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The political economy of development
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The process that has come to be known as globalization -i.e., the progressively greater influence being exerted by worldwide economic, social and cultural processes over national or regional ones-  is clearly leaving its mark on the world of today. This is not a new process. Its historical roots run deep. Yet the dramatic changes in terms of space and time being brought about by the communications and information revolution represent a qualitative break with the past. In the light of these changes, the countries of the region have requested the secretariat to focus the deliberations of the twenty-ninth session of ECLAC on the issue of globalization and development.

ECLAC: TWENTY-NINTH SESSION - BRASILIA, BRAZIL
6-10 MAY 2002

Globalization and development

Introduction (13)
Part I: Global outlook (15)
Chapter 1
Globalization: a historical and multidimensional perspective (17)
I. The globalization process (18)
II. Non-economic dimensions (21)
1. Ethical and cultural dimensions (21)
2. The political dimension (23)
III. Opportunities and risks (24)
Chapter 2
The economic dimensions of globalization (29)
I. International trade and investment (30)
1. International trade and economic growth: a variable historical relationship (30)
2. The emergence of internationally integrated production systems (39)
3. Outstanding challenges posed by the relationship
between trade and economic growth  (46)
4. Development of the institutional framework for international trade (50)
II. International finance and the macroeconomic regime (52)
1. Historic transformations in the international financial system (52)
2. Changes and recent episodes of volatility in financial markets (57)
3. Capital flows to developing countries (62)
III. International migration (70)
Chapter 3
Inequalities and asymmetries in the global order (75)
I. Inequalities in global income distribution (76)
1. Long-term disparities between regions and countries (76)
2. Overall effect of international and national inequality (80)
II. Basic asymmetries in the global order (85)
1. Three asymmetries in the international structure (85)
2. The rise and fall of the concept of international development cooperation (91)
Chapter 4
An agenda for the global era (95)
I. Fundamental principles for the construction of a better global order (96)
1. Three key objectives: supply global public goods, correct international asymmetries and firmly establish a rights-based global social agenda (96)
2. Global rules and institutions that respect diversity (98)
3. Complementarity of global, regional and national institution-building (99)
4. Equitable participation and appropriate governance (100)
II. National strategies for dealing with globalization (102)
1. The role and basic components of national strategies (102)
2. Macroeconomic strategy (102)
3. Building systemic competitiveness (104)
4. Environmental sustainability (106)
5. Social strategies in an era of globalization (108)
III. The key role of action at the regional level (110)
IV. The global agenda (113)
1. Provision of global macroeconomic public goods (114)
2. Sustainable development as a global public good (115)
3. The correction of financial and macroeconomic asymmetries (117)
4. Overcoming production and technological asymmetries (119)
5. Full inclusion of migration on the international agenda (123)
6. Economic, social and cultural rights: the foundations for global citizenship (125)
Part II: Regional outlook (127)
Chapter 5
External vulnerability and macroeconomic policy (129)
I. Composition of external financing and vulnerability (130)
1. Anatomy of capital flows in the 1990s (130)
2. External financing and the business cycle (135)
II. Globalization and real macroeconomic instability (141)
1. Procyclical behaviour linked to the financial accelerator (141)
2. The procyclical behaviour of public finances (144)
3. Weak investment process and inadequate financial development (148)
III. The domestic domain: tackling the globalization of financial volatility through countercyclical macroeconomic policies (150)
1. Prudential management of cyclical upswings: fiscal, monetary and regulatory aspects (151)
2. The exchange-rate regime (153)
3. “Self-insurance” mechanisms (154)
4. Prudential regulation and supervision of financial systems (154)
5. Domestic financial development (155)
IV. The international domain: strengthening the governance of financial globalization (157)
1. Creation of an institutional framework promoting financial stability (158)
2. Emergency financing (159)
3. The solution to problems of overborrowing (160)
4. The role of multilateral development banks (162)
5. The role of regional institutions (163)
Chapter 6
The integration of Latin America and the Caribbean in global trade and production circuits (167)
I. Trade specialization in Latin America and the Caribbean (168)
1. General trends (168)
2. The composition of trade in goods (175)
3. Trade in services (178)
II. Foreign direct investment flows to Latin America and the Caribbean (180)
III. Integration processes in the region (187)
1. Subregional integration schemes and intraregional free trade agreements (187)
2. Other integration arrangements (190)
IV. The Latin American and Caribbean agenda for trade and investment (191)
1. The national agenda: export promotion policies (191)
2. The national agenda: policies on linkages and clusters (194)
3. The regional agenda (196)
4. The international agenda (198)
Chapter 7
Strengthening innovation systems and technological development (203)
I. Innovation systems and technological development (204)
II. The evolution of innovation systems (205)
1. Innovation systems in the State-led industrialization phase (205)
2. Changes in innovation systems brought about by external openness and globalization (207)
3. Science and technology expenditure (210)
III. Information and communications technologies (ICTs) (212)
1. The nature of changes generated by ICTs (212)
2. The progress of connectivity in the region (214)
IV. Intellectual property rights (218)
1. Standardization of intellectual property regulations (218)
2. Latin American patent activity (221)
V. Policies to facilitate changes in production and technological patterns (221)
1. Reinforcing innovation systems: active strategies and policies (223)
2. Policies to speed up progress in ICTs (224)
3. Policies on intellectual property rights (226)
Chapter 8
International migration and globalization (229)
I. The interactive nature of migration and globalization (231)
1. Factors which promote mobility and heterogeneity (231)
2. Migrant culture and the formation of transnational communities (233)
3. Persistence of barriers and institutional difficulties which restrict mobility (234)
4. Global forces and the future of migration (235)
II. International migration patterns of the Latin American and
Caribbean population (236)
1. Emigration to the United States (237)
2. Emigration to other destinations (242)
3. Intraregional migration (243)
III. Potential and problems of migration (246)
1. Remittances (246)
2. Lack of protection and vulnerability of migrants (249)
3. Citizenship and human rights (251)
IV. Proposals for a regional agenda on international migration (253)
1. Governance of international migration (253)
2. Links with emigrants (256)
3. Measures to prevent the risks associated with migration (257)
Chapter 9
Globalization and environmental sustainability (259)
I. The impact of productive restructuring on sustainable development (260)
II. Changes in the production structure and their effects on environmental sustainability (262)
III. Economic globalization and the environment (266)
1. The environmental impact of exports and foreign direct investment (266)
2. Changes in the international economic context and the environment (271)
IV. The environmental repercussions of productive and technological restructuring in the energy sector (272)
1. Energy intensity (272)
2. CO2 emissions (275)
3. The Latin American and Caribbean energy sector and global
climate change (277)
V. Changes in the region’s vulnerability (279)
VI. Changes in national and regional environmental management institutions and governance (281)
1. Institution-building (281)
2. Challenges for the future (282)
3. Changes in environmental financing (283)
VII. Changes in international environmental governance (283)
VIII. An agenda for action (286)
1. Consolidating national environmental management mechanisms and
strengthening institutional capacity to cope with the trends observed (286)
2. Developing institutional capacity and mechanisms to reduce the
region’s vulnerability to natural disasters (286)
3. Developing institutional capacity and mechanisms for the sustainable
management of natural and energy resources (287)
4. Innovative ways to finance the attainment of sustainable development
goals (287)
5. Consolidating international markets for global environmental services
and building regional capacity to participate actively in them (288)
6. Increasing the absorption of cleaner production technologies through existing foreign investment and trade links and domestic investment in research and development (289)
7. Strengthening political commitment to sustainable development goals
among all social actors nationally, regionally and globally (289)
Chapter 10
Globalization and social development (291)
I Educational deficits and gaps in the region (291)
1. Progress in terms of coverage (292)
2. Quality deficits (299)
3. Education, employment and income (302)
II. Globalization and employment (307)
1. Dynamics of the production and employment structure (308)
2. Globalization and greater labour flexibility and precariousness (315)
III. Social protection (317)
1. Social insurance and protection: dealing with risk and volatility (317)
2. Social safety nets, employment and poverty (319)
IV. The social agenda (321)
1. Closing educational gaps (321)
2. The main challenges in employment (324)
3. Education, training and employment (employability) (326)
4. Social protection systems (326)
5. Social protection and employment (328)
6. Social agenda for regional integration and cooperation (328)
Chapter 11
The effects of globalization on CARICOM Caribbean economies (331)
I. Caribbean integration as a positive response to globalization (332)
II. The process of structural change under globalization (336)
III. Capital flows (342)
IV. Labour issues and migration (346)
V. Globalization and macroeconomic policy and perfomance (349)
VI. Sustainable development issues (352)
Bibliography (355)
Tables
Table 2.1 Global exports, by origin (31)
Table 2.2 Structure of world imports, by origin and destination, 1985 and 2000 (33)
Table 2.3 Dynamic and stagnant products in world imports, 1985-2000 (37)
Table 2.4 Export structure by competitive position (40)
Table 2.5 Foreign direct investment (44)
Table 2.6 FDI inflows (44)
Table 2.7 Geographical concentration of foreign subsidiaries in selected manufacturing industries, by technology- intensiveness, 1999 (45)
Table 2.8 GDP growth: world and largest regions, 1820-1998 (51)
Table 2.9 Financial holdings by institutional investors selected OECD countries (58)
Table 2.10 Net resource flows: 1973-1999 (64)
Table 2.11 Net resource flows, 1990-1999 (67)
Table 2.12 Organisation for Economic Co-operation and Development:  the 10 main countries of destination of immigrants (71)
Table 2.13 Organisation for Economic Co-operation and Development: nations of origin of immigrants to the main recipient countries, 1999 (72)
Table 3.1 Patterns of interregional disparities (76)
Table 3.2 Indices of per capita income inequality in the world (78)
Table 3.3 Standard deviation of per capita GDP growth (79)
Table 3.4 World trend in income inequality, 1975-1995 (82)
Table 3.5 International asymmetries: share of the developing countries in the world economy (88)
Table 5.1 Latin America and the Caribbean: sources of external financing, 1990-2000 (132)
Table 5.2 Latin America and the Caribbean: net private resource flows, 1990-1999  (134)
Table 5.3 Latin America and the Caribbean: long-term external financing by groups of countries, 1990-1999 (135)
Table 5.4 Latin America and the Caribbean: trend of balance of payments, 1990-2001 (139)
Table 5.5 Indicators of external vulnerability among developing countries, 1990-2000 (140)
Table 5.6 Latin America and the Caribbean: exchange rate regimes, 2002 (144)
Table 6.1 Growth in trade in goods and services in Latin America, 1990-2001 (170)
Table 6.2 Latin America and the Caribbean: changes in market shares and relative specialization index for high-demand products (173)
Table 6.3 Selected countries: export structure by category of technological intensity 1985 and 2000 (176)
Table 6.4 Volume and composition of exports of services, 2000 (179)
Table 6.5 Latin America and the Caribbean: foreign direct investment inflows, 1990-2001 (180)
Table 6.6 Latin America and the Caribbean: strategies of transnational corporations in the 1990s (183)
Table 6.7 Latin America (10 countries): share of total sales in each sector of the 1,000 largest firms, by type of ownership (1990-1992; 1994-1996; 1998-2000) (185)
Table 6.8 The twenty largest export companies in Latin America, 2000 (186)
Table 6.9 Latin America and the Caribbean: exports by destination and level of technology, 2000 (189)
Table 7.1 Latin America: expenditure on research and development, by funding sector, 1999 (211)
Table 7.2 Latin America and the Caribbean: number of researchers per 1,000 members of economically active population (212)
Table 7.3 Connectivity levels and gaps, 1995-2000 (215)
Table 7.4 Latin America and the Caribbean: level of connectivity in 2000 and trend between 1995 and 2000, compared to world pattern (217)
Table 7.5 United States: patents obtained, by country (219)
Table 7.6 WIPO: plant patent applications and awards (222)
Table 8.1 United States: distribution of the economically active population, both native-born and born in Latin America and the Caribbean, by branches of activity. Data taken from the 1990 census (239)
Table 8.2 United States: total number of immigrants admitted, and total coming from Latin America and the Caribbean, 1971-1998 (240)
Table 8.3 United States: immigrants admitted from selected countries of Latin America and the Caribbean, 1971-1998 (241)
Table 8.4 United States: immigrants admitted from Latin America and the Caribbean, by subregion of origin and admission class, 1998 (241)
Table 8.5 Latin American and Caribbean immigrants in Europe and in other countries for which information is available, around the year 2000 (242)
Table 8.6 Latin America: number of persons born abroad, by region of origin and country where present, around 1990 (244)
Table 8.7 Caribbean: number of persons born abroad, by region of origin and country where present, around 1990 (245)
Table 8.8 Latin America and the Caribbean: main countries receiving remittances, 1990 and 2000 (247)
Table 9.1 Latin America and the Caribbean: selected environmental indicators (265)
Table 9.2 Average annual growth in environmentally sensitive export volumes, by destination (268)
Table 9.3 Revealed comparative advantage (RCA) indices for the group of environmentally sensitive industries (269)
Table 9.4 Firms investing in their production processes for environmental reasons, 1996 (270)
Table 9.5 Indicators of energy consumption and energy intensity in Latin America and the Caribbean (273)
Table 10.1 Latin America and the Caribbean (17 countries): school enrolment by age group and sex, and by age group and family income, 1990 and 1999 (293)
Table 10.2 Enrolment in secondary and higher education, 1985 to 1997 (297)
Table 10.3 School life expectancy in selected countries, 1980, 1990 and 1995 (298)
Table 10.4 Latin America and the Caribbean (17 countries): social public expenditure on education (299)
Table 10.5 Relative position of Ibero-American countries in international studies of education quality (301)
Table 10.6 Latin America and the Caribbean (17 countries): average number of years of schooling of economically active population (EAP), by age group and employment status, 1990 and 1999 (303)
Table 10.7 Latin America (17 countries): output trends in the 1990s (309)
Table 10.8 Latin America (16 countries): trend of total and wage employment, 1990-1999 (311)
Table 10.9 Latin America and the Caribbean: indicators of employment trends in the 1990s (313)
Table 10.10 Latin America (16 countries): trend of wage differentials in the 1990s (314)
Table 10.11 Latin America (12 countries): wage-earners with no employment contract and without social security in urban areas (316)
Table 10.12 Latin America (7 countries): incidence of non-permanent wage-earning work in urban areas (317)
Table 10.13 Poverty in households headed by 25-64-year-olds, by employment status (320)
Table 11.1 CARICOM: exports and market share, 1985-1999 (335)
Table 11.2 CARICOM: distribution of intraregional import market share, by member country, selected years between 1985 and 1999 (335)
Table 11.3 Sectoral share of output, 1990 and 2000 (337)
Table 11.4 Tourist arrivals and receipts in selected Caribbean countries, 1980-1998 (340)
Table 11.5 Net inflows of foreign direct investment, 1990-1999 (343)
Table 11.6 Growth of manufacturing employment, 1992-1997 (347)
Table 11.7 Caribbean countries: growth in real GDP, 1991-2000 (350)
Boxes
Box1.1 Inclusion and identity: The issue of ethnicity (23)
Box 2.1 The long-term deterioration of raw material prices (38)
Box 2.2 United States interest rates and emerging market bond spreads (65)
Box 4.1 Economic links between Puerto Rico and the United States mainland (121)
Box 5.1 Three crises in less than a decade (136)
Box 8.1 Changes in the mobility of persons in one area of MERCOSUR (246)
Box 8.2 Government programmes in Mexico in support of collective remittances (248)
Box 8.3 United States: estimates of the number of persons without official documents (250)
Box 8.4 The international convention on the protection of the rights of all migrant workers and members of their families (252)
Box 11.1 Macroeconomic convergence in CARICOM (333)
Box 11.2 The new technologies in the Caribbean (341)
Figures
Figure 1.1 Ratification of human rights convention (22)
Figure 2.1 Trade and global output, 1870-1998 (30)
Figure 2.2 Exports from Latin America (34)
Figure 2.3 Export growth and GDP growth by country (35)
Figure 2.4 Trade and GDP in Latin America, 1870-1998 (47)
Figure 2.5 De-industrialisation, foreign trade, employment and income (49)
Figure 2.6 International monetary fund: total credits and outstanding loans, 1950-2001 (56)
Figure 2.7 Financial derivatives traded on organized markets (59)
Figure 2.8 Spreads in emerging markets (61)
Figure 2.9 Net flows to developing countries (62)
Figure 2.10 Credits of international financial institutions (68)
Figure 2.11 External debt (69)
Figure 3.1 Weighted international inequality, 1950-1998 (81)
Figure 3.2 Global income inequality, 1820-1992 (81)
Figure 3.3 Inequality and wealth (84)
Figure 3.4 Instability of economic growth (88)
Figure 5.1 Patterns of growth, trade deficit and net resource transfer (131)
Figure 5.2a Latin America and the Caribbean: international bond issuance (133)
Figure 5.2b Latin America and the Caribbean: conditions of international bond issues (133)
Figure 5.3 Procyclical movements in economic activity and net resource transfer(137)
Figure 5.4a Trend of global emerging markets bond index (EMBI) (138)
Figure 5.4b Eurobond spreads (138)
Figure 5.5 Net resource transfer and appreciation of currency and financial assets (142)
Figure 5.6 Latin America (19 countries): central government accounts. (145)
Figure 5.7 Latin America: central government tax burden, 1990-2000 (146)
Figure 5.8 Latin America: episodes of procyclical policies, 1990-2000 (147)
Figure 5.9 Difference between rate of growth of GDP and real interest rate paid on public debt (148)
Figure 5.10 Latin America and the Caribbean: volatility of net resource transfer and investment/GDP ratio (149)
Figure 6.1 Latin America and the Caribbean: trade and gross domestic product, 1985-2001 (169)
Figure 6.2a Average annual growth rate of real GDP and exports between 1970-1980 and 1990-2000 (171)
Figure 6.2b Variation in GDP growth rate and import elasticity (built-in) between 1970-1980 and 1990-2000 (171)
Figure 6.3 Latin America and the Caribbean: destination of exports, 1990 and 2000 (174)
Figure 6.4 FDI flows to Latin America and the Caribbean, by country of origin, 1990-2000 (181)
Figure 6.5 LAIA countries: sectoral distribution of foreign direct investment, 1981-2000 (182)
Figure 7.1 World investment in research and development, 1996-1997 (210)
Figure 7.2 Latin America and the Caribbean: expenditure on science and technology as a percentage of GDP ( 211)
Figure 7.3 Connectivity and GDP in the world, 1995-2000 (216)
Figure 7.4 United States: number of patents obtained, by main sectors of activity (220)
Figure 8.1 United States: percentage of professionals in the labour force, by origin, 1997 (238)
Figure 8.2 United States: percentage of population aged 25 or more with at least full high school education, by origin, 2000 (240)
Figure 9.1 Expansion of the agricultural frontier, 1961-1999 (262)
Figure 9.2 Trends in selected natural resource sectors in Latin America and the Caribbean (263)
Figure 9.3 MERCOSUR: export volumes of environmentally sensitive industries, by destination market (267)
Figure 9.4 Andean Community: export volumes of environmentally sensitive industries, by destination market (268)
Figure 9.5 Energy intensity in Latin America, 1970-2000 (273)
Figure 9.6 Energy intensity and per capita income in Latin America and the Caribbean, 1970-2000 (274)
Figure 9.7 Ratio of CO2 emissions to GDP in Latin America and the Caribbean (275)
Figure 9.8 CO2 emissions, 1980-1999 (276)
Figure 9.9 CO2 emissions from power stations, 1970-2000 (277)
Figure 9.10 Emissions by world region, 1973-1999 (277)
Figure 9.11 Latin America and the Caribbean: effects of disasters caused by natural phenomena, 1998-2001 (279)
Figure 10.1 Median and 75th percentile score in standardized tests applied to 4th grade students in public and private schools (300)
Figure 10.2 Average years of schooling of total economically active population (EAP), by age groups, 1999 (307)
Figure 10.3 Latin America (17 countries): urban unemployment rates by period, 1991-1994, 1995-1996, 1997-1998 and 1999-2000 (312)
Figure 11.1 United States apparel imports from selected Caribbean countries (339)
Figure 11.2 Capital flows to the Caribbean, 1990-1999 (343)
Figure 11.3 International bond issues and bank lending (344)
Figure 11.4 FDI as a percentage of gross domestic fixed capital formation for the Caribbean, 1990-1999 (345)
Figure 11.5 Employment and labour force growth (346)
Figure 11.6 Average inflation rates for selected Caribbean countries, 1981-2000 (351)
Figure 11.7 Carbon dioxide emissions (CO2) for selected Caribbean economies (354)
"....This relatively benign soft-landing scenario for developing countries faces both internal and external risks. First, the high growth of the past several years is generating tensions within individual countries. In several East European countries this has taken the form of rising inflation, currency appreciation, and high current-account deficits, while in others it has expressed itself in rising asset prices, inflationary pressure, and growing domestic tensions between fast and slower growing regions and sectors. Second, many of the buffers that permitted countries to absorb higher oil prices with a minimum of disruption have been exhausted, and countries have yet to fully adjust to higher oil prices. As a result, developing countries are much more vulnerable to potential external shocks, such as a disruptive resolution of global imbalances, a decline in nonoil commodity prices, or a hike in oil prices following a supply shock." (GDF 2006, p. 13)