# Stratification in the World System

## Colonialism and Neocolonialism

Colonialism is the establishment, maintenance, acquisition, and expansion of colonies in one territory by people from another territory.

### Learning Objectives

Differentiate between dependency theory, world-systems theory, and the Marxist perspective on colonialism

### Key Takeaways

#### Key Points

• The colonial period ranges from the 1450s to the 1970s, beginning when several European powers (Spain, Portugal, Britain, and France especially) established colonies in Asia, Africa, and the Americas.
• Decolonization took place after the First and Second World Wars as former colonies established independence from colonial powers.
• Neocolonialism refers to the unequal economic and power relations that currently exist between former colonies and former colonizing nations.
• Marx viewed colonialism as part of the global capitalist system, which has led to exploitation, social change, and uneven development.
• Dependency theory argues that countries have developed at an uneven rate because wealthy countries have exploited poor countries in the past through colonialism and today through foreign debt and trade.
• World-systems theory splits the world economic system into core, peripheral, and semi-peripheral countries.

#### Key Terms

• decolonization: The freeing of a colony or territory from dependent status by granting it sovereignty.
• Age of Discovery: A period in history starting in the early 15th century and continuing into the early 17th century during which Europeans engaged in intensive exploration of the world, establishing direct contact with Africa, the Americas, Asia, and Oceania and mapping the planet.
• Scramble for Africa: A process of invasion, occupation, colonization and annexation of African territory by European powers during the New Imperialism period, between 1881 and World War I in 1914.
• colonialism: the establishment, exploitation, maintenance, acquisition and expansion of territories (or colonies) in one geographic area by people from another area

Colonialism is the establishment, maintenance, acquisition, and expansion of colonies in one territory, imposed by people from another territory. It is a process whereby the metropole, or parent state, claims sovereignty over the colony, and the social structure, government, and economy of the colony are changed by colonizers from the metropole. Colonialism is a set of unequal relationships between the metropole and the colony, and between the colonists and the indigenous, or native, population.

Map of Empires and Colonies: 1800: By the end of the 19th century, most of the Americas were under the control of European colonial empires. At present, much of South and Central America is still economically dependent on foreign nations for capital and export markets.

### History of Colonialism

Modern colonialism started with the Age of Discovery, during which Portugal and Spain discovered new lands across the oceans (including the Americas and Atlantic/South Pacific islands) and built trading posts. According to some scholars, building these colonies across oceans differentiates colonialism from other types of expansionism. These new lands were first divided between the Portuguese Empire and Spanish Empire, though the British, French, and Dutch soon acquired vast territory as well.

The 17th century saw the creation of the French colonial empire, the Dutch Empire, and the English colonial empire, which later became the British Empire. It also saw the establishment of some Swedish overseas colonies and a Danish colonial empire.

The spread of colonial empires diminished in the late 18th and early 19th centuries, largely due to the American Revolutionary War and Latin American wars for independence. However, many new colonies were established after this period, including the German colonial empire and Belgian colonial empire. In the late 19th century, many European powers were involved in the so-called Scramble for Africa, in which many African colonies were established.

### Decolonization

After the First World War, the victorious allies divided up the German colonial empire and much of the Ottoman Empire according to League of Nations mandates. These territories were divided into three classes based on how quickly they would be ready for independence. Decolonization outside the Americas lagged until after World War II. In ideal cases, decolonized colonies were granted sovereignty, or the right to self-govern, becoming independent countries.

### Neocolonialism

The term "neocolonialism" has been used to refer to a variety of contexts since the decolonization that took place after World War II. Generally, it does not refer to any type of direct colonization, but colonialism by other means. Specifically, neocolonialism refers to the theory that former or existing economic relationships—the General Agreement on Tariffs and Trade (GATT) and the Central American Free Trade Agreement—are used to maintain control of former colonies after formal independence was achieved. In broader usage, neocolonialism may simply refer to the involvement of powerful countries in the affairs of less powerful countries; this is especially relevant in modern Latin America. In this sense, neocolonialism implies a form of economic imperialism.

### Colonialism and Neocolonialism in the World System

One approach sociologists take to colonialism and neocolonialism is a Marxist perspective. Marx viewed colonialism as part of the global capitalist system, which has led to exploitation, social change, and uneven development. He argued that it was destructive and produced dependency. According to some Marxist historians, in all of the colonial countries ruled by Western European countries, indigenous people were robbed of health and opportunities. From a Marxist perspective, colonies are considered vis-à-vis modes of production. The search for raw materials and new investment opportunities is the result of inter-capitalist rivalry for capital accumulation.

Dependency theory builds upon Marxist thought, blaming colonialism and neocolonialism for poverty within the world system. This theory argues that countries have developed at an uneven rate because wealthy countries have exploited poor countries in the past and today through foreign debt and foreign trade.

### World-Systems Theory

The world-systems theory suggests that the aftermath of colonialism and the continuing practice of neocolonialism produces unequal economic relations within the world system. Sociologist Immanuel Wallerstein elaborated on these forms of economic inequality. In this theory, the world economic system is divided into a hierarchy of three types of countries: core, semiperipheral, and peripheral. Core countries (e.g., U.S., Japan, Germany) are dominant capitalist countries characterized by high levels of industrialization and urbanization. Peripheral countries (e.g., most African countries and low income countries in South America) are dependent on core countries for capital, and have very little industrialization and urbanization. Peripheral countries are usually agrarian and have low literacy rates and lack Internet connection in many areas. Semiperipheral countries (e.g., South Korea, Taiwan, Mexico, Brazil, India, Nigeria, South Africa) are less developed than core nations but are more developed than peripheral nations.

French Pith Helmet: The pith helmet is a symbol of French colonialism in tropical regions, as it was worn by colonial officers.

## Multinational Corporations

A multinational corporation (MNC) is a business enterprise that manages production or delivers services in more than one country.

### Learning Objectives

Reconstruct the debate between critics and proponents of economic globalization

### Key Takeaways

#### Key Points

• Multinational corporations affect local and national policies by causing governments to compete with each other to be attractive to multinational corporation investment in their country.
• Multinational corporations often hold power over local and national governments through a monopoly on technological and intellectual property. Because of their size, multinationals can also have a significant impact on government policy through the threat of market withdrawal.
• Economic globalization refers to increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, services, technology and capital. Multinational corporations play a key role in this process.
• Those who view economic globalization positively cite evidence of per capita GDP growth, decrease in poverty, and a narrowing gap between rich and poor nations.
• Those who view economic globalization negatively cite evidence of exploitation of the local labor force, funneling of important resources away from the country itself into foreign exports, and overall dependency of developing countries upon wealthy countries.
• Those who view economic globalization positively cite evidence of per capita GDP growth, decrease in poverty, and a narrowing gap between rich and poor nations.
• Those who view economic globalization negatively cite evidence of exploitation of the local labor force, funneling of important resources away from the country itself into foreign exports, and overall dependency of developing countries upon wealthy countries.

#### Key Terms

• Economic Imperialism: The geopolitical practice of using capitalism, business globalization, and cultural imperialism to control a country, in lieu of either direct military control or indirect political control.
• Market Withdrawal: The act or threat of removing one's goods or services from the consumer market, potentially reducing the supply of a product, or of jobs.
• tax break: A deduction in tax that is given in order to encourage a certain economic activity or a social objective.

A multinational corporation (MNC) or multinational enterprise (MNE) is a corporate enterprise that manages production or delivers services in more than one country.

A MNC differs slightly from a transnational corporation (TNC), because while MNC's are traditionally national companies with foreign subsidiaries, a TNC does not identify itself with one national home. However, these terms are often used interchangeably. Multinational corporations can have a powerful influence in local economies, and even the world economy.

### Influence on Local and National Economies

National and local governments often compete with one another to attract MNC facilities, with the expectation of increased tax revenue, employment, and economic activity. To compete, political entities may offer MNCs incentives such as tax breaks, pledges of governmental assistance or subsidized infrastructure, or lax environmental or labor regulations.

Besides holding the promise of economic growth for local and national governments, multinational corporations also exert power over political entities once they are established, through their control over technical and intellectual property. For example, Adidas holds patents on shoe designs, Siemens A.G. holds many patents on equipment and infrastructure and Microsoft benefits from software patents. These patents often allow multinational corporations to exercise a monopoly in the local economy, preventing local enterprises from developing. This also functions to keep labor costs low, sometimes exploitatively so.

Because of their size, multinational corporations can also have a significant impact on government policy through the threat of market withdrawal.

### Influence on the World Economy

Multinational corporations play an important role in the world economy through the process of economic globalization; in other words, the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, services, technology and capital.

Multinational corporations have played a leading role in this globalization, establishing multiple links between the economies of various countries. Using capital from developed countries, MNCs establish factories and plants in developing countries, where they can access raw materials and labor more cheaply. The finished products are then shipped back to wealthy countries where there is a consumer market.

These multiple links lead to an increasing economic integration between various economies, resulting in the emergence of a global marketplace or a single world market.

### A Positive View of Economic Globalization

Those who view this phenomenon positively cite the evidence of per capita GDP growth, decrease in poverty, and a narrowing gap between rich and poor nations. Proponents of economic globalization argue that the economic benefits are widely shared between different parts of society, discounting critics who point to rising inequality between the rich and poor within nations who have joined the global market.

Those in favour of globalization also cite evidence of overall improvement of living standards and poverty reduction in globalizing countries. For example, there has been a 5.4 percent annual growth in income for the poorest fifth of the population of Malaysia. Even in China, where inequality continues to be a problem, the poorest fifth of the population saw a 3.8 percent annual growth in income in 2001. Finally, there is evidence that the gap has narrowed between rich and poor countries, which is often touted as a positive benefit of economic globalization.

### Critical Views of Economic Globalization

Not all observers of economic globalization have a positive evaluation. As discussed above, multinational corporations exert powerful influence over local and national governments, often prompting them to enact policies that benefit business, rather than protecting the rights of local people. Thus, economic globalization in the form of MNCs can lead to exploitation of the local labor force, funneling of important resources away from the country itself into foreign exports, and overall dependency of developing countries upon wealthy countries.

In addition to the uneven distribution of benefits that often occurs, critics also point to the ways that resources are diverted from the local population into foreign exports. For example, some of the land in Cape Verde could be planted and harvested to feed people but is planted instead with cash crops for foreign exchange. Fresh produce is regularly sold or changed to a nonperishable type, such as canned tuna for export, rather than consumed by the population. Widespread malnutrition is one of the effects of this foreign dependency.

Finally, economic globalization may result in unequal economic relations of dependency between developing and developed countries. Instead of acting independently on behalf of the people in the country, governments of developing countries may act more in the interests of MNCs and of other nations on whom they rely on for aid. They may feel that without these forms of economic connection, their country cannot survive.

Thus, dependent relations that were formed in the colonial period continue on today in the form of what many scholars call neocolonialism or economic imperialism.

Walmart in Quanzhou, China: Walmart is an example of a large multi-national corporation, with stores and manufacturing facilities all over the world.

## Poverty

Poverty is the condition of not having access to material resources, income, or wealth.

### Learning Objectives

Compare the definitions of poverty, absolute poverty, and extreme poverty

### Key Takeaways

#### Key Points

• The U.S. officially defines poverty using the poverty line, which is the measure of those whose incomes are less than three times the approximate cost of a subsistence level food budget.
• Absolute poverty is the level of poverty where individuals and families cannot meet food, shelter, warmth, and safety needs, while relative poverty refers to economic disadvantage compared to wealthier members of society.
• Extreme poverty is a severe lack of material possessions or money, defined by the World Bank as living on less than US $1.25 a day. • Poverty may correspond not only to lack of resources, but to lack of opportunity to improve one's standard of living and acquire resources. • Globally, countries are stratified in an economic hierarchy that is often measured by GNI PPP, or gross national income converted to international dollars. Individuals in wealthy countries are less likely to live in poverty than those in poor countries. #### Key Terms • Economic Stratification: Economic stratification refers to the condition within a society where social classes are separated, or stratified, along economic lines, with distinct economic strata, or levels. • GNI PPP: The GNI PPP is the gross national income of a country converted to international dollars using a factor called the purchasing power parity, and is a commonly used measure of national economic well-being. • The Poverty Line: The threshold of poverty, below which one's income does not cover necessities. Poverty describes the state of not having access to material resources, wealth, or income. The U.S. officially defines poverty using the poverty line, which is the official measure of those whose incomes are less than three times the approximate cost of a subsistence level food budget. This definition has been in use in the U.S. to track demographic changes and allocate welfare aid since the 1960s. Near poverty is when one earns up to 25% above the poverty line; put otherwise, a person near poverty has an income below 125% of the current poverty line. Absolute poverty is the level of poverty where individuals and families cannot meet food, shelter, warmth, and safety needs, while relative poverty refers to economic disadvantage compared to wealthier members of society. Extreme poverty is a severe lack of material possessions or money, defined by the World Bank as living on less than US$1.25 a day.

Poverty may correspond not only to lack of resources, but to lack of opportunity to improve one's standard of living and acquire resources. Life chances are an individual's access to basic opportunities and resources in the marketplace. Someone who is living in poverty but has high life chances may be able to improve their economic standing, while someone with low life chances will likely have a consistently low standard of living.

Billions of people around the world live in poverty, and often experience hunger, preventable illness, and low life expectancy as a result. A commonly used measure of national economic well-being is the GNI PPP. The GNI PPP is the gross national income of a country converted to international dollars using a factor called the purchasing power parity. In other words, GNI PPP lets you understand how much a person could buy with a given amount of money (in other words, a person's annual income), regardless of the country's currency. It enables comparisons between the relative wealth and poverty of countries — the higher a country's GNI PPP is, the better off the average person in that country is.

Comparing GNI PPPs makes clear that there is global economic stratification, or that countries are arranged in a hierarchy based on the unequal distribution wealth.The developed world is over 6 times wealthier than the less developed world. Globally, Africa has the highest level of poverty, with the average person earning less than 10% of what the average US citizen earns.

Percentage of Population Living on Less than $1/day: This map shows the percentage of national populations living on less than$1/day, adjusted for international purchasing power. This is a commonly used measure of poverty to allow international comparisons.

United Nations Human Development Index (HDI) Rankings for 2011: Human Development Index (HDI) is a measure of how much of a nation's wealth is invested into local services such as education and infrastructure. Countries with low HDI tend to be caught in a national cycle of poverty -- they have little wealth to invest, but the lack of investment perpetuates their poverty.

## Modernization and Technology

Modernization deals with social change from agrarian societies to industrial ones, with new technologies playing an important role.

### Learning Objectives

Discuss some problems with modernization theory, especially for poorer countries

### Key Takeaways

#### Key Points

• The Renaissance period (14th-17th centuries) was an important era of introducing new technologies of mechanization and efficient production which paved the way for the Industrial Revolution.
• The printing press, invented by Johannes Gutenburg in the 15th century, is regarded as one of the most important Renaissance inventions because it allowed the rapid spread of information across borders.
• The mass production technologies perfected during the Industrial Revolution led to a dramatic change in production processes, which in turn spurred on patterns of urbanization, wage labor, and nuclear family life.
• The Information Revolution refers to the most recent era of technological developments, including cell phones and the Internet.
• The assumption that it is always beneficial to adopt new technologies in order to modernize must be questioned, because it can sometimes lead to value judgments against societies and groups who do not use the latest technologies.

#### Key Terms

• Information Revolution: Refers to the most recent era of technological developments, including cell phones and the Internet.
• Industrial Revolution: The major technological, socioeconomic, and cultural change in the late 18th and early 19th century, resulting from the replacement of an economy based on manual labor to one dominated by industry and machine manufacturing.
• modernization: A model of an evolutionary transition from a "pre-modern" or "traditional" society to a "modern" society, including the adoption of new industry and technology.

### Background

New technology is a major source of social change. Modernization deals with social change from agrarian societies to industrial ones, so it is important to look at technology changes across contexts. New technologies do not change societies by themselves. Rather, it is the response to technology that causes change. Frequently, a new technology will be recognized but not put to use for a very long time. Later, it may be taken up on large scale such that an entire society is revolutionized by it.

From the perspective of Western societies, one of the most important epochs for technological innovation was the Renaissance, which spanned roughly the 14th through 17th centuries starting from Italy and spreading throughout the rest of Europe. Many technologies which had profound impact of social life were either invented or popularized during this time. For example, the compound crank and connecting rod converted circular motion into reciprocal motion and was of utmost importance for the mechanization of work processes, later becoming integrated into machine design. The mariner's astrolabe played an important role in sea navigation, aiding in the discovery of the Americas and other overseas lands. Other technologies introduced during this time include the cranked reel (used to wind skeins of yarn), the blast furnace (enhanced iron production), and the rotary grindstone with treadle.

### The Printing Press

Of extreme significance during this period was the invention of the printing press in the mid-1400s by Johannes Gutenburg. Paving the way for mass production of printed material, the printing press is widely regarded as one of the most important inventions of the Renaissance. It made possible the relatively free flow of information, which transcended borders and induced a sharp rise in Renaissance literacy, learning, and education. It also allowed for greater circulation of (sometimes revolutionary) ideas among the rising middle classes and peasants and threatened the traditional power monopoly of the ruling nobility. The printing press became a key factor in the rapid spread of the Protestant Revolution and is thought to have enabled the development of national identities.

### The Renaissance

The technologies of the Renaissance period, which introduced methods of mechanization, were the predecessors of the mass-production techniques that fueled the Industrial Revolution during the 18th and 19th centuries, which started in Great Britain and emanated outwards. Key technologies developed during this period included the steam engine, new iron smelting methods, and the water frame, spinning Jenny, and spinning mule (in the textile industry). As a result of these developments, new factories sprung up everywhere and production shifted from homes or small workshops to factories. These developments also shaped new patterns of urbanization, labor, and family life, all of which may be deemed a process of modernization. For example, people moved from the countryside into the city in search of new work opportunities, more people were employed as wage-laborers doing repetitive tasks in a factory, and nuclear families became disconnected from the more extended kinship networks found in rural areas as people moved into cities.

Modernization continues apace today as technologies spread into areas that were previously less technologically advanced and as new innovations are introduced almost daily. Cell phones, for example, have changed the lives of millions throughout the world. This is especially true in Africa and parts of the Middle East where there is a low cost communication infrastructure. Spread of Internet connection is another powerful factor which facilitates rapid flows of information and interconnection between people in all corners of the globe. These processes may be considered the phase of technological innovation following the Industrial Revolution, which some have labeled the Information Revolution.

Modernization through technological innovation is seen by modernization theorists as a key way that poor countries can "catch up" to the developed world. The converse may also prove to be true though, if nations that do not adopt cutting edge technology at the same pace as developed nations are shut out of the global economy. This can lead to ethnocentric bias and prejudice against poorer countries who do not develop the new technologies that higher income countries do. Another flaw with modernization theory is its failure to recognize that if poorer countries adopt the technologies of higher-income countries, this may foster dependence. Poorer countries will rely on higher-income countries for support and guidance, thus widening (rather than narrowing) the power differential.