1.
The Global North and the Global South:
Why the Divide?
Course name: Economic Growth and
Development Lecture 3
Rajshree Bedamatta
Department of Humanities & Social
Sciences Indian Institute of
Technology Guwahati

2.
Global North and Global South
The concept of Global North and Global South (or North–South
divide in a global context) is used to describe a grouping of countries
along socio-economic and political characteristics. The Global South is
a term often used to identify regions within Latin America, Asia, Africa,
and Oceania. Most, though not all of these countries are low-income,
often politically or culturally marginalized, and are on one side of the
divide; while on other side is the Global North (the United States and
Canada, all European countries, Russia, Israel, Japan, Australia and
New Zealand and few others depending on context). As such, the terms
Global North and Global South do not refer to directional North-south as
many of the Global South country are geographically within the Northern
Hemisphere.
Developed countries are considered as Global North countries, while
developing countries are considered as Global South countries. The term
as used by governmental and developmental organizations was first
introduced as a more open and value-free alternative to "Third World"
and similarly potentially "valuing" terms like developing countries.
Countries of the Global South have been described as newly
industrialized or are in the process of industrializing, and are frequently
current or former subjects of colonialism

3.
•The concept of a gap between the Global North and the Global South in terms of development
and wealth was given by Williy Brandt in 1980s
•In the 1980s, the Brandt Line was developed as a way of showing the how the world was
geographically split into relatively richer and poorer nations.
•According to this model:
• Richer countries are almost all located in the Northern Hemisphere, with the exception of
Australia and New Zealand.
• Poorer countries are mostly located in tropical regions and in the Southern Hemisphere.
Criticism of the Model
•However over time it was realised that this view was too simplistic. Countries such as
Argentina, Malaysia and Botswana all have above global average GDP (PPP) per capita, yet
still appear in the ‘Global South’.
•Conversely, countries such as Ukraine appear to be now amongst a poorer set of countries by
the same measure.

4.
The gap between the ‘North’ and ‘South’ (The Current Scenario)
•Despite very significant development gains globally which have raised many millions of people
out of absolute poverty, there is substantial evidence that inequality between the world’s
richest and poorest countries is widening.
•In 1820 western Europe’s per capita income was three times bigger than Africa’s but by 2000
it was thirteen times as big.
•In addition, in 2013, Oxfam reported that the richest 85 people in the world owned the same
amount of wealth as the poorest half of the world’s population.
•Today the world is much more complex than the Brandt Line depicts as many poorer countries
have experienced significant economic and social development.
Global North and Global South
•However, inequality within countries has also been growing and some commentators now talk
of a ‘Global North’ and a ‘Global South’ referring respectively to richer or poorer communities
which are found both within and between countries.
•For example, whilst India is still home to the largest concentration of poor people in a single
nation it also has a very sizable middle class and a very rich elite.

5.
Global North-Global South
For the purposes of our discussion, the Global North includesAustralia,
Canada, Israel, Hong Kong, Macau, New Zealand, Japan, Singapore,
South Korea, Taiwan, the United States and all of Europe (including
Russia)
The Global South includes Asia (with the exception of Japan, Hong
Kong, Macau, Singapore, South Korea and Taiwan), Africa, Central
America, South America, Mexico,Africa, and the Middle East (with the
exception of Israel)

6.
o In economic terms, the North—with one quarter of the world population—controls
four-fifths of the income earned anywhere in the world.
o 90% of the manufacturing industries are owned by and located in the North.
o Inversely, the South—with three quarters of the world populations—has access to
one-fifth of the world income.
o As nations become economically developed, they may become part of the "North",
regardless of geographical location.
o similarly, any nations that do not qualify for "developed" status are in effect deemed to
be part of the "South".

7.
Globalization
Globalization in economics refers to the interdependence of nations around the globe promoted
through free trade. Reduction of barriers between national economies facilitates the spread of products,
information, jobs, and technology across national borders.
Globalization Characteristics
Globalization initiates growth and interconnectivity of various sectors across nations. Its
essential features include the cross-border connectivity or integration, free trade
environment and interdependency of nations.
In addition, it facilitates global business expansion, cross-culture diversification, lower tariffs
and taxes on international business operations
Migration of workforce and international investments
create job opportunities, enhanced goods and services as well economic development.
The vast concept of globalization is often explained by classifying into sections by educational
instituties and government bodies such as the IMF. The four more major sections include –
trade, capital movement, movement of people, dissemination of knowledge.

8.
Globalization refers to the increased
flow of trade, people, investment,
technology, culture, ideas among
countries and creates a more
integrated and interdependent
world

9.
Examples
Let us look at some real-world examples of globalization in different sectors to understand why it
is such an important concept in economics.
Globalization in business
With the World Trade Organization (WTO) and United Nations (UN) allowing international trade
reforms and agreements on tariffs, it has become easier for the domestic entities to go global.
Additionally, due to the FDIs, many companies can now find a firm footing in the international
markets.
For instance, this report indicates that by 2028, the global handbag market is expected to reach
$78.46 billion. The industry is dominated by renowned global manufacturers like Calvin Klein Inc.
and Louis Vuitton Malletier. In addition, the creation of eco-friendly handbags owing to the
environmentally conscious consumers has added to the demand spike.
Globalization in Food
When nations connect, they exchange a lot more than the products and services. Food is
perhaps one of the strongest segments to have changed due to the interaction of different
cultures. People experienced the flavors, cuisines and traditions of other nations, especially
through global food chains like McDonald’s and Krispy Kreme. It also led to the fusion of cuisines.
Moreover, the sharing of farming techniques, fertilizers, biotechnology, and agricultural practices
among the nations facilitated them to grow non-indigenous crops. Grocery chains such as
Walmart have been offering a variety of international food in different nations.
For example, Andean superfood quinoa’s popularity became so intense in American and
European countries that their prices went through the roof. As a result, the local people of Bolivia
and Peru, where quinoa was a staple food, could no longer afford it.

10.
Globalization in Culture
International cultural fusion has facilitated nations to share their art, music,
values, ideas, beliefs, traditions, customs, food, festivals, and languages.
Employees and companies operating outside their home country often get
exposed to a new culture. The entertainment industry also plays a crucial
role in introducing viewers to foreign cultures.
For instance, yoga is considered an Indian tradition, which was anciently
confined within the geographical boundaries of India. Today, it is widely
practised worldwide for physical and mental well-being. June 21 is observed
as the International Yoga Day across the globe, as declared by the United
Nations in 2015. Hundreds of countries plan special events for celebrating
the day.
Globalization in Technology
Technology is the carrier of development, and it travels from one country to
another to upgrade different sectors of the nations. With the emergence of
the internet, globalization has reached a new horizon in the field of
technology. Since some countries are ahead in technical know-how, it has
helped economies solve some of their woes cheaper. For instance: the
emergence of 5G technology has been the talk of the town in many countries
due to its innovative applications.

11.
World Bank’s Prescription wrt
Globalization
o First, countries should dismantle protectionist measures they have in place, and
make a firm commitment not to implement policies that distort global markets.
o Second, countries should come together to update the international rules governing
trade to account for changing economic conditions, and effectively implement
negotiated agreements.
o Third, individual countries and institutions such as the World Trade Organization
should work together to eliminate barriers that increase trade costs. In particular, they
must abolish agricultural subsidies, remove restrictions on trade in services, improve
connectivity, facilitate cross-border trade and investment, and increase trade finance.
o Finally, and most important, wealthy countries should support developing countries’
efforts to integrate themselves further into the global economy. Given trade’s record of
reducing poverty, this is a moral imperative; it is also indispensable for peace and
stability.

12.
Globalization was “painted” as
o The emergence of the South due to a massive “diffusion of development” within the
Capitalist World Order, from the North to the South, and consequently the historically
observed duality of the World Economy (North and South) will disapper.
This picture was based on the following assumptions:
o Real wages in the South are much lower than in the North since the South is
overpopulated with large labour reserves
o In a world where capital is more mobile, even if labour is not, capital from the North
will shift the location of its production activity from the North to the South, to take
advantage of these low wages, for meeting global demand.
o Even if capital from the North does not move to the South, local capitalists in the
South who have access (or can obtain access) to frontier production technologies in
a large number of spheres, can produce in the South, to meet global demand.
However increased income inequalities of the 1990s and the global financial crisis of the
later part of the 2000s associated with the increased fragility of the advanced capitalist
economies posed a grave danger to this picture.

13.
Globalization and its Discontents
o Globalization has siphoned the resources and knowledge of the poor of the South
into the global marketplace, stripping them of their life-support systems, livelihoods,
and lifestyles.
o The WTO, run by an oligarchy of countries (the United States, Japan, the European
Union, and Canada), claims to protect poorer states from unilateral actions of
stronger ones by providing uniform rules and dispute settlement mechanisms for
global trade. In truth there is a gross imbalance in bargaining and negotiating
capacities between the North and South.
o By joining the WTO, developing countries give up their power to impose conditions on
the entry of foreign comparties. This liberalization of investment has enabled cheaper
goods and services to swamp southern markets, often replacing what is locally made.
o Vandana Shiva of India's Research Foundation for Science, Technology and Ecology,
considers global free trade in food and agriculture to be the world's biggest refugee
creation program. India, for example, has seen a shift from production of food crops
to cotton for export. The amount of land dedicated to the production of "white gold"
has tripled. Profits are high, but so too are the costs. Pesticide use has increased.

14.
Paradigms in international poverty discourse
o The North – South worldview and the Cancun Summit of 1981
o Deterioration of international economic conditions, debt crisis, new balance of power
between the developed and developing countries
o Financial distress of the developing countries
o Growing social unrest, impossible strains on governments, and prospects of
revolution or chaos
o The evolution of global economic forces did not allow the concerns of the developing
countries to remain a priority on the international agenda
o Important “ideological shifts” contributed to the marginalisation of North-South issues
o Given their differences in economic structure, the North and the South had different
needs
Perspective of Bretton Woods Paradigm in analyzing world poverty
Perspective of UN paradigm in analyzing world poverty

15.
Globalization Pros
•The process opens up new ways for the domestic businesses to transform
into multinational companies. Domestic firms gain exposure to new
international markets, hire talented and cheaper human resources, access
newer raw material at lower costs.
•Moreover, cross-border business operations often result in cultural
integration of two nations, along with their language, art, music, food, values,
etc. For developing countries, globalization brings in multiple opportunities
for employment and monetary gains, improving living standards.
•With higher investments in developing countries, it leads to infrastructural
growth, better products and services that initiates economic growth and
greater per capita income.
•It also promotes global economic balance, international trade, social justice
and diversification globally, bringing nations closer to each other.

16.
Globalization Cons
While companies go global, they face numerous hurdles such as language
barriers, opposition and competition from the local sellers. In addition, global
business expansion requires enormous capital investment coupled with risks
like legal compliance or political unrest. On the other hand, it is a pitfall for
the local entities that lose their customers to foreign products and services.
Other challenges include the immigration of talented personnel from the
domestic region to foreign countries. Also, many successful business
organizations migrate to other nations. Sometimes, most of these companies
belong to a single industry.
When world economies are interconnected, the economic downfall in one
nation may affect the functioning of the other countries. Besides, a handful of
leading companies rule the world, resulting in uneven distribution of power
and wealth. Moreover, it has often increased labor exploitation in developing
nations through poor working conditions, low wages and unethical practices.

17.
Three approaches to world poverty
Traditional North-
South Approach
Bretton Woods
Paradigm
UN Paradigm
Worldview Bipolar division
between rich and poor
countries
Inclusive globalization
Economic integration
Two-tiered globalization
Social exclusion
Geography of Poverty Developing countries Least-
developed
countries
Developed countries
and developing
countries
Determinants of Poverty External factors
(economic
environment
dominated by
developed countries
Internal factors
(non ‘market-
friendly’ economic
policies
Internal and external
factors (conflict
between economic
objectives and social
needs)
Political Platform New international
economic order
Liberalization of markets
Competitiveness of firms
Sustainable human
development
Inter-generational equity
Source: Therien, Jean-Philippe (1999), “Beyond the North-South Divide: The Two Tales of World Poverty”, Third World
Quarterly, Vol. 20, No.4.

18.
Snapshot of Lecture 4
o Indices of economic development
o Contemporary controversies of Growth and Development
o Unequal growth
o The concept of “inclusive growth”