversely affected the First World countries. Third World countries benefited in terms of industrialization and economic advancement as natural resources had higher prices and had access to large supply of credit and investment. A “fear of falling” was created among First World countries due to their de-industrialization. The U. S. adopted neo-utilitarian and state minimalist doctrines as a response to the U. S. hegemony crisis.
According to Bourdieu, the response of the U. S. an be characterized as a stepping up of investments within the disintegrating Keynesian framework of state action and capital accumulation. By 1980, the U. S. specialized in global financial intermediation and speculation. This new innovation by the U. S. was a more profitable innovation as this market niche was not overcrowded like the industrialization market niche. This contributed to the rattling of the reoccurrence of the North-South divide as the restructuring led to large capital outflows in Third World countries, as proven by Mexico’s default in 1982.
This further led to the division in the fortunes of Third World countries because when the U. S. ’s demand for cheap industrial products grew, East Asian countries had an advantage over Sub-Saharan Africa and Latin America because they were able to provide these manufactured goods. Finally, the development project experienced a crisis during this restructuring. Third World countries had not experienced any benefits from this development effort as promised.
Third World countries reluctantly joined the new illusio or globalization project which was propagated by the Washington Consensus which called for open markets and intense competition. In the final subsection titled Limits and Contradictions of the Neoliberal Counter Revolution, the authors seek to explain how stable the new illusio is expected to be and if there are signs of future subversion of the Northern-dominated global hierarchy of wealth in present trends. The authors state that the new illusio is a global system characterized by unstable mix of large and persistent inequalities (Arrighi,G,. t al. 2003).
Furthermore, sources likely to destabilize the global project are presented. This includes the restoration of the US hegemony and Western wealth and non-compliance of Third World countries in opening up their economies fully. Finally, the authors explain that the demand for a New International Economic Order will have impact on the re-emergence of East Asia as a dynamic region of global economy and emphasize that the present and future of the global hierarchy of wealth may be China’s expansion.
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