Core Essay ⋆ Business Essay Examples ⋆ EssayEmpire

“The core” refers, collectively, to those affluent, heavily industrialized, and highly developed countries from which emanates the majority of global economic activity. Prime examples of “core” nations include the United States, Japan, Germany, France, and the United Kingdom (UK). Understanding the nature of “the core” and how it interfaces with non-core areas of the world is essential to understanding economic development and the global economic system.

From a practical standpoint, the notion of “the core” is useful in accounting for the fact that there is great heterogeneity among the nations of the world in terms of their respective nature and level of involvement in the global economic system. Some countries are very inwardly focused—domestically producing most products consumed and not engaging in extensive exporting. Other countries—the “core” countries—are heavily involved in global economic activity. In this regard, a core nation’s role in the global economic system typically involves high levels of both transnational exporting (of domestically produced products) and importing (of foreign-made goods). It should thus be of little surprise that core nations are typically home to the world’s largest and most global businesses. For example, 337 of the corporations in the 2007 Fortune Global 500 are headquartered in five core nations (162 in the United States, 67 in Japan, 38 in France, 37 in Germany, and 33 in the UK). Nine of the 10 largest global corporations are headquartered in these five core nations.

The notion of the core also helps account for vast international heterogeneity with regard to level of wealth. Core nations tend to be very wealthy in terms of a host of indicators such as gross domestic product (GDP), per capita income, and average household income. Consider, for example, that although the United States and Japan account, respectively, for only 4.67 percent and 2.09 percent of the world’s population, they account for 25.4 percent (United States) and 9.86 percent (Japan) of global wealth and 21.67 percent (United States) and 7.05 percent (Japan) of the world’s GDP. The world’s seven wealthiest nations, while accounting for only 11.66 percent of the world’s population, account for 54.81 percent of global wealth and 43.48 percent of the world’s GDP.

Theoretically, the notion of the core formally originated in the context of dependency theory. This theory of economic development was created in the late 1950s and 1960s by development scholars in poor nations who felt that then dominant theories of development failed to adequately account for the fact that the uneven diffusion of technical progress had heavily contributed to the division of the global economy into two types of countries (i.e., affluent, heavily industrialized, and highly developed “core” nations, and less affluent, relatively unindustrialized, and underdeveloped “peripheral” countries [e.g., inwardly focused, agrarian African nations such as Burundi, Rwanda, Tanzania, and Zambia]). Further, these scholars believed that existing conceptualizations of economic development focused far too heavily on understanding “core” nations while also misguidedly laying much of the blame for the underdevelopment of poor countries on these nations and their disadvantaged peoples.

Dependency theory holds, most essentially, that “peripheral” countries may suffer negative (economic, cultural, and developmental) consequences as a result of forming economic bonds with “core” nations heavily involved in the global economic system. Dependency proponents contend, in this regard, that the formation of ties with “the core” may cause “peripheral” nations to become highly dependent on the core and that self-serving, potentially imperialistic core leaders may take advantage of this situation by exploiting key peripheral nation resources (e.g., human labor and water, lumber, minerals, and other raw materials).

However, it should be noted that the hypothesized outcomes of interaction with the core for peripheral countries differ in the two main forms of dependency theory. In the context of “orthodox (or radical) dependency,” increased linkage to core nations is viewed as necessarily leading to the “development of underdevelopment” (i.e., worsened economic conditions and quality of life) in “the periphery.” In the less extreme “unorthodox” version of dependency theory, development and underdevelopment can occur simultaneously. Here, the level of development in the periphery is viewed as being a function of the manner in which the periphery interacts with the core. It is hypothesized, for example, that interactions with the core involving foreign direct investment (i.e., allowing companies located in the core to purchase or establish wholly owned production facilities in peripheral territory), foreign debt, and export trade lead to a higher level of dependence and less positive and slower peripheral development than interactions based on the acceptance of foreign aid and foreign trade.

From a theoretical perspective, it is also important to understand that the hypothesized role of the core in dependency theory is diametrically opposed to the core’s role in (the previously dominant) modernization theory. The latter theory of economic development contends that poor nation development is predicated first and foremost on the establishment of close economic bonds with the core. From this perspective, less-affluent, peripheral nations are necessarily brought up to core-nation standards (i.e., modernized) as a result of increasing involvement in the global economic system—realized perhaps only by forging intimate economic ties to the core. Modernization theorists contend that the developmental benefits of this increased level of involvement in the global economic system necessarily “trickle down” from the core to the periphery.

The Case Of China

Consider China’s rapid, ongoing ascension toward “core” status. The world’s largest country was for many years a relatively isolated, inwardly focused peripheral nation in the background of the modern global economic system. In the last three decades the Chinese economy has not only become very global but has also doubled in size every eight years. In addition, during this same period of time, nearly 400 million Chinese people have emerged from poverty—many of them by personally becoming part of the global economic system as a result of moving from farms in rural areas to manufacturing jobs in large cities.

Although China’s amazing rise toward the core can be viewed as at least somewhat supportive of both the unorthodox version of dependency theory and modernization theory, its development defies simple, complete explanation by either theory. Consistent with unorthodox dependency theory, China’s (highly uneven and far from completely core-like) development is predicated significantly on high levels of foreign trade—both importing and exporting—with governments and corporations in established core nations. At the same time, more consistent with modernization theory, the growth of China’s economy can also be credited to high levels of foreign direct investment from core nations. However, neither theory adequately takes into account other developmental factors including, but not limited to, high levels of personal savings and the leveraging of outsourcing-based partnerships with core-nation manufacturers (to gain access to key technologies that can be used to spawn Chinese firms that eventually compete in the global marketplace against the very same core-nation companies outsourcing their manufacturing to China in the first place).

Bibliography:

James Davies, Susanna Sandstrom, Anthony Shorrocks, and Edward Wolff, “Estimating the Level and Distribution of Global Household Wealth,” World Institute for Development Economics Research of the United Nations University, www.wider.unu.edu (cited March 2009);
Peter Evans and John D. Stephens, “Development and the World Economy,” in Handbook of Sociology, N. J. Smelser, ed. (Sage, 1988);
Gary Gereffi, “The International Economy and Economic Development,” in The Handbook of Economic Sociology, N. J. Smelser and R. Swedberg, eds. (Princeton University Press, 1994);
Fareed Zakaria, The Post-American World (W. W. Norton, 2008).

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